What Sep IRA means is "Simplified Employee Pension Individual Retirement Account". Basically it is the retirement plan used by small to medium size companies, Sole proprietors, and even independent contractors (that have a business license).The Sep IRA is easy to set up and can be managed "in house" or the administration can be outsourced to a company that specializes in handling retirement plans. There are a couple things you should be aware of though, like which employees qualify, must you cover all the employees exactly the same, how do you compute the maximum contribution, and what are the dead lines for setting it up and making contributions.

1) be at least 21 years of age

2) has worked for the employer for at least three of the previous five years, and

3) received at least $500 in compensation for the tax year

Each employee must have an IRA stet up

Once all of the qualified employes have joined the Sep IRA they must be treated equally. This means that the contribution percentage for all employees must be the same, including the business owner. Unlike other retirement plans the Sep IRA doesn't let the company contribute more to higher valued employees. They must all receive exactly the same percentage contribution.

The employer may contribute up to 25% of the employee's wages. The total contribution to the Sep IRA can be more than this limit and it includes contributions the employee makes to the IRA separately from the employers contribution.

The contribution limit for self-employed persons is more complicated; barring limits, it is 18.587045% (approximately 18.6%) of net profit.

If you have questions about how to caculate the Sep IRA contribution consult an expert, don't just guess.

The nice thing is that the Sep IRA can be set up any time before the Tax Filing deadline has passed.

Contributions to a Sep IRA can be made any time prior to the employer filing his taxes

The ease with which a Sep IRA can be set up and managed makes it very popular with many small to medium businesses. It also makes it easy for sole proprietors and independent businessmen to have a pension plan. If you fit into one of these categories you should check it out.