SIMPLE IRAs
The most frequently asked tax questions related to SIMPLE IRAs
For Tax Payers
Need professional help with a specific tax issue or have general tax questions? Ask a CPA is the easiest way to get advice from a licensed accountant in our network.
Ask a Tax QuestionFor Accountants
Provide answers to tax questions and introduce your practice to new potential clients. Build your CPAdirectory profile and earn reputation points.
Answer Tax QuestionsWhat are some benefits of a SIMPLE plan ?
Asked Wednesday, January 17, 2001 by an anonymous user
The biggest benefit for a business with a Simple IRA plan is that it provides a very easy way to provide an employee retirement option without all the technical complications of 401Ks and similar account plans. Second, the establishment and maintenance costs to run a Simple IRA plan are a big plus for the cost-conscious business. Additional benefits include No special plan-level tax reporting is required for the employer annually. No discrimination testing is necessary. There is no requirement on the employer to track vesting. All contributions are immediately 100% vested (at the point of deposit the employee owns the full amount in the retirement account without any time delay).
What is the penalty rate on a SIMPLE plan withdrawal in the first year?
Asked Wednesday, January 17, 2001 by an anonymous user
If you withdraw money from a SIMPLE IRA in the first 2 years, you will be subject to a 25% withdrawal penalty.
This is 15% higher than a traditional IRA premature distribution penalty.
This is 15% higher than a traditional IRA premature distribution penalty.
When must a SIMPLE IRA plan be set up by for contributions to be deductible ?
Asked Wednesday, January 17, 2001 by an anonymous user
SIMPLE IRA plans must be set up by 10/1/xx for that year's contributions to be deductible on that year's tax return.
Retirement plans - SIMPLE IRA plan
Asked Wednesday, October 18, 2000 by an anonymous user
A SIMPLE IRA, or "Savings Incentive Match Plan for Employees Individual Retirement Account", is a type of tax-deferred employer-provided retirement plan in the United States that allows employees to set aside money and invest it to grow for later use.
Specifically, it is a type of Individual Retirement Account (IRA) that is set up to be an employer-provided plan. It is an employer sponsored plan, like more well-known plans such as the 401(k) (profit-sharing plans) and 403(b) (Tax Sheltered Annuity plans), but offers simpler and less costly administration rules.
Like a 401(k) plan, the SIMPLE IRA is funded by a pretax salary reduction. Like other salary reduction contributions, these deductions are subject to social security, medicare, and Federal Unemployment Tax Act taxes. Contribution limits for SIMPLE plans are lower than for most other types of employer-provided retirement plans: $12,000 for the current year with a $2,500 catch up contribution, as compared to $17,500 and a $5,500 catch up contribution for convention defined contribution plans (Section 402(g) limit) like 401(k), 401(a), and 403(b) plans.
In 2014 the limitation remains unchanged at $12,000.
Specifically, it is a type of Individual Retirement Account (IRA) that is set up to be an employer-provided plan. It is an employer sponsored plan, like more well-known plans such as the 401(k) (profit-sharing plans) and 403(b) (Tax Sheltered Annuity plans), but offers simpler and less costly administration rules.
Like a 401(k) plan, the SIMPLE IRA is funded by a pretax salary reduction. Like other salary reduction contributions, these deductions are subject to social security, medicare, and Federal Unemployment Tax Act taxes. Contribution limits for SIMPLE plans are lower than for most other types of employer-provided retirement plans: $12,000 for the current year with a $2,500 catch up contribution, as compared to $17,500 and a $5,500 catch up contribution for convention defined contribution plans (Section 402(g) limit) like 401(k), 401(a), and 403(b) plans.
In 2014 the limitation remains unchanged at $12,000.
