Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.
Q. For self-employed people, what are the considerations for starting either an SEP or Keogh tax-deferred retirement savings plan? Are the requirements the same? Which is easier? How do I start?
A. An SEP plan is an individual retirement account or individual retirement annuity and is much easier to set up than a Keogh; a Keogh plan is a qualified employer plan established by a sole proprietor or partnership. You need not have other employees to have a Keogh. If you have employees, they must meet minimum participation requirements. To take contribution deductions for a tax year, the plan must have been adopted by the last day of
that year; but contributions may be made up to the due date of your return (plus extensions). An informational tax return is required to be filed for all Keogh plans.
Q. I'm self-employed. Can I take a medical insurance deduction even if I don't itemize?
A. Self-employed persons, partners in partnerships and S corporation shareholders may deduct from gross income up to 30 percent of premiums paid for health insurance for themselves, spouses and dependents. Sole proprietors and partners also may deduct up to 50 percent of self-employment taxes assessed on their net earned income.
The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.
To ask a tax question, call Sundial at (410) 783-1800. Call 268-7736 in Anne Arundel County, 836-5028 in Harford County and 848-0338 in Carroll County. Using a Touch-Tone phone, punch in the four-digit code 6225 after you hear the greeting.
Readers also can e-mail questions through The Sun's Web site -- www.sunspot.net. Visitors to the Web site will be able to access an archive of the questions and answers as well as other useful tax information and links.
Selected questions will be answered in the Business section. No questions will be answered by phone.
Pub Date: 2/14/97