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           Department of the Treasury                    Contents
           Internal Revenue Service
                                                         What's New. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1
                                                         Reminders    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    2
Publication 560
Cat. No. 46574N                                          Introduction  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3
                                                         Chapter  1.  Definitions You Need To Know                     . . . . . . .   5
                                                         Chapter  2.  Simplified Employee 
Retirement 
                                                         Pensions (SEPs)           . . . . . . . . . . . . . . . . . . . . . . . .     7
                                                         Setting up a SEP          . . . . . . . . . . . . . . . . . . . . . . . .     8
Plans                                                    How Much Can I Contribute? . . . . . . . . . . . . . . . .                    8
                                                         Deducting Contributions                 . . . . . . . . . . . . . . . . . . . 9
                                                         Salary Reduction Simplified Employee 
for Small                                                      Pensions (SARSEPs)                . . . . . . . . . . . . . . . . . .   10
                                                         Distributions (Withdrawals)               . . . . . . . . . . . . . . . .     12
Business                                                 Additional Taxes . . . . . . . . . . . . . . . . . . . . . . . .              12
                                                         Reporting and Disclosure Requirements . . . . . . .                           12
(SEP, SIMPLE, and                                        Chapter  3.  SIMPLE Plans               . . . . . . . . . . . . . . . . . .   12
                                                         SIMPLE IRA Plan . . . . . . . . . . . . . . . . . . . . . . .                 13
Qualified Plans)                                         SIMPLE 401(k) Plan . . . . . . . . . . . . . . . . . . . . .                  16
For use in preparing                                     Chapter  4.  Qualified Plans            . . . . . . . . . . . . . . . . .     17
                                                         Kinds of Plans        . . . . . . . . . . . . . . . . . . . . . . . . .       18
2023 Returns                                             Qualification Rules         . . . . . . . . . . . . . . . . . . . . . .       18
                                                         Setting up a Qualified Plan               . . . . . . . . . . . . . . . .     20
                                                         Minimum Funding Requirement . . . . . . . . . . . . .                         21
                                                         Contributions       . . . . . . . . . . . . . . . . . . . . . . . . . .       22
                                                         Employer Deduction . . . . . . . . . . . . . . . . . . . . .                  22
                                                         Elective Deferrals (401(k) Plans)                 . . . . . . . . . . . .     24
                                                         Qualified Roth Contribution Program                     . . . . . . . . .     27
                                                         Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . .           28
                                                         Prohibited Transactions . . . . . . . . . . . . . . . . . . .                 31
                                                         Reporting Requirements . . . . . . . . . . . . . . . . . .                    32
                                                         Chapter  5.  Table and Worksheets for the 
                                                         Self-Employed           . . . . . . . . . . . . . . . . . . . . . . . .       34
                                                         Chapter  6.  How To Get Tax Help                . . . . . . . . . . . . .     39
                                                         Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     43

                                                         Future Developments
                                                         For  the  latest  information  about  developments  related  to 
                                                         Pub.  560,  such  as  legislation  enacted  after  it  was 
                                                         published, go to IRS.gov/Pub560.

                                                         What's New
                                                         Compensation limits for 2023 and 2024.                        For 2023, the 
                                                         maximum  compensation  used  for  figuring  contributions 
                                                         and benefits is $330,000. This limit increases to $345,000 
Get forms and other information faster and easier at:    for 2024.
• IRS.gov (English)    • IRS.gov/Korean (한국어) 
• IRS.gov/Spanish (Español)  • IRS.gov/Russian (Pусский) Elective deferral limits for 2023 and 2024.                     The limit on 
• IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (Tiếng Việt) elective  deferrals,  other  than  catch-up  contributions,  is 

Jul 5, 2024

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$22,500 for 2023 and $23,000 for 2024. These limits ap- in section 402(g)(3)) to an eligible employer plan, subject
ply for participants in SARSEPs, 401(k) plans (excluding to limitation. See the instructions to Form 3800 and Form
SIMPLE plans), section 403(b) plans, and section 457(b) 8881 for more information on the employer contributions
plans. credit.
Defined contribution limits for 2023 and 2024. The Small employer military spouse participation credit.
limit on contributions, other than catch-up contributions, The Secure 2.0 Act added a new military spouse partici-
for a participant in a defined contribution plan is $66,000 pation credit under section 45AA available to eligible small
for 2023 and increases to $69,000 for 2024. employers who maintain defined contribution plans with
Defined benefit limits for 2023 and 2024. The limit on specific features that benefit military spouses. See the in-
annual benefits for a participant in a defined benefit plan is structions to Form 3800 and Form 8881 for more informa-
$265,000 for 2023 and increases to $275,000 for 2024. tion on the military spouse participation credit.
SIMPLE plan salary reduction contribution limits for Designated Roth nonelective contributions and des-
2023 and 2024. The limit on salary reduction contribu- ignated Roth matching contributions. The Secure 2.0
tions, other than catch-up contributions, is $15,500 for Act of 2022 permits certain nonelective contributions and
2023 and increases to $16,000 for 2024. matching contributions that are made after December 29,
2022, to be designated as Roth contributions.
Catch-up contribution limits for 2023 and 2024. A
plan can permit participants who are age 50 or over at the
end of the calendar year to make catch-up contributions in
addition to elective deferrals and SIMPLE plan salary re- Reminders
duction contributions. The catch-up contribution limit for
defined contribution plans other than SIMPLE plans is Small employer automatic enrollment credit. The Fur-
$7,500 for 2023 and 2024. The catch-up contribution limit ther Consolidated Appropriations Act, 2020, P.L. 116-94,
for SIMPLE plans is $3,500 for 2023 and 2024. added section 45T. An eligible employer may claim a tax
A participant's catch-up contributions for a year can't credit if it includes an eligible automatic contribution ar-
exceed the lesser of the following amounts. rangement under a qualified employer plan. The credit
equals $500 per year over a 3-year period beginning with
• The catch-up contribution limit. the first tax year in which it includes the automatic contri-
• The excess of the participant's compensation over the bution arrangement, and may first be claimed on the em-
elective deferrals that aren’t catch-up contributions. ployer’s return for the year 2020.
See Catch-up contributions under Contribution Limits and Increase in credit limitation for small employer plan
Limit on Elective Deferrals in chapters 3 and 4, respec- startup costs. The Further Consolidated Appropriations
tively, for more information. Act, 2020, P.L. 116-94, amended section 45E. For tax
years beginning after December 31, 2019, eligible em-
Required minimum distributions (RMDs). Individuals
ployers can claim a tax credit for the first credit year and
who reach age 72 after December 31, 2022, may delay re-
each of the 2 tax years immediately following. The credit
ceiving their RMDs until April 1 of the year following the
equals 50% of qualified startup costs, up to the greater of
year in which they turn age 73. This change in the age for
(a) $500; or (b) the lesser of (i) $250 for each employee
making these beginning RMDs applies to both IRA own-
who is not a “highly compensated employee” eligible to
ers and participants in a qualified retirement plan.
participate in the employer plan, or (ii) $5,000.
Plans established after end of taxable year. For 2023
and later years, a sole-proprietor with no employees can Note. The SECURE 2.0 Act further amended section
adopt a section 401(k) plan after the end of the taxable 45E to increase the credit for tax years beginning after De-
year, provided the plan is adopted by the tax filing dead- cember 31, 2022. See What’s New.
line (without regard to extensions). See the instructions for Form 3800 and Form 8881 for
Increased small employer pension plan startup cost more information on the small employer automatic enroll-
credit. The Secure 2.0 Act of Division T of the Consolida- ment credit and the small employer startup cost credit.
ted Appropriations Act, 2023, P.L. 117-328 (SECURE 2.0 Restriction on conditions of participation. Effective
Act), provides that eligible employers with 1–50 employ- for plan years beginning after December 31, 2020, a
ees are eligible for an increased small employer pension 401(k) plan can’t require, as a condition of participation,
plan startup cost credit under section 45E of 100% of that an employee complete a period of service that ex-
qualified startup costs, subject to limitation. The credit for tends beyond the close of the earlier of (a) 1 year of serv-
eligible employers with 51–100 employees remains at ice, or (b) the first period of 3 consecutive 12-month peri-
50% of qualified startup costs, subject to limitation. See ods (excluding 12-month periods beginning before
the instructions to Form 3800 and Form 8881 for more in- January 1, 2021) during each of which the employee has
formation on the startup cost credit. completed at least 500 hours of service. Effective for plan
Employer contributions credit. The Secure 2.0 Act years beginning after December 31, 2024, 3 consecutive
added an additional startup cost credit under section 45E 12-month periods are reduced to 2 consecutive 12-month
available to certain eligible employers, in an amount equal periods.
to an applicable percentage of the employer’s Retirement savings contributions credit. Retirement
contributions (not including an elective deferral, as defined plan participants (including self-employed individuals)

