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Question for the Money Doctors

Question submitted on Jun 5, 2012.

Question

My husband is a solo practice doctor in southern Arizona. He has 3employees working for him. Our accountant has asked us to start SEP accounts for The company. We have only been in business for two years. So can we open the SEP account just for us,? (the owners) The employees have not worked for us for 3 yrs yet

Answer

SEP IRAs can be a good choice for small professional practices.  The typical eligibility requirements for employees are they must be at least 21 years of age and have performed service for you in at least 3 out of the last 5 years.  One caveat to watch for here is if your husband (or yourself if you are employed by the practice) meets the 3 year service requirement.  If you want to make the plan most restrictive, you can do so as long as you are not excluding yourselves.  If the practice is less than 3 years old you will want the eligibility requirements to match your ability to participate.  Otherwise, you can use the 3 year eligibility requirement and add the employees later once they become eligible.  Hopefully your accountant has the CPA/PFS designations and can assist you with all aspects of starting up this plan.


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