[sitetest]

Dear rwrcpa1,

I don't know about individual IRAs, but with my SEP IRA, it was pre-payroll tax money that went into the accounts. I'm in the middle of setting up a 401(K) to replace the old SEP, and I'd have to double check, but I believe that through the "salary reduction," and with the employer contribution, both are pre-payroll tax.


sitetest

[rwrcpa1]

No, you have to deduct the self-employment tax from your profit before you make the calculation according to this: http://invest-faq.com/articles/ret-plan-sep-ira.html

"In the case of self-employed people, the contribution is based on the net profit from the business (not the gross income). Calculating the maximum allowed requires you to compute the self-employment tax first. This seems to be the formula, where "CR" is the contribution rate, like .15 for a 15 percent rate: CR * ( ( Schedule C profit - ( 0.5 * Schedule SE tax )) / ( 1 + CR ) )"

Wouldn't it be better if the whole thing were tax free and you weren't subject to any BS regulations of the IRS telling you what is best for you?