2 Publication 560 (2023)

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who make contributions to their plan may qualify for the re- case of a qualified Roth contribution program) pay to the
tirement savings contribution credit. The maximum contri- plan. These amounts (and the earnings on them) are gen-
bution eligible for the credit is $2,000. To take the credit, erally tax free until your employees receive distributions
use Form 8880, Credit for Qualified Retirement Savings from the plan or, in the case of a qualified distribution from
Contributions. For more information on who is eligible for a designated Roth account, completely tax free.
the credit, retirement plan contributions eligible for the
credit, and how to figure the credit, see Form 8880 and its What this publication covers. This publication contains
instructions or go to IRS.gov/Retirement-Plans/Plan- the information you need to understand the following top-
Participant-Employee/Retirement-Savings-Contributions- ics.
Savers-Credit. • What type of plan to set up.
Photographs of missing children. The IRS is a proud
partner with the National Center for Missing & Exploited • How to set up a plan.
Children® (NCMEC). Photographs of missing children se- • How much you can contribute to a plan.
lected by the Center may appear in this publication on pa-
ges that would otherwise be blank. You can help bring • How much of your contribution is deductible.
these children home by looking at the photographs and • How to treat certain distributions.
calling 1-800-THE-LOST (1-800-843-5678) if you recog- How to report information about the plan to the IRS
•
nize a child. and your employees.
• Basic features of SEP, SIMPLE, and qualified plans.
The key rules for SEP, SIMPLE, and qualified plans
Introduction are outlined in Table 1.
This publication discusses retirement plans you can set SEP plans. SEP plans provide a simplified method for
up and maintain for yourself and your employees. In this you to make contributions to a retirement plan for yourself
publication, “you” refers to the employer. See chapter 1 for and your employees. Instead of setting up a profit-sharing
the definition of the term “employer” and the definitions of or money purchase plan with a trust, you can adopt a SEP
other terms used in this publication. This publication cov- agreement and make contributions directly to a traditional
ers the following types of retirement plans. individual retirement account or a traditional individual re-
• SEP (simplified employee pension) plans. tirement annuity (SEP-IRA) set up for yourself and each
eligible employee.
• SIMPLE (savings incentive match plan for employees)
plans. SIMPLE plans. Generally, if you had 100 or fewer em-
ployees who received at least $5,000 in compensation last
• Qualified plans (also called H.R. 10 plans or Keogh year, you can set up a SIMPLE IRA plan. Under a SIMPLE
plans when covering self-employed individuals), in- plan, employees can choose to make salary reduction
cluding 401(k) plans. contributions rather than receiving these amounts as part
SEP, SIMPLE, and qualified plans offer you and your of their regular pay. In addition, you will contribute match-
employees a tax-favored way to save for retirement. You ing or nonelective contributions. The two types of SIMPLE
can deduct contributions you make to the plan for your plans are the SIMPLE IRA plan and the SIMPLE 401(k)
employees. If you are a sole proprietor, you can deduct plan.
contributions you make to the plan for yourself. You can
Qualified plans. The qualified plan rules are more
also deduct trustees' fees if contributions to the plan don't
complex than the SEP plan and SIMPLE plan rules. How-
cover them. Earnings on the contributions are generally
ever, there are advantages to qualified plans, such as in-
tax free until you or your employees receive distributions
creased flexibility in designing plans and increased contri-
from the plan.
bution and deduction limits in some cases.
Under a 401(k) plan, employees can have you contrib-
ute limited amounts of their before-tax (after-tax, in the

Publication 560 (2023) 3

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Table 1. Key Retirement Plan Rules for 2023

    Type
       of 
    Plan           Last Date for Contribution                  Maximum Contribution                                                                                                                                             Maximum Deduction                            When To Set Up Plan
SEP          Due date of employer's return                    Smaller of $66,000 or 25%  1                                                                                                                                      25%  of all participants' 1                 Any time up to the due date of 
             (including extensions).                          of participant's 2                                                                                                                                                compensation.2                              employer's return (including 
                                                              compensation.                                                                                                                                                                                                 extensions).
SIMPLE       Salary reduction contributions: 30               Employee contribution:                                                                                                                                            Same as maximum                             Any time between January 1 
IRA          days after the end of the month for            4 Salary reduction contribution  contribution.                                                                                                                                                                  and October 1 of the calendar 
and          which the contributions are to be made.          up to $15,500; $19,000 if                                                                                                                                                                                     year.
SIMPLE                                                        age 50 or over.                                                                                                                                                                                                
401(k)       Matching or nonelective                                                                                                                                                                                                                                        For a new employer coming 
             contributions: Due date of employer's            Employer contribution:                                                                                                                                                                                        into existence after October 1, 
             return (including extensions).                   Either dollar-for-dollar                                                                                                                                                                                      as soon as administratively 
                                                              matching contributions, up to                                                                                                                                                                                 feasible.
                                                              compensation,
                                                              3% of employee's 3 or fixed 
                                                              nonelective contributions of 2
                                                              2% of compensation.
Qualified    Elective deferral: Due date of                   Employee contribution:                                                                                                                                            25%  of all participants' 1                 By the employer’s tax-filing 
Plan:        employer's return (including 4                   Elective deferral up to                                                                                                                                           compensation,  plus 2                       due date, including 
Defined      extensions).                                     $22,500; $30,000 if age 50                                                                                                                                        amount of elective                          extensions, for the taxable 
Contribution                                                  or over.                                                                                                                                                          deferrals made.                             year.
 Plan                                                          
             Employer contribution:                           Employer contribution:
             Profit-Sharing Plan: Due date of                 Money Purchase Pension 
             employer's return (including                     Plan: Smaller of $66,000 or 1
             extensions). Money Purchase Pan: 8               100%  of participant's 2
             1/2 months after the end of the plan             compensation.
             year.                                             
                                                              Profit-Sharing: Smaller of 1
                                                              $66,000 or 100%  of                                                                                                                                              2
                                                              participant's compensation.
Qualified    Contributions must generally be paid in          Amount needed to provide                                                                                                                                          Based on actuarial                          By the employer’s tax filing 
Plan:        quarterly installments, due 15 days              an annual benefit no larger                                                                                                                                       assumptions and                             due date (although it’s not best 
Defined      after the end of each quarter, with a            than the smaller of $265,000                                                                                                                                      computations.                               to set up after the minimum 
Benefit Plan final contribution due 8 1/2 months after  or 100% of the participant's                                                                                                                                                                                        funding due date).
             the end of the plan year. See Minimum            average compensation for 
             Funding Requirement in chapter 4.                the highest 3 consecutive 
                                                              calendar years.

3124 Under a SIMPLE 401(k) plan, compensation is generally limited to $330,000 in 2023. Net earnings from self-employment must take the contribution into account. See  Compensation is generally limited to $330,000 in 2023.  Certain plans subject to Department of Labor (DOL) rules may have an earlier due date for salary reduction contributions and elective deferrals, such as 401(k) Deduction Limit for Self-Employed Individuals in chapters   and  .2 4
plans. See the “elective deferral” definition in Definitions You Need To Know, later. Solo/self-employed 401(k) plans are non-ERISA plans and don’t fall under DOL 
rules.

What this publication doesn’t cover.            Although the pur-                                                                           Comments  and  suggestions.                                                                                                      We  welcome  your  com-
pose of this publication is to provide general information                                                                                  ments about this publication and your suggestions for fu-
about retirement plans you can set up for your employees,                                                                                   ture editions.
it doesn't contain all the rules and exceptions that apply to                                                                                                                                                                  You  can  send  us  comments  through                                IRS.gov/
these  plans.  You  may  need  professional  help  and  guid-                                                                               FormComments. Or you can write to the Internal Revenue 
ance.                                                                                                                                       Service,  Tax  Forms  and  Publications,  1111  Constitution 
    Also,  this  publication  doesn't  cover  all  the  rules  that                                                                         Ave. NW, IR-6526, Washington, DC 20224.
may be of interest to employees. For example, it doesn't                                                                                                                                                                       Although  we  can’t  respond  individually  to  each  com-
cover the following topics.                                                                                                                 ment  received,  we  do  appreciate  your  feedback  and  will 
                                                                                                                                            consider  your  comments  and  suggestions  as  we  revise 
•   The comprehensive IRA rules an employee needs to 
                                                                                                                                            our tax forms, instructions, and publications. Don’t send 
    know. These rules are covered in Pub. 590-A, Contri-
                                                                                                                                            tax questions, tax returns, or payments to the above ad-
    butions to Individual Retirement Arrangements (IRAs), 
                                                                                                                                            dress.
    and Pub. 590-B, Distributions from Individual Retire-
    ment Arrangements (IRAs).                                                                                                                                                                                                  Getting answers to your tax questions.                               If you have 
•   The comprehensive rules that apply to distributions                                                                                     a tax question not answered by this publication or the                                                                                                                                                                                                                                                                   How 
    from retirement plans. These rules are covered in Pub.                                                                                  To Get Tax Help section at the end of this publication, go 
    575, Pension and Annuity Income.                                                                                                        to  the  IRS  Interactive  Tax  Assistant  page  at                                                                                                     IRS.gov/
                                                                                                                                            Help/ITA  where  you  can  find  topics  by  using  the  search 
•   The comprehensive rules that apply to section 403(b)                                                                                    feature or viewing the categories listed.
    plans. These rules are covered in Pub. 571, Tax-Shel-
    tered Annuity Plans (403(b) Plans) For Employees of                                                                                                                                                                        Getting  tax  forms,  instructions,  and  publications. 
    Public Schools and Certain Tax-Exempt Organiza-                                                                                         Go to                                                                              IRS.gov/Forms to download current and prior-year 
    tions.                                                                                                                                  forms, instructions, and publications.
                                                                                                                                                                                                                               Ordering  forms  and  publications.                      Go  to      IRS.gov/
                                                                                                                                            OrderForms  to  order  current  forms,  instructions,  and 

4                                                                                                                                                                                                                                                                            Publication 560 (2023)

