SEP IRA as contractor

Hey folks. First post here.

I’ve recently become a full time contractor (will get 1099 from a single firm). It seems like I am eligible for a SEP IRA however I’m not sure if I need to create a business entity for myself before I can file the paperwork for the SEP? I’ve not found much online for this case as most articles assume self employment. Thanks!

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Welcome. You don’t need to establish a business entity (although there are unrelated reasons why you may want to), to participate in an SEP-IRA.

Here’s a recent (11/19/19) update from the IRS on some options:


Thanks for the reply. I guess what confused me was the first field in the 5305-SEP form is “Name of employer” which I assumed to be the business name that I don’t have. But perhaps I just need to open the the account with a proper custodian and I don’t have to file this form?

That form (5305-SEP) is a model contract and it is never filed with the IRS. It really should have another name and not use the term “form” as everyone assumes it has to be filed or used as a worksheet with a filed form. This is a simple thing, but the IRS needlessly complicates it.

The IRS needs to clarify this as it is for those entities setting up a new SEP between an employer and a fiduciary–not for someone setting up an account with a fiduciary or custodian.

So, in your case as is the case with nearly all self-employeds, the custodian with whom you open your SEP-IRA account will handle all of the details and recordkeeping. It may have more sensible contracts or simplified forms, but it’s unlikely to use the IRS form.

Just don’t forget to set up beneficiaries so that your account will revert to them without probate.


I see. Thanks a lot for explaining that! Yeah the IRS can be super confusing for no reason some times.

Tagged for insight - my wife has been established as an independent contractor (1099) for some side work. Thinking of what I can do for this tax year to contribute to a IRA for her.

That can quickly become complex. Depends on what you mean by “side work.” Very generally, up to 25% of self-employed income (up to annually indexed limits) as a 1099 contractor can be contributed to a retirement account.

Age can factor in that there are some available catch-ups for those over 50.

What complicates it are health-care costs, whether she has an HSA, and other earned-income benefits and taxes paid. She may have to pay some self-employed social security and medicare taxes depending on her earned income, for example.

You have plenty of time to sort it out as contributions for 2019 will not be due until April 15 2020 (or perhaps later if on a fiscal tax year).

Complex may be an understatement: always seek competent local counsel before making any decisions.