Answer:
Jerry's SEP Plan
Maximum Allowable Contribution
= $30,250.
Explanation:
a) Data and Calculation:
Net earned income = $121,000
SEP IRA Plan = 25% of $121,000 = $30,250
The value of the above calculation is less than the $57,000 maximum.
b) Jerry, as a self-employed therapist, can make contributions to his SEP-IRA each year. These contributions cannot exceed the lesser of 25% of compensation or $57,000 for 2020 ($56,000 for 2019 and subject to annual cost-of-living adjustments for later years), according to the information published by the Internal Revenue Service.
c) Jerry's simplified employee pension (SEP or SEP IRA) is a retirement plan that Jerry can establish as a self-employed therapist or individual.