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publications; call 800-829-3676 to order prior-year forms though their earnings are treated as self-employment in-
and instructions. The IRS will process your order for forms come.
and publications as soon as possible. Don’t resubmit re- However, an individual may be a common-law em-
quests you’ve already sent us. You can get forms and pub- ployee and a self-employed person as well. For example,
lications faster online. an attorney can be a corporate common-law employee
during regular working hours and also practice law in the
Tax questions. If you have a tax question not an-
evening as a self-employed person. In another example, a
swered by this publication, check IRS.gov and How To Get
minister employed by a congregation for a salary is a com-
Tax Help at the end of this publication.
mon-law employee even though the salary is treated as
self-employment income for social security tax purposes.
However, fees reported on Schedule C (Form 1040), Profit
or Loss From Business, for performing marriages, bap-
tisms, and other personal services are self-employment
earnings for qualified plan purposes.
1.
Compensation. Compensation for plan allocations is the
pay a participant received from you for personal services
Definitions for a year. You can generally define compensation as in-
cluding all the following payments.
You Need To Know 1. Wages and salaries.
Certain terms used in this publication are defined below. 2. Fees for professional services.
The same term used in another publication may have a
3. Other amounts received (cash or noncash) for per-
slightly different meaning.
sonal services actually rendered by an employee, in-
Annual additions. Annual additions are the total of all cluding, but not limited to, the following items.
your contributions in a year, employee contributions (not a. Commissions and tips.
including rollovers), and forfeitures allocated to a partici-
pant's account. b. Fringe benefits.
c. Bonuses.
Annual benefits. Annual benefits are the benefits to be
paid yearly in the form of a straight life annuity (with no ex- For a self-employed individual, compensation means
tra benefits) under a plan to which employees don't con- the earned income, discussed later, of that individual.
tribute and under which no rollover contributions are Compensation generally includes amounts deferred at
made. the employee's election in the following employee benefit
plans.
Business. A business is an activity in which a profit mo-
tive is present and economic activity is involved. Service • Section 401(k) plans.
as a newspaper carrier under age 18 or as a public official • Section 403(b) plans.
isn’t a business.
• SIMPLE IRA plans.
Common-law employee. A common-law employee is • SARSEPs.
any individual who, under common law, would have the
status of an employee. A leased employee can also be a • Section 457 deferred compensation plans.
common-law employee. • Section 125 cafeteria plans.
A common-law employee is a person who performs
However, an employer can choose to exclude elective
services for an employer who has the right to control and
deferrals under the above plans from the definition of com-
direct the results of the work and the way in which it is
pensation. The limit on elective deferrals is discussed in
done. For example, the employer:
chapter 2 under Salary Reduction Simplified Employee
• Provides the employee's tools, materials, and work- Pension (SARSEP) and in chapter 4.
place; and
Other options. In figuring the compensation of a par-
• Can fire the employee. ticipant, you can treat any of the following amounts as the
Common-law employees aren't self-employed and can't employee's compensation.
set up retirement plans for income from their work, even if • The employee's wages as defined for income tax with-
that income is self-employment income for social security holding purposes.
tax purposes. For example, common-law employees who
are ministers, members of religious orders, full-time insur- • The employee's wages you report in box 1 of Form
ance salespeople, and U.S. citizens employed in the Uni- W-2, Wage and Tax Statement.
ted States by foreign governments can't set up retirement • The employee's social security wages (including elec-
plans for their earnings from those employments, even tive deferrals).

Publication 560 (2023) Chapter 1 Definitions You Need To Know 5

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Compensation generally can't include either of the fol- gardless of how much compensation that person
lowing items. earned or received; or
• Nontaxable reimbursements or other expense allow- • For the preceding year, received compensation from
ances. you of more than $135,000 (if the preceding year is
2022 and increased to $150,000 for 2023), more than
• Deferred compensation (other than elective deferrals).
$155,000 (if the preceding year is 2024), and, if you so
SIMPLE plans. A special definition of compensation choose, was in the top 20% of employees when
applies for SIMPLE plans. See chapter 3. ranked by compensation.

Contribution. A contribution is an amount you pay into a Leased employee. A leased employee who isn't your
plan for all those participating in the plan, including common-law employee must generally be treated as your
self-employed individuals. Limits apply to how much, un- employee for retirement plan purposes if they do all the
der the contribution formula of the plan, can be contrib- following.
uted each year for a participant.
• Provides services to you under an agreement be-
Deduction. A deduction is the plan contribution you can tween you and a leasing organization.
subtract from gross income on your federal income tax re- • Has performed services for you (or for you and related
turn. Limits apply to the amount deductible. persons) substantially full time for at least 1 year.
Earned income. Earned income is net earnings from • Performs services under your primary direction or con-
self-employment, discussed later, from a business in trol.
which your services materially helped to produce the in- Exception. A leased employee isn't treated as your
come. employee if all the following conditions are met.
You can also have earned income from property your
personal efforts helped create, such as royalties from your 1. Leased employees aren't more than 20% of your
books or inventions. Earned income includes net earnings non-highly compensated workforce.
from selling or otherwise disposing of the property, but it 2. The employee is covered under the leasing organiza-
doesn't include capital gains. It includes income from li- tion's qualified pension plan.
censing the use of property other than goodwill.
Earned income includes amounts received for services 3. The leasing organization's plan is a money purchase
by self-employed members of recognized religious sects pension plan that has all the following provisions.
opposed to social security benefits who are exempt from a. Immediate participation. (This requirement doesn't
self-employment tax. apply to any individual whose compensation from
If you have more than one business, but only one has a the leasing organization in each plan year during
retirement plan, only the earned income from that busi- the 4-year period ending with the plan year is less
ness is considered for that plan. than $1,000.)
Elective deferral. An elective deferral is the contribution b. Full and immediate vesting.
made by employees to a qualified retirement plan.
c. A nonintegrated employer contribution rate of at
• Non-owner employees: The employee salary reduc- least 10% of compensation for each participant.
tion/elective deferral contributions must be elected/
made by the end of the tax year and deposited into the However, if the leased employee is your common-law em-
employee’s plan account within 7 business days (safe ployee, that employee will be your employee for all purpo-
harbor) and no later than 15 days. ses, regardless of any pension plan of the leasing organi-
zation.
• Owner/employees: The employee deferrals must be
elected by the end of the tax year and can then be Net earnings from self-employment. For SEP and
made by the tax return filing deadline, including exten- qualified plans, net earnings from self-employment are
sions. your gross income from your trade or business (provided
your personal services are a material income-producing
Employer. An employer is generally any person for whom factor) minus allowable business deductions. Allowable
an individual performs or did perform any service, of what- deductions include contributions to SEP and qualified
ever nature, as an employee. A sole proprietor is treated plans for common-law employees and the deduction al-
as its own employer for retirement plan purposes. How- lowed for the deductible part of your self-employment tax.
ever, a partner isn't an employer for retirement plan purpo- Net earnings from self-employment don’t include items
ses. Instead, the partnership is treated as the employer of excluded from gross income (or their related deductions)
each partner. other than foreign earned income and foreign housing
cost amounts.
Highly compensated employee. A highly compensated
For the deduction limits, earned income is net earnings
employee is an individual who:
for personal services actually rendered to the business.
• Owned more than 5% of the interest in your business You take into account the income tax deduction for the de-
at any time during the year or the preceding year, re- ductible part of self-employment tax and the deduction for

6 Chapter 1 Definitions You Need To Know Publication 560 (2023)

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contributions to the plan made on your behalf when figur-
ing net earnings.
Net earnings include a partner's distributive share of 2.
partnership income or loss (other than separately stated
items, such as capital gains and losses). They don’t in-
clude income passed through to shareholders of S corpo- Simplified Employee
rations. Guaranteed payments to limited partners are net
earnings from self-employment if they are paid for serv-
Pensions (SEPs)
ices to or for the partnership. Distributions of other income
or loss to limited partners aren't net earnings from self-em-
ployment. Topics
For SIMPLE plans, net earnings from self-employment This chapter discusses:
are the amount on line 4 ofSchedule SE (Form 1040),
Self-Employment Tax, before subtracting any contribu- • Setting up a SEP
tions made to the SIMPLE plan for yourself. How much can I contribute
•
Qualified plan. A qualified plan is a retirement plan that • Deducting contributions
offers a tax-favored way to save for retirement. You can
• Salary reduction simplified employee pensions (SAR-
deduct contributions made to the plan for your employees.
SEPs)
Earnings on these contributions are generally tax free until
distributed at retirement. Profit-sharing, money purchase, • Distributions (withdrawals)
and defined benefit plans are qualified plans. A 401(k) • Additional taxes
plan is also a qualified plan.
• Reporting and disclosure requirements
Participant. A participant is an eligible employee who is
covered by your retirement plan. See the discussions, Useful Items
later, of the different types of plans for the definition of an You may want to see:
employee eligible to participate in each type of plan.
Publications
Partner. A partner is an individual who shares ownership
of an unincorporated trade or business with one or more 590-A 590-A Contributions to Individual Retirement
persons. For retirement plans, a partner is treated as an Arrangements (IRAs)
employee of the partnership. 590-B 590-B Distributions from Individual Retirement
Self-employed individual. An individual in business for Arrangements (IRAs)
himself or herself, and whose business isn't incorporated, 3998 3998 Choosing a Retirement Solution for Your Small
is self-employed. Sole proprietors and partners are Business
self-employed. Self-employment can include part-time
4285
work. 4285 SEP Checklist
Not everyone who has net earnings from self-employ- 4286 4286 SARSEP Checklist
ment for social security tax purposes is self-employed for
qualified plan purposes. See Common-law employee and 4333 4333 SEP Retirement Plans for Small Businesses
Net earnings from self-employment, earlier. 4336 4336 SARSEP for Small Businesses
In addition, certain fishermen may be considered
self-employed for setting up a qualified plan. See Pub. 4407 4407 SARSEP—Key Issues and Assistance
595, Capital Construction Fund for Commercial Fisher-
men, for the special rules used to determine whether fish- Forms (and Instructions)
ermen are self-employed. W-2 W-2 Wage and Tax Statement
Sole proprietor. A sole proprietor is an individual who 1040 1040 U.S. Individual Income Tax Return
owns an unincorporated business alone, including a sin- 1040-SR 1040-SR U.S. Tax Return for Seniors
gle-member limited liability company that is treated as a
disregarded entity for tax purposes. For retirement plans, 5305-SEP 5305-SEP Simplified Employee Pension—Individual
a sole proprietor is treated as both an employer and an Retirement Accounts Contribution Agreement
employee. 5305A-SEP 5305A-SEP Salary Reduction Simplified Employee
Pension—Individual Retirement Accounts
Contribution Agreement
8880 8880 Credit for Qualified Retirement Savings
Contributions
8881 8881 Credit for Small Employer Pension Plan
Startup Costs

