Katherine's only income for 2020 consisted of 60000 in wages and 2000 in interest income. She is 50 years old and will use single filing status. She is covered by an employer sponsored retirement plan but would like to contribute to a traditional IRA if it will lower her tax liability. Assuming she has no other adjustments to income what is the maximum fully deductible amount she can contribute to a traditional IRA for 2020. a. 0 b. 6000 c. 6500 d. 7500

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Tax Deferred Retirement Benefits

It stands for Simplified Employee Pension Individual Retirement Account. This savings plan is for self-employed persons such as independent contractors, freelancers, entrepreneurs, etc. The tax rules of SEP IRA are the same as traditional IRA. Entrepreneurs can also open SEP IRA accounts for their employees and gain a tax advantage. The employees cannot make contributions to these accounts by themselves however they will be taxed upon withdrawal.