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A comment on The Challenges of Being in the New Contract Workforce. Parent comment

Re:The Challenges of Being in the New Contract Workforce by paulclinger on Tuesday January 23, 2018 @08:32PM (#16219598)
> Heads up that you can only contribute 20% of your earnings up (up to the limit) to a SEP-IRA.

I don't think this is correct. We are talking about employER contribution to the employee SEP-IRA account, which is 25% of the compensation, not exceeding the annual limit (https://www.irs.gov/retirement-plans/retirement-plans-faqs-r...).

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Re:The Challenges of Being in the New Contract Workforce by AgalmicVentures on Tuesday January 23, 2018 @09:28PM (#16219846)
Disclaimer: I am not an accountant and I am definitely not your accountant.

You are correct to say that you can contribute 25% of compensation. However, your wages are different than your profits, even as a self-employed person.

Let's say you are self-employed and you make $1 of profits and pay yourself $0.80 of wages. You can contribute the other $0.20 you have to your SEP-IRA, since it's 25% of your wages (or 20% of your profits).

Because of this, you need $275K of profits to generate $220K of income and a corresponding $55K SEP-IRA contribution.

For more, see: https://en.wikipedia.org/wiki/SEP-IRA#Reduced_rate

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