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A SEP is a written plan that allows you to make contribu- If you adopt an IRS model SEP using Form 5305-SEP,
tions toward your own retirement and your employees' re- no prior IRS approval or determination letter is required.
tirement without getting involved in a more complex quali- Keep the original form. Don't file it with the IRS. Also, us-
fied plan. ing Form 5305-SEP will usually relieve you from filing an-
Under a SEP, you make contributions to a traditional indi- nual retirement plan information returns with the IRS and
vidual retirement arrangement (called a SEP-IRA) set up the Department of Labor. See the Form 5305-SEP instruc-
by or for each eligible employee. A SEP-IRA is owned and tions for details. If you choose not to use Form 5305-SEP,
controlled by the employee, and you make contributions to you should seek professional advice in adopting a SEP.
the financial institution where the SEP-IRA is maintained. When not to use Form 5305-SEP. You can't use
SEP-IRAs are set up for, at a minimum, each eligible em- Form 5305-SEP if any of the following apply.
ployee (defined below). A SEP-IRA may have to be set up 1. You currently maintain any other qualified retirement
for a leased employee (defined in chapter 1), but doesn't plan other than another SEP.
need to be set up for excludable employees (defined
later). 2. You have any eligible employees for whom IRAs
haven’t been set up.
Eligible employee. An eligible employee is an individual
3. You use the services of leased employees, who aren't
who meets all the following requirements.
your common-law employees (as described in chap-
• Has reached age 21. ter 1).
• Has worked for you in at least 3 of the last 5 years. 4. You are a member of any of the following unless all eli-
• Has received at least $750 in compensation from you gible employees of all the members of these groups,
in 2023. The amount remains the same for 2023. trades, or businesses participate under the SEP.
You can use less restrictive participation require- a. An affiliated service group described in section
TIP ments than those listed, but not more restrictive 414(m).
ones. b. A controlled group of corporations described in
section 414(b).
Excludable employees. The following employees can
be excluded from coverage under a SEP. c. Trades or businesses under common control de-
scribed in section 414(c).
• Employees covered by a union agreement and whose
retirement benefits were bargained for in good faith by 5. You don't pay the cost of the SEP contributions.
the employees' union and you.
Information you must give to employees. You must
• Nonresident alien employees who have received no give each eligible employee a copy of Form 5305-SEP, its
U.S. source wages, salaries, or other personal serv- instructions, and the other information listed in the Form
ices compensation from you. For more information 5305-SEP instructions. An IRS model SEP isn't consid-
about nonresident aliens, see Pub. 519, U.S. Tax ered adopted until you give each employee this informa-
Guide for Aliens. tion.

Setting up the employee's SEP-IRA. A SEP-IRA must
be set up by or for each eligible employee. SEP-IRAs can
Setting up a SEP
be set up with banks, insurance companies, or other quali-
fied financial institutions. You send SEP contributions to
There are three basic steps in setting up a SEP.
the financial institution where the SEP-IRA is maintained.
1. You must execute a formal written agreement to pro-
vide benefits to all eligible employees. Deadline for setting up a SEP. You can set up a SEP for
any year as late as the due date (including extensions) of
2. You must give each eligible employee certain informa- your income tax return for that year.
tion about the SEP.
3. A SEP-IRA must be set up by or for each eligible em-
ployee. How Much Can I Contribute?
Many financial institutions will help you set up a
TIP SEP. The SEP rules permit you to contribute a limited amount of
money each year to each employee's SEP-IRA. If you are
self-employed, you can contribute to your own SEP-IRA.
Formal written agreement. You must execute a formal Contributions must be in the form of money (cash, check,
written agreement to provide benefits to all eligible em- or money order). You can't contribute property. However,
ployees under a SEP. You can satisfy the written agree- participants may be able to transfer or roll over certain
ment requirement by adopting an IRS model SEP using property from one retirement plan to another. See Pubs.
Form 5305-SEP. However, see When not to use Form 590-A and 590-B for more information about rollovers.
5305-SEP, later.

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You don't have to make contributions every year. But if you can only contribute $66,000 to your employee’s
you make contributions, they must be based on a written SEP-IRA.
allocation formula and must not discriminate in favor of
highly compensated employees (defined in chapter 1). More than one plan. If you contribute to a defined contri-
When you contribute, you must contribute to the bution plan (defined in chapter 4), annual additions to an
SEP-IRAs of all participants who actually performed per- account are limited to the lesser of $66,000 or 100% of the
sonal services during the year for which the contributions participant's compensation. When you figure this limit, you
are made, including employees who die or terminate em- must add your contributions to all defined contribution
ployment before the contributions are made. plans maintained by you. Because a SEP is considered a
defined contribution plan for this limit, your contributions to
Contributions are deductible within limits, as discussed a SEP must be added to your contributions to other de-
later, and generally aren't taxable to the plan participants. fined contribution plans you maintain.
Employer contributions to a SEP-IRA won’t affect the
Tax treatment of excess contributions. Excess contri-
amount an individual can contribute to a Roth or traditional
butions are your contributions to an employee's SEP-IRA
IRA.
(or to your own SEP-IRA) for 2023 that exceed the lesser
Unlike regular contributions to a traditional IRA before of the following amounts.
2020, contributions under a SEP can be made to partici- • 25% of the employee's compensation (or, for you,
pants over age 70 / . If you are self-employed, you can 1 2 20% of your net earnings from self-employment).
also make contributions under the SEP for yourself even if
you are over age 70 / . Participants age 72 or over (if age 1 2 • $66,000.
70 / was reached after December 31, 2019) must take 1 2 Excess contributions are included in the employee's in-
RMDs. come for the year and are treated as contributions by the
employee to their SEP-IRA. For more information on em-
Note. Individuals who reach age 72 after December ployee tax treatment of excess contributions, see Pub.
31, 2022, may delay receiving their RMDs until April 1 of 590-A.
the year following the year in which they reach age 73.
Reporting on Form W-2. Don't include SEP contribu-
Time limit for making contributions. To deduct contri- tions on your employee's Form W-2 unless contributions
butions for a year, you must make the contributions by the were made under a salary reduction arrangement (dis-
due date (including extensions) of your tax return for the cussed later).
year.

Contribution Limits Deducting Contributions
Contributions you make for 2023 to a common-law em-
Generally, you can deduct the contributions you make
ployee's SEP-IRA can't exceed the lesser of 25% of the
each year to each employee's SEP-IRA. If you are
employee's compensation or $66,000. Compensation
self-employed, you can deduct the contributions you make
generally doesn't include your contributions to the SEP.
each year to your own SEP-IRA.
The SEP plan document will specify how the employer
contribution is determined and how it will be allocated to
participants. Deduction Limit for Contributions for
Participants
Example. Your employee has earned $21,000 for
2023. The maximum contribution you can make to your The most you can deduct for your contributions to your or
employee’s SEP-IRA is $5,250 (25% (0.25) x $21,000). your employee's SEP-IRA is the lesser of the following
amounts.
Contributions for yourself. The annual limits on your
contributions to a common-law employee's SEP-IRA also 1. Your contributions (including any excess contributions
apply to contributions you make to your own SEP-IRA. carryover).
However, special rules apply when figuring your maximum
2. 25% of the compensation (limited to $330,000 per
deductible contribution. See Deduction Limit for Self-Em-
participant) paid to the participants during 2023, from
ployed Individuals, later.
the business that has the plan, not to exceed $66,000
Annual compensation limit. You can't consider the part per participant.
of an employee's compensation over $330,000 when fig- In 2024, the amounts in (2) above increase to $345,000
uring your contribution limit for that employee. However, and $69,000, respectively.
$66,000 is the maximum contribution for an eligible em-
ployee. These limits increase to $345,000 and $69,000,
respectively, in 2024.

Example. Your employee has earned $260,000 for
2023. Because of the maximum contribution limit for 2023,

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Deduction Limit for Where To Deduct Contributions
Self-Employed Individuals
Deduct the contributions you make for your common-law
If you contribute to your own SEP-IRA, you must make a employees on your tax return. For example, sole proprie-
special computation to figure your maximum deduction for tors deduct them on Schedule C (Form 1040) or Sched-
these contributions. When figuring the deduction for con- ule F (Form 1040), Profit or Loss From Farming; partner-
tributions made to your own SEP-IRA, compensation is ships deduct them on Form 1065, U.S. Return of
your net earnings from self-employment (defined in chap- Partnership Income; and corporations deduct them on
ter 1), which takes into account both the following deduc- Form 1120, U.S. Corporation Income Tax Return, or Form
tions. 1120-S, U.S. Income Tax Return for an S Corporation.

• The deduction for the deductible part of your self-em- Sole proprietors and partners deduct contributions for
ployment tax. themselves on line 16 of Schedule 1 (Form 1040). (If you
• The deduction for contributions to your own SEP-IRA. are a partner, contributions for yourself are shown on the
Schedule K-1 (Form 1065), Partner's Share of Income,
The deduction for contributions to your own SEP-IRA
Deductions, Credits, etc., you receive from the partner-
and your net earnings depend on each other. For this rea-
ship.)
son, you determine the deduction for contributions to your
own SEP-IRA indirectly by reducing the contribution rate Remember that sole proprietors and partners
called for in your plan. To do this, use the Rate Table for ! can't deduct as a business expense contributions
Self-Employed or the Rate Worksheet for Self-Employed, CAUTION made to a SEP for themselves, only those made
whichever is appropriate for your plan's contribution rate, for their common-law employees.
in chapter 5. Then, figure your maximum deduction by us-
ing the Deduction Worksheet for Self-Employed in chap-
ter 5.
Salary Reduction Simplified

