J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

41.3 Choosing a SEP

Under a SEP (simplified employee pension plan), you may contribute to a special type of IRA more than is allowed under the regular IRA rules. Contributions do not have to be made every year. When you do make contributions, they must be based on a written allocation formula and must not discriminate in favor of yourself, other owners with more than a 5% interest, or highly compensated employees. Coverage requirements for employees are in 8.15. A salary-reduction arrangement for employees may be provided under a qualifying SEP established before 1997 or under a SIMPLE IRA plan established after 1996 (8.17).

The deadline for both setting up and contributing to a SEP is the due date for your return, including extensions. Thus, if you have not set up a Keogh plan by the end of the taxable year (41.1), you may still make a deductible retirement contribution for the year by contributing to a SEP by the due date of your return.