Understanding the SEP Account for Small BusinessesThe SEP account has been known as a simplified employee pension account. It enables the employees of that company to prepare for their retirement in an adequate fashion. Employers can save in much the same way as their employees. Both parties are expected to retire at some point. The employer will contribute directly to the individual retirement accounts for all employees of the company including the employer. There are no startup and operating costs that would be expected in a conventional savings setting. It also allows for a contribution of up to 25% of the pay for each employee. This is a wonderful opportunity for small business to work with their employees on retirement incomes using proven methods of working.Some advantages of the SEP accountThe SEP account allows for contributions which are tax deductible so that the income generated is not taxed in the normal way. This can be a significant advantage for businesses which are already facing unprecedented levels of taxation on earnings and investments. The contributions are not locked so that the employer has to make payments in every single year. The employer is free to decide how much they are going to contribute to the unitary fund. The bureaucratic requirement to file documents with the federal government is reduced under this scheme.The SEP account is open to many types of business arrangement including partnerships, sole proprietors and corporations. This means that employees are not taken out of the loop for things that could help them to plan for retirement. There are instances where the employer will be eligible for tax credits of up to five hundred dollars each year for the first three years of the program. This means a lot to small businesses that are always struggling to balance the books. The administrative costs of the SEP account are relatively low and this reduces the hassle that employers and their employees face.Key definitions under the SEP account schemeUnder this scheme the employee is defined as anyone that works for the organization. It also includes self employed people as long as they earned an income. Family members who work for the organization are also not excluded from the scheme. This gives it the widest coverage possible in order to ensure that the public begins to understand the benefits of a savings culture. The eligibility criteria exclude employees that are below the age of twenty one years. The employee must have worked for the organization in three of the last five years.Eligible employees are required to participate in the program and this includes seasonal or part-time employees. The program is open for employees that die during the year or those that are terminated during the qualifying period. The employer has the option to include people under a union contract as well as nonresident alien employees that did not earn an income on that particular business. It is also possible to include employees that received compensation of less than five hundred and fifty dollars within that year.