Carryover of Excess SEP Employee Pensions
Contributions
(SARSEPs)
If you made SEP contributions that are more than the de-
duction limit (nondeductible contributions), you can carry A SARSEP is a SEP set up before 1997 that includes a
over and deduct the difference in later years. However, the salary reduction arrangement. (See the Caution next.) Un-
carryover, when combined with the contribution for the der a SARSEP, your employees can choose to have you
later year, is subject to the deduction limit for that year. If contribute part of their pay to their SEP-IRAs rather than
you also contributed to a defined benefit plan or defined receive it in cash. This contribution is called an elective
contribution plan, see Carryover of Excess Contributions deferral because employees choose (elect) to set aside
under Employer Deduction in chapter 4 for the carryover the money, and they defer the tax on the money until it is
limit. distributed to them.
Excise tax. If you made nondeductible (excess) contribu- You aren't allowed to set up a SARSEP after
tions to a SEP, you may be subject to a 10% excise tax. ! 1996. However, participants (including employees
For information about the excise tax, see Excise Tax for CAUTION hired after 1996) in a SARSEP set up before 1997
Nondeductible (Excess) Contributions under Employer can continue to have you contribute part of their pay to the
Deduction in chapter 4. plan. If you are interested in setting up a retirement plan
that includes a salary reduction arrangement, see chap-
ter 3.
When To Deduct Contributions
When you can deduct contributions made for a year de- Who can have a SARSEP? A SARSEP set up before
pends on the tax year for which the SEP is maintained. 1997 is available to you and your eligible employees only if
all the following requirements are met.
• If the SEP is maintained on a calendar-year basis, you
deduct the yearly contributions on your tax return for • At least 50% of your employees eligible to participate
the year within which the calendar year ends. choose to make elective deferrals.
• If you file your tax return and maintain the SEP using a • You have 25 or fewer employees who were eligible to
fiscal year or short tax year, you deduct contributions participate in the SEP at any time during the preceding
made for a year on your tax return for that year. year.
• The elective deferrals of your highly compensated em-
Example. You are a fiscal-year taxpayer whose tax
ployees meet the SARSEP average deferral percent-
year ends June 30. You maintain a SEP on a calen-
age (ADP) test.
dar-year basis. You deduct SEP contributions made for
calendar year 2023 on your tax return for your tax year SARSEP ADP test. Under the SARSEP ADP test, the
ending June 30, 2024. amount deferred each year by each eligible highly

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compensated employee as a percentage of pay (the de- Catch-up contributions. A SARSEP can permit partici-
ferral percentage) can't be more than 125% of the ADP of pants who are age 50 or over at the end of the calendar
all non-highly compensated employees eligible to partici- year to also make catch-up contributions. The catch-up
pate. A highly compensated employee is defined in chap- contribution limit is $7,500 for 2023 and 2024. Elective de-
ter 1. ferrals aren't treated as catch-up contributions for 2023
until they exceed the elective deferral limit (the lesser of
Deferral percentage. The deferral percentage for an
25% of compensation, or $22,500), the SARSEP ADP test
employee for a year is figured as follows.
limit discussed earlier, or the plan limit (if any). However,
the catch-up contribution a participant can make for a year
The elective employer contributions can't exceed the lesser of the following amounts.
(excluding certain catch-up contributions)
paid to the SEP for the employee for the year • The catch-up contribution limit.
The employee's compensation The excess of the participant's compensation over the
(limited to $330,000 in 2023) •
elective deferrals that aren't catch-up contributions.
The instructions for Form 5305A-SEP have a Catch-up contributions aren't subject to the elective de-
TIP worksheet you can use to determine whether the ferral limit (the lesser of 25% of compensation, or $22,500
elective deferrals of your highly compensated em- in 2023 and $23,000 in 2024).

ployees meet the SARSEP ADP test. Overall limit on SEP contributions. If you also make
nonelective contributions to a SEP-IRA, the total of the
Employee compensation. For figuring the deferral
nonelective and elective contributions to that SEP-IRA
percentage, compensation is generally the amount you
can't exceed the lesser of 25% of the employee's compen-
pay to the employee for the year. Compensation includes
sation, or $66,000 for 2023 ($69,000 for 2024). The same
the elective deferral and other amounts deferred in certain
rule applies to contributions you make to your own
employee benefit plans. See Compensation in chapter 1.
SEP-IRA. See Contribution Limits, earlier.
Elective deferrals under the SARSEP are included in figur-
ing your employees' deferral percentage even though they Figuring the elective deferral. For figuring the 25% limit
aren't included in the income of your employees for in- on elective deferrals, compensation doesn't include SEP
come tax purposes. contributions, including elective deferrals or other
Compensation of self-employed individuals. If you amounts deferred in certain employee benefit plans.
are self-employed, compensation is your net earnings
from self-employment as defined in chapter 1. Tax Treatment of Deferrals
Compensation doesn't include tax-free items (or de-
ductions related to them) other than foreign earned in- Elective deferrals that aren't more than the limits dis-
come and housing cost amounts. cussed earlier under Limit on Elective Deferrals are exclu-
ded from your employees' wages subject to federal in-
Choice not to treat deferrals as compensation. You come tax in the year of deferral. However, these deferrals
can choose not to treat elective deferrals (and other are included in wages for social security, Medicare, and
amounts deferred in certain employee benefit plans) for a federal unemployment (FUTA) taxes.
year as compensation under your SARSEP.
Excess deferrals. For 2023, excess deferrals are the
Limit on Elective Deferrals elective deferrals for the year that are more than the
$22,500 limit discussed earlier. For a participant who is el-
The most a participant can choose to defer for calendar igible to make catch-up contributions, excess deferrals are
year 2023 is the lesser of the following amounts. the elective deferrals that are more than $30,000. The
treatment of excess deferrals made under a SARSEP is
1. 25% of the participant's compensation (limited to
similar to the treatment of excess deferrals made under a
$330,000 of the participant's compensation).
qualified plan. See Treatment of Excess Deferrals under
2. $22,500. Elective Deferrals (401(k) Plans) in chapter 4.

The $22,500 limit applies to the total elective deferrals Excess SEP contributions. Excess SEP contributions
the employee makes for the year to a SEP and any of the are elective deferrals of highly compensated employees
following. that are more than the amount permitted under the SAR-
• Cash or deferred arrangement (section 401(k) plan). SEP ADP test. You must notify your highly compensated
employees within 2 / months after the end of the plan 1 2
• Salary reduction arrangement under a tax-sheltered year of their excess SEP contributions. If you don't notify
annuity plan (section 403(b) plan). them within this time period, you must pay a 10% tax on
• SIMPLE IRA plan. the excess. For an explanation of the notification require-
ments, see Revenue Procedure 91-44, 1991-2 C.B. 733. If
In 2024, the $330,000 limit increases to $345,000, and
you adopted a SARSEP using Form 5305A-SEP, the notifi-
the $22,500 limit increases to $23,000.
cation requirements are explained in the instructions for
that form.

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Reporting on Form W-2. Don’t include elective deferrals
in the “Wages, tips, other compensation” box of Form
W-2. You must, however, include them in the “Social se- Reporting and Disclosure
curity wages” and “Medicare wages and tips” boxes. You
Requirements
must also include them in box 12. Check the “Retirement
plan” checkbox in box 13. For more information, see the
If you set up a SEP using Form 5305-SEP, you must give
Form W-2 instructions.
your eligible employees certain information about the SEP
when you set it up. See Setting Up a SEP, earlier. Also,
you must give your eligible employees a statement each
Distributions (Withdrawals) year showing any contributions to their SEP-IRAs. You
must also give them notice of any excess contributions.
As an employer, you can't prohibit distributions from a For details about other information you must give them,
SEP-IRA. Also, you can't make your contributions on the see the instructions for Form 5305-SEP or Form
condition that any part of them must be kept in the ac- 5305A-SEP (for a salary SARSEP).
count after you have made your contributions to the em-
Even if you didn't use Form 5305-SEP or Form
ployee's accounts.
5305A-SEP to set up your SEP, you must give your em-
Distributions are subject to IRA rules. Generally, you or ployees information similar to that described above. For
your employee must begin to receive distributions from a more information, see the instructions for either Form
SEP-IRA by April 1 of the first year after the calendar year 5305-SEP or Form 5305A-SEP.
in which you or your employee reaches age 72 (if age
70 / was reached after December 31, 2019). For more in-1 2
formation about IRA rules, including the tax treatment of
distributions, rollovers, required distributions, and income
tax withholding, see Pubs. 590-A and 590-B.
3.
Note. Individuals who reach age 72 after December
31, 2022, may delay receiving their RMDs until April 1 of
the year following the year in which they reach age 73. SIMPLE Plans

Topics
Additional Taxes This chapter discusses:

The tax advantages of using SEP-IRAs for retirement sav- SIMPLE IRA plans
•
ings can be offset by additional taxes that may be im-
posed for all the following actions. • SIMPLE 401(k) plans
• Making excess contributions.
Useful Items
• Making early withdrawals. You may want to see:
• Not making required withdrawals.
Publications
For information about these taxes, see Pubs. 590-A 590-A 590-A Contributions to Individual Retirement
and 590-B. Also, a SEP-IRA may be disqualified, or an ex-
Arrangements (IRAs)
cise tax may apply, if the account is involved in a prohibi-
ted transaction, discussed next. 590-B 590-B Distributions from Individual Retirement
Arrangements (IRAs)
Prohibited transaction. If an employee improperly uses 3998 3998 Choosing a Retirement Solution for Your Small
their SEP-IRA, such as by borrowing money from it, the
employee has engaged in a prohibited transaction. In that Business
case, the SEP-IRA will no longer qualify as an IRA. For a 4284 4284 SIMPLE IRA Plan Checklist
list of prohibited transactions, see Prohibited Transactions 4334 4334 SIMPLE IRA Plans for Small Businesses
in chapter 4.
Effects on employee. If a SEP-IRA is disqualified be- Forms (and Instructions)
cause of a prohibited transaction, the assets in the ac- W-2 W-2 Wage and Tax Statement
count will be treated as having been distributed to the em- 5304-SIMPLE 5304-SIMPLE Savings Incentive Match Plan for
ployee on the first day of the year in which the transaction
occurred. The employee must include in income the fair Employees of Small Employers (SIMPLE)—Not
market value of the assets (on the first day of the year) for Use With a Designated Financial Institution
that is more than any cost basis in the account. Also, the 5305-SIMPLE 5305-SIMPLE Savings Incentive Match Plan for
employee may have to pay the additional tax for making Employees of Small Employers (SIMPLE)—for
early withdrawals. Use With a Designated Financial Institution

