Don’t Miss This Tax-Saving Opportunity: Set Up a SEP Before You File

If you’re a business owner or self‑employed and don’t yet have a retirement plan, there’s still time to lower your 2025 tax bill.

One option worth a closer look is a Simplified Employee Pension (SEP). A SEP allows you to make tax‑deductible contributions for 2025, even if you establish the plan in 2026. It’s one of the easiest retirement plans to set up and offers generous contribution limits.

Important to know: If you have employees, you’ll generally need to contribute to their SEP accounts as well. The upside? Those contributions are also tax‑deductible.

Key Deadlines to Know

You can establish and fund a SEP up until your business’s tax filing deadline (including extensions).

For 2025 returns, the deadlines are:

• March 16, 2026 for Partnerships & S Corporations, September 15, 2026 (if extended)

• April 15, 2026 for Sole Proprietors & C Corporations, October 15, 2026 (if extended)

• For LLCs, deadlines depend on how your LLC is taxed (partnership, corporation, etc.)

Note: You can also make your 2025 contributions up until these same deadlines and still deduct them on your 2025 tax return.

Easy Setup, Minimal Paperwork

One of the biggest advantages of a SEP is how simple it is to get started. To establish a plan, you’ll need to:

• Complete Form 5305-SEP (no IRS filing required)

• Keep the form for your records

• Provide a copy to eligible employees

After setting up your plan, you’ll make contributions to your SEP-IRA as well as accounts for each qualified employee.

A few key points:

• Contributions are immediately 100% vested

• Employee contributions are not taxed when made

• Funds are taxed when withdrawn (typically in retirement)

Flexible Contributions (With Big Potential)

SEP contributions are flexible, so you decide how much to contribute each year.

Keep in mind: Any percentage you contribute to your own SEP must be contributed at the same percentage of compensation for all eligible employees.

2025 Contribution Limits:

• Up to 25% of compensation (20% of net self-employment income)

• Compensation Cap: $350,000

• Maximum Contribution: $70,000

So, is a SEP Right for You?

A SEP can be a great fit if you:

• Want a simple, low-maintenance retirement plan

• Need flexibility in annual contributions

• Are looking to reduce your current tax bill

That said, SEPs aren’t one-size-fits-all especially if you have employees or want to maximize contributions in different ways.

Next Steps

Setting up a SEP before filing your 2025 tax return can result in meaningful tax savings. If you’re unsure whether a SEP is the right move, a tax professional can help evaluate your situation, set up the plan correctly, and make sure you’re maximizing your tax benefits.