How should I interpret the SEP IRA Calculator employee contribution results?
The calculator at https://fitsmallbusiness.com/sep-ira-calculator/ appears to calculate the required employee contribution based on the actual percentage determined for the employer contribution.
Am I correct in assuming that this is a minimum contribution requirement and not a maximum?
In other words, can the employee contribution be any percentage between the employers actual percentage of net income and 25% if the employer contribution is maxed out at $55,000?
Hi Walter Helm,
Thank you for asking the question.
You are absolutely correct in assuming that this is the minimum contribution requirement, if you have employees.
Absolutely, as long as you meet the minimum requirement of the employee contribution, you can continue to contribute more than that up to the 25% maximum, but total contributions for any one person cannot exceed $55,000.
All the best,