12 Chapter 3 SIMPLE Plans Publication 560 (2023)

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8880 8880 Credit for Qualified Retirement Savings A different rule applies if you don't meet the 100-em-
Contributions ployee limit because of an acquisition, disposition, or simi-
lar transaction. Under this rule, the SIMPLE IRA plan will
8881 8881 Credit for Small Employer Pension Plan
be treated as meeting the 100-employee limit for the year
Startup Costs and Auto Enrollment
of the transaction and the 2 following years if both the fol-
A SIMPLE plan is a written arrangement that provides you lowing conditions are satisfied.
and your employees with a simplified way to make contri- Coverage under the plan hasn’t significantly changed
•
butions to provide retirement income. Under a SIMPLE during the grace period.
plan, employees can choose to make salary reduction
contributions to the plan rather than receiving these • The SIMPLE IRA plan would have continued to qualify
amounts as part of their regular pay. In addition, you will after the transaction if you had remained a separate
contribute matching or nonelective contributions. employer.
SIMPLE plans can only be maintained on a calendar-year The grace period for acquisitions, dispositions,
basis. ! and similar transactions also applies if, because
CAUTION of these types of transactions, you don't meet the
A SIMPLE plan can be set up in either of the following rules explained under Other qualified plan or Who Can
ways. Participate in a SIMPLE IRA Plan, later.
• Using SIMPLE IRAs (SIMPLE IRA plan).
Other qualified plan. The SIMPLE IRA plan must gener-
• As part of a 401(k) plan (SIMPLE 401(k) plan).
ally be the only retirement plan to which you make contri-
Many financial institutions will help you set up a butions, or to which benefits accrue, for service in any
TIP SIMPLE plan. year beginning with the year the SIMPLE IRA plan be-
comes effective.
Exception. If you maintain a qualified plan for collec-
tive bargaining employees, you are permitted to maintain a
SIMPLE IRA Plan SIMPLE IRA plan for other employees.

A SIMPLE IRA plan is a retirement plan that uses a SIM-
Who Can Participate in a SIMPLE IRA
PLE IRA for each eligible employee. Under a SIMPLE IRA
plan, a SIMPLE IRA must be set up for each eligible em- Plan?
ployee. For the definition of an eligible employee, see Who
Eligible employee. Any employee who received at least
Can Participate in a SIMPLE IRA Plan, later.
$5,000 in compensation during any 2 years preceding the
current calendar year and is reasonably expected to re-
Who Can Set up ceive at least $5,000 during the current calendar year is
a SIMPLE IRA Plan? eligible to participate. The term “employee” includes a
self-employed individual who received earned income.
You can set up a SIMPLE IRA plan if you meet both the You can use less restrictive eligibility requirements (but
following requirements. not more restrictive ones) by eliminating or reducing the
• You meet the employee limit. prior year compensation requirements, the current year
compensation requirements, or both. For example, you
• You don't maintain another qualified plan unless the can allow participation for employees who received at
other plan is for collective bargaining employees. least $3,000 in compensation during any preceding calen-
dar year. However, you can't impose any other conditions
Employee limit. You can set up a SIMPLE IRA plan only
for participating in a SIMPLE IRA plan.
if you had 100 or fewer employees who received $5,000 or
more in compensation from you for the preceding year. Excludable employees. The following employees don't
Under this rule, you must take into account all employees need to be covered under a SIMPLE IRA plan.
employed at any time during the calendar year regardless
of whether they are eligible to participate. Employees in- • Employees who are covered by a union agreement
clude self-employed individuals who received earned in- and whose retirement benefits were bargained for in
come and leased employees (defined in chapter 1). good faith by the employees' union and you.
Once you set up a SIMPLE IRA plan, you must con- • Nonresident alien employees who have received no
tinue to meet the 100-employee limit each year you main- U.S. source wages, salaries, or other personal serv-
tain the plan. ices compensation from you.

Grace period for employers who cease to meet the Compensation. Compensation for employees is the total
100-employee limit. If you maintain the SIMPLE IRA wages, tips, and other compensation from the employer
plan for at least 1 year and you cease to meet the 100-em- subject to federal income tax withholding and the amounts
ployee limit in a later year, you will be treated as meeting it paid for domestic service in a private home, local college
for the 2 calendar years immediately following the calen- club, or local chapter of a college fraternity or sorority.
dar year for which you last met it.

Publication 560 (2023) Chapter 3 SIMPLE Plans 13

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Compensation also includes the employee's salary reduc- custodial account documents the participant and the
tion contributions made under this plan and, if applicable, trustee (or custodian) can use for this purpose.
elective deferrals under a section 401(k) plan, a SARSEP, Contributions to a SIMPLE IRA won't affect the amount
or a section 403(b) annuity contract and compensation an individual can contribute to a Roth or traditional IRA.
deferred under a section 457 plan required to be reported
Deadline for setting up a SIMPLE IRA. A SIMPLE
by the employer on Form W-2. If you are self-employed,
IRA must be set up for an employee before the first date
compensation is your net earnings from self-employment
by which a contribution is required to be deposited into the
(line 4 of Schedule SE (Form 1040) before subtracting any
employee's IRA. See Time limits for contributing funds,
contributions made to the SIMPLE IRA plan for yourself.
later, under Contribution Limits.

How To Set up a SIMPLE IRA Plan
Notification Requirement
You can use Form 5304-SIMPLE or Form 5305-SIMPLE to
If you adopt a SIMPLE IRA plan, you must notify each em-
set up a SIMPLE IRA plan. Each form is a model SIMPLE
ployee of the following information before the beginning of
plan document. Which form you use depends on whether
the election period.
you select a financial institution or your employees select
the institution that will receive the contributions. 1. The employee's opportunity to make or change a sal-
ary reduction choice under a SIMPLE IRA plan.
Use Form 5304-SIMPLE if you allow each plan partici-
pant to select the financial institution for receiving their 2. Your decision to make either matching contributions
SIMPLE IRA plan contributions. Use Form 5305-SIMPLE or nonelective contributions (discussed later).
if you require that all contributions under the SIMPLE IRA
3. A summary description provided by the financial insti-
plan be deposited initially at a designated financial institu-
tution.
tion.
4. Written notice that their balance can be transferred
The SIMPLE IRA plan is adopted when you have com-
without cost or penalty if they use a designated finan-
pleted all appropriate boxes and blanks on the form and
cial institution.
you (and the designated financial institution, if any) have
signed it. Keep the original form. Don’t file it with the IRS. Election period. The election period is generally the
60-day period immediately preceding January 1 of a cal-
Other uses of the forms. If you set up a SIMPLE IRA
endar year (November 2 to December 31 of the preceding
plan using Form 5304-SIMPLE or Form 5305-SIMPLE,
calendar year). However, the dates of this period are
you can use the form to satisfy other requirements, includ-
modified if you set up a SIMPLE IRA plan mid-year (for ex-
ing the following.
ample, on July 1) or if the 60-day period falls before the
• Meeting employer notification requirements for the first day an employee becomes eligible to participate in
SIMPLE IRA plan. Form 5304-SIMPLE and Form the SIMPLE IRA plan.
5305-SIMPLE contain a Model Notification to Eligible A SIMPLE IRA plan can provide longer periods for per-
Employees that provides the necessary information to mitting employees to enter into salary reduction agree-
the employee. ments or to modify prior agreements. For example, a SIM-
• Maintaining the SIMPLE IRA plan records and proving PLE IRA plan can provide a 90-day election period
you set up a SIMPLE IRA plan for employees. instead of the 60-day period. Similarly, in addition to the
60-day period, a SIMPLE IRA plan can provide quarterly
Deadline for setting up a SIMPLE IRA plan. You can election periods during the 30 days before each calendar
set up a SIMPLE IRA plan effective on any date from Jan- quarter, other than the first quarter of each year.
uary 1 through October 1 of a year, provided you didn't
previously maintain a SIMPLE IRA plan. This requirement Contribution Limits
doesn't apply if you are a new employer that comes into
existence after October 1 of the year the SIMPLE IRA plan Contributions are made up of salary reduction contribu-
is set up and you set up a SIMPLE IRA plan as soon as tions and employer contributions. You, as the employer,
administratively feasible after your business comes into must make either matching contributions or nonelective
existence. If you previously maintained a SIMPLE IRA contributions, defined later. No other contributions can be
plan, you can set up a SIMPLE IRA plan effective only on made to the SIMPLE IRA plan. These contributions, which
January 1 of a year. A SIMPLE IRA plan can't have an ef- you can deduct, must be made timely. See Time limits for
fective date that is before the date you actually adopt the contributing funds, later.
plan.
Salary reduction contributions. The amount the em-
Setting up a SIMPLE IRA. SIMPLE IRAs are the individ- ployee chooses to have you contribute to a SIMPLE IRA
ual retirement accounts or annuities into which the contri- on their behalf can't be more than $15,500 for 2023 and
butions are deposited. A SIMPLE IRA must be set up for increases to $16,000 for 2024. These contributions must
each eligible employee. Forms 5305-S, SIMPLE Individual be expressed as a percentage of the employee's compen-
Retirement Trust Account, and 5305-SA, SIMPLE Individ- sation unless you permit the employee to express them as
ual Retirement Custodial Account, are model trust and a specific dollar amount. You can't place restrictions on

14 Chapter 3 SIMPLE Plans Publication 560 (2023)

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the contribution amount (such as limiting the contribution                 during the 5-year period that ends with (and includes) the 
percentage),  except  to  comply  with  the  $15,500  limit  for           year for which the choice is effective.
2023 ($16,000 for 2024).
If you or an employee participates in any other qualified                  Nonelective  contributions.            Instead  of  matching  contri-
plan during the year and you or your employee has salary                   butions,  you  can  choose  to  make  nonelective  contribu-
reduction  contributions  (elective  deferrals)  under  those              tions  of  2%  of  compensation  on  behalf  of  each  eligible 
plans, the salary reduction contributions under a SIMPLE                   employee who has at least $5,000 (or some lower amount 
IRA  plan  also  count  toward  the  overall  annual  limit                you select) of compensation from you for the year. If you 
($22,500 for 2023; $23,000 for 2024) on exclusion of sal-                  make  this  choice,  you  must  make  nonelective  contribu-
ary reduction contributions and other elective deferrals.                  tions whether or not the employee chooses to make salary 
                                                                           reduction contributions. Only $330,000 of the employee's 
Catch-up contributions.               A SIMPLE IRA plan can per-           compensation can be taken into account to figure the con-
mit participants who are age 50 or over at the end of the                  tribution limit in 2023 ($345,000 in 2024).
calendar  year  to  also  make  catch-up  contributions.  The              If  you  choose  this  2%  contribution  formula,  you  must 
catch-up contribution limit for SIMPLE IRA plans is $3,500                 notify  the  employees  within  a  reasonable  period  of  time 
for  2023  and  2024.  Salary  reduction  contributions  aren't            before  the  60-day  election  period  (discussed  earlier)  for 
treated  as  catch-up  contributions  until  they  exceed                  the calendar year.
$15,500  for  2023  ($16,000  for  2024).  However,  the 
catch-up  contribution  a  participant  can  make  for  a  year            Example  1.  In  2023,  your  employee,  Jane  Wood, 
can't exceed the lesser of the following amounts.                          earned $36,000 and chose to have you contribute 10% of 
• The catch-up contribution limit.                                         her  salary.  Your  net  earnings  from  self-employment  are 
                                                                           $50,000, and you choose to contribute 10% of your earn-
• The excess of the participant's compensation over the                    ings  to  your  SIMPLE  IRA.  You  make  a  2%  nonelective 
  salary reduction contributions that aren't catch-up                      contribution. Both of you are under age 50. The total con-
  contributions.                                                           tribution you make for Jane is $4,320, figured as follows.

Employer  matching  contributions.                    You  are  generally  Salary reduction contributions
required to match each employee's salary reduction con-                    ($36,000 × 10% (0.10)). . . . . . . . . . . . . . . . . . . . .  $3,600
tribution(s) on a dollar-for-dollar basis up to 3% of the em-              2% nonelective contributions
ployee's compensation, where only employees who have                       ($36,000 × 2% (0.02)). . . . . . . . . . . . . . . . . . . . . . 720
elected  to  make  contributions  will  receive  an  employer              Total contributions . . . . . . . . . . . . . . . . . . . . . .  $4,320
matching  contribution.  This  requirement  doesn't  apply  if 
you make nonelective contributions, as discussed later.                    The total contribution you make for yourself is $6,000, 
                                                                           figured as follows.
Example. In 2023, your employee earned $25,000 and 
chose to defer 5% of their salary. The net earnings from                   Salary reduction contributions
self-employment are $40,000, and you choose to contrib-                    ($50,000 × 10% (0.10)). . . . . . . . . . . . . . . . . . . . .  $5,000
ute 10% of your earnings to your SIMPLE IRA. You make                      2% nonelective contributions
3%  matching  contributions.  The  total  contribution  made               ($50,000 × 2% (0.02)). . . . . . . . . . . . . . . . . . . . . . 1,000
for the employee is $2,000, figured as follows.                            Total contributions . . . . . . . . . . . . . . . . . . . . . .  $6,000

Salary reduction contributions                                             Example  2.  Using  the  same  facts  as  in                     Example  1 
($25,000 × 5% (0.05)). . . . . . . . . . . . . . . . . . . . . . $1,250    above, the maximum contribution you make for Jane or for 
Employer matching contribution                                             yourself if you each earned $75,000 is $14,000, figured as 
($25,000 × 3% (0.03)). . . . . . . . . . . . . . . . . . . . . . 750
                                                                           follows.
Total contributions . . . . . . . . . . . . . . . . . . . . . .  $2,000
                                                                           Salary reduction contributions
The total contribution you make for yourself is $5,200,                    (maximum amount allowed). . . . . . . . . . . . . . . . . .      $12,500
figured as follows.                                                        2% nonelective contributions
                                                                           ($75,000 × 2% (0.02)). . . . . . . . . . . . . . . . . . . . . . 1,500
Salary reduction contributions                                             Total contributions . . . . . . . . . . . . . . . . . . . . . .  $14,000
($40,000 × 10% (0.10)). . . . . . . . . . . . . . . . . . . . .  $4,000
Employer matching contribution                                             Time limits for contributing funds.                 You must make the 
($40,000 × 3% (0.03)). . . . . . . . . . . . . . . . . . . . . . 1,200
Total contributions . . . . . . . . . . . . . . . . . . . . . .  $5,200    salary  reduction  contributions  to  the  SIMPLE  IRA  within 
                                                                           30 days after the end of the month in which the amounts 
Lower  percentage.            If  you  choose  a  matching  contri-        would have otherwise have been payable to the employee 
bution less than 3%, the percentage must be at least 1%.                   in  cash.  You  must  make  matching  contributions  or  non-
You must notify the employees of the lower match within a                  elective  contributions  by  the  due  date  (including  exten-
reasonable period of time before the 60-day election pe-                   sions) for filing your federal income tax return for the year. 
riod  (discussed  earlier)  for  the  calendar  year.  You  can't          Certain  plans  subject  to  Department  of  Labor  rules  may 
choose a percentage less than 3% for more than 2 years                     have an earlier due date for salary reduction contributions.

Publication 560 (2023)                                           Chapter 3 SIMPLE Plans                                                     15

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When To Deduct Contributions IRA into another SIMPLE IRA. However, a rollover from a
SIMPLE IRA to a non-SIMPLE IRA can be made tax free
You can deduct SIMPLE IRA contributions in the tax year only after a 2-year participation in the SIMPLE IRA plan.
within which the calendar year for which contributions
Generally, you or your employee must begin to receive
were made ends. You can deduct contributions for a par-
distributions from a SIMPLE IRA by April 1 of the first year
ticular tax year if they are made for that tax year and are
after the calendar year in which you or your employee rea-
made by the due date (including extensions) of your fed- 1 2
ches age 72 (if age 70 / was reached after December 31,
eral income tax return for that year.
2019).
The due date for making contributions for 2023 for most
plans is Monday, April 15, 2024. Note. Individuals who reach age 72 after December
31, 2022, may delay receiving their RMDs until April 1 of
Example 1. Your tax year is the fiscal year ending the year following the year in which they reach age 73.
June 30. Contributions under a SIMPLE IRA plan for cal-
Early withdrawals are generally subject to a 10% addi-
endar year 2023 (including contributions made by the due
tional tax. However, the additional tax is increased to 25%
date for the return for the tax year that ends on June 30,
if funds are withdrawn within 2 years of beginning partici-
2024) are deductible in the tax year ending June 30, 2024.
pation.
Example 2. You are a sole proprietor whose tax year is
More information. See Pubs. 590-A and 590-B for infor-
the calendar year. Contributions under a SIMPLE IRA plan
mation about IRA rules, including those on the tax treat-
for calendar year 2023 (including contributions made by
ment of distributions, rollovers, required distributions, and
the due date for the return for the 2023 tax year) are de-
income tax withholding.
ductible in the 2023 tax year.

More Information on SIMPLE IRA
Where To Deduct Contributions
Plans
Deduct the contributions you make for your common-law
employees on your tax return. For example, sole proprie- If you need help to set up or maintain a SIMPLE IRA plan,
tors deduct them on Schedule C (Form 1040) or Sched- go to the IRS website and searchSIMPLE IRA Plan.
ule F (Form 1040), partnerships deduct them on Form
1065, and corporations deduct them on Form 1120 or
1120-S. SIMPLE 401(k) Plan
Sole proprietors and partners deduct contributions for
themselves on line 16 of Schedule 1 (Form 1040). (If you You can adopt a SIMPLE plan as part of a 401(k) plan if
are a partner, contributions for yourself are shown on the you meet the 100-employee limit, as discussed earlier un-
Schedule K-1 (Form 1065) you receive from the partner- der SIMPLE IRA Plan. A SIMPLE 401(k) plan is a qualified
ship.) retirement plan and must generally satisfy the rules dis-
cussed under Qualification Rules in chapter 4, including
the required distribution rules. However, a SIMPLE 401(k)
Tax Treatment of Contributions plan isn't subject to the nondiscrimination and top-heavy
rules discussed in chapter 4 if the plan meets the condi-
You can deduct your contributions and your employees tions listed below.
can exclude these contributions from their gross income.
SIMPLE IRA plan contributions aren't subject to federal in- 1. Under the plan, an employee can choose to have you
come tax withholding. However, salary reduction contribu- make salary reduction contributions for the year to a
tions are subject to social security, Medicare, and FUTA trust in an amount expressed as a percentage of the
taxes. Matching and nonelective contributions aren't sub- employee's compensation, but not more than $15,500
ject to these taxes. for 2023 ($16,000 for 2024). If permitted under the
plan, an employee who is age 50 or over can also
Reporting on Form W-2. Don’t include SIMPLE IRA make a catch-up contribution of up to $3,500 for 2023
plan contributions in the “Wages, tips, other compensa- and 2024. See Catch-up contributions, earlier, under
tion” box of Form W-2. You must, however, include them in Contribution Limits.
the “Social security wages” and “Medicare wages and
tips” boxes. You must also include them in box 12. Check 2. You must make either:
the “Retirement plan” checkbox in box 13. For more infor- a. Matching contributions up to 3% of compensation
mation, see the Form W-2 instructions. for the year, or
b. Nonelective contributions of 2% of compensation
Distributions (Withdrawals) on behalf of each eligible employee who has at
least $5,000 of compensation from you for the
Distributions from a SIMPLE IRA are subject to IRA rules
year.
and are generally includible in income for the year re-
ceived. Tax-free rollovers can be made from one SIMPLE 3. No other contributions can be made to the trust.

16 Chapter 3 SIMPLE Plans Publication 560 (2023)

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4. No contributions are made, and no benefits accrue,              3066    3066 Have you had your check-up this year? for 
  for services during the year under any other qualified               Retirement Plans
  retirement plan sponsored by you on behalf of any                3998    3998 Choosing a Retirement Solution for Your Small 
  employee eligible to participate in the                              Business
  SIMPLE 401(k) plan.
                                                                   4222    4222 401(k) Plans for Small Businesses
5. The employee's rights to any contributions are nonfor-
                                                                           4530 
  feitable.                                                        4530         Designated Roth Accounts under a 401(k), 
                                                                       403(b) or governmental 457(b) plan
No more than $330,000 of the employee's compensa-
                                                                           4531 
tion can be taken into account in figuring matching contri-        4531         401(k) Plan Checklist
butions  and  nonelective  contributions  in  2023  ($345,000      4674    4674 Automatic Enrollment 401(k) Plans for Small 
in 2024). Compensation is defined earlier in this chapter.             Businesses
                                                                           4806 
Employee notification.  The notification requirement that          4806         Profit Sharing Plans for Small Businesses
applies  to  SIMPLE  IRA  plans  also  applies  to  SIMPLE 
                                                                 Forms (and Instructions)
401(k) plans. See  Notification Requirement, earlier in this 
chapter.                                                           W-2 W-2 Wage and Tax Statement
                                                                                                                                                               Schedule K-1 (Form 1065) 
Note  on  forms.   Please  note  that  Forms  5304-SIMPLE          Schedule K-1 (Form 1065)                                                                                             Partner's Share of 
and  5305-SIMPLE  can’t  be  used  to  establish  a  SIMPLE            Income, Deductions, Credits, etc.
401(k) plan. To set up a SIMPLE 401(k) plan, see          Adopt-   1099-R        1099-R Distributions From Pensions, Annuities, 
ing a Written Plan in chapter 4.                                       Retirement or Profit-Sharing Plans, IRAs, 
                                                                       Insurance Contracts, etc.
                                                                   1040    1040 U.S. Individual Income Tax Return
                                                                   1040-SR                      1040-SR U.S. Tax Return for Seniors
                                                                   Schedule C (Form 1040)                                               Schedule C (Form 1040) Profit or Loss From 
4.                                                                     Business
                                                                   Schedule F (Form 1040)                        Schedule F (Form 1040) Profit or Loss From 
                                                                       Farming
Qualified Plans
                                                                   5300    5300 Application for Determination for Employee 
                                                                       Benefit Plan
Topics
This chapter discusses:                                            5310    5310 Application for Determination for Terminating 
                                                                       Plan
• Kinds of plans                                                   5329    5329 Additional Taxes on Qualified Plans (Including 
• Qualification rules                                                  IRAs) and Other Tax-Favored Accounts
• Setting up a qualified plan                                      5330    5330 Return of Excise Taxes Related to Employee 
                                                                       Benefit Plans
• Minimum funding requirement
                                                                   5500    5500 Annual Return/Report of Employee Benefit 
• Contributions
                                                                       Plan
• Employer deduction                                               5500-EZ              5500-EZ Annual Return of A One-Participant 
• Elective deferrals (401(k) plans)                                    (Owners/Partners and Their Spouses) 
• Qualified Roth contribution program                                  Retirement Plan or A Foreign Plan
                                                                                        5500-SF 
• Distributions                                                    5500-SF                      Short Form Annual Return/Report of Small 
                                                                       Employee Benefit Plan
• Prohibited transactions
                                                                   8717    8717 User Fee for Employee Plan Determination 
• Reporting requirements                                               Letter Request
                                                                   8880    8880 Credit for Qualified Retirement Savings 
Useful Items
You may want to see:                                                   Contributions
                                                                   8881    8881 Credit for Small Employer Pension Plan 
Publications                                                           Startup Costs
    575  575 Pension and Annuity Income                            8955-SSA                             8955-SSA Annual Registration Statement Identifying 
    590-A    590-A Contributions to Individual Retirement              Separated Participants With Deferred Vested 
         Arrangements (IRAs)                                           Benefits
    590-B    590-B Distributions from Individual Retirement      These qualified retirement plans set up by self-employed 
         Arrangements (IRAs)                                     individuals are sometimes called Keogh or H.R. 10 plans. 

Publication 560 (2023)                     Chapter 4             Qualified Plans                                                                                                                           17

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A sole proprietor or a partnership can set up one of these have profits (or the self-employed person has earned in-
plans. A common-law employee or a partner can't set up come).
one of these plans. The plans described here can also be
set up and maintained by employers that are corporations. Defined Benefit Plan
All of the rules discussed here apply to corporations ex-
cept where specifically limited to the self-employed. A defined benefit plan is any plan that isn't a defined con-
The plan must be for the exclusive benefit of employees or tribution plan. Contributions to a defined benefit plan are
their beneficiaries. These qualified plans can include cov- based on what is needed to provide definitely determina-
erage for a self-employed individual. ble benefits to plan participants. Actuarial assumptions
and computations are required to figure these contribu-
As an employer, you can usually deduct, subject to limits, tions. Generally, you will need continuing professional help
contributions you make to a qualified plan, including those to have a defined benefit plan.
made for your own retirement. The contributions (and
earnings and gains on them) are generally tax free until
distributed by the plan.
Qualification Rules

To qualify for the tax benefits available to qualified plans, a
Kinds of Plans plan must meet certain requirements (qualification rules)
of the tax law. Generally, unless you write your own plan,
There are two basic kinds of qualified plans—defined con- the financial institution that provided your plan will take the
tribution plans and defined benefit plans—and different continuing responsibility for meeting qualification rules
rules apply to each. You can have more than one qualified that are later changed. The following is a brief overview of
plan, but your contributions to all the plans must not total important qualification rules that generally haven't yet
more than the overall limits discussed under Contributions been discussed. It isn't intended to be all-inclusive. See
and Employer Deduction, later. Setting Up a Qualified Plan, later.
Generally, the following qualification rules also ap-
Defined Contribution Plan TIP ply to a SIMPLE 401(k) retirement plan. A SIM-
PLE 401(k) plan is, however, not subject to the
A defined contribution plan provides an individual account top-heavy plan rules and nondiscrimination rules if the
for each participant in the plan. It provides benefits to a plan satisfies the provisions discussed in chapter 3 under
participant largely based on the amount contributed to that SIMPLE 401(k) Plan.
participant's account. Benefits are also affected by any in-
come, expenses, gains, losses, and forfeitures of other ac-
Plan assets must not be diverted. Your plan must
counts that may be allocated to an account. A defined
make it impossible for its assets to be used for, or diverted
contribution plan can be either a profit-sharing plan or a
to, purposes other than the exclusive benefit of employees
money purchase pension plan.
and their beneficiaries. As a general rule, the assets can't
Profit-sharing plan. Although it is called a profit-sharing be diverted to the employer.
plan, you don’t actually have to make a business profit for
Minimum coverage requirement must be met. To be a
the year in order to make a contribution (except for your-
qualified plan, a defined benefit plan must benefit at least
self if you are self-employed, as discussed under Self-em-
the lesser of the following.
ployed individual, later). A profit-sharing plan can be set
up to allow for discretionary employer contributions, 1. 50 employees.
meaning the amount contributed each year to the plan
2. The greater of:
isn't fixed. An employer may even make no contribution to
the plan for a given year. a. 40% of all employees, or
The plan must provide a definite formula for allocating
b. Two employees.
the contribution among the participants and for distributing
the accumulated funds to the employees after they reach If there is only one employee, the plan must benefit that
a certain age, after a fixed number of years, or upon cer- employee.
tain other occurrences.
In general, you can be more flexible in making contribu- Contributions or benefits must not discriminate. Un-
tions to a profit-sharing plan than to a money purchase der the plan, contributions or benefits to be provided must
pension plan (discussed next) or a defined benefit plan not discriminate in favor of highly compensated employ-
(discussed later). ees.

Money purchase pension plan. Contributions to a Contributions and benefits must not be more than
money purchase pension plan are fixed and aren't based certain limits. Your plan must not provide for contribu-
on your business profits. For example, a money purchase tions or benefits that are more than certain limits. The lim-
pension plan may require that contributions be 10% of the its apply to the annual contributions and other additions to
participants' compensation without regard to whether you the account of a participant in a defined contribution plan

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and to the annual benefit payable to a participant in a de- • The plan year in which the 10th anniversary of the
fined benefit plan. These limits are discussed later in this year in which the participant began participating in the
chapter under Contributions. plan occurs.
Minimum vesting standard must be met. Your plan • The plan year in which the participant separates from
must satisfy certain requirements regarding when benefits service.
vest. A benefit is vested (you have a fixed right to it) when Early retirement. Your plan can provide for payment
it becomes nonforfeitable. A benefit is nonforfeitable if it of retirement benefits before the normal retirement age. If
can't be lost upon the happening, or failure to happen, of your plan offers an early retirement benefit, a participant
any event. Special rules apply to forfeited benefit who separates from service before satisfying the early re-
amounts. In defined contribution plans, forfeitures can be tirement age requirement is entitled to that benefit if the
allocated to the accounts of remaining participants in a participant meets both the following requirements.
nondiscriminatory way, or they can be used to reduce your
contributions. • Satisfies the service requirement for the early retire-
ment benefit.
Forfeitures under a defined benefit plan can't be used
to increase the benefits any employee would otherwise re- • Separates from service with a nonforfeitable right to
ceive under the plan. Forfeitures must be used instead to an accrued benefit. The benefit, which may be actuari-
reduce employer contributions. ally reduced, is payable when the early retirement age
requirement is met.
Participation. In general, an employee must be allowed
to participate in your plan if they meet both the following Required minimum distributions (RMDs). Special
requirements. rules require minimum annual distributions from qualified
plans, generally beginning after age 72 (if age 70 / was 1 2
• Has reached age 21.
reached after December 31, 2019). See Required Distri-
• Has at least 1 year of service (2 years if the plan isn't a butions under Distributions, later.
401(k) plan and provides that after not more than 2
years of service the employee has a nonforfeitable Note. Individuals who reach age 72 after December
right to all their accrued benefit). 31, 2022, may delay receiving their RMDs until April 1 of
the year following the year in which they reach age 73.
See Elective Deferrals )401(k) Plans, later, for addi-
tional information regarding conditions of participation in a Survivor benefits. Defined benefit and money purchase
401(k) plan. pension plans must provide automatic survivor benefits in
A plan can't exclude an employee