Anthony, a self-employed plumber, makes a maximum contribution to a SEP for his employee, Debra

Accounting Apr 02, 2021

Anthony, a self-employed plumber, makes a maximum contribution to a SEP for his employee, Debra. Debra's compensation is $50,000 for the year. How much is he allowed to contribute to the plan for Debra?

$_______

Expert Solution

The maximum contribution made for an employee and the related deduction cannot exceed the lesser of 25% of the employee's compensation or $53,000 in 2016.

So, For year 2016 employer's maximum contribution to a SEP for his employee = 25%
$50,000 * 25% = $12,500
He is allowed to contribute $12,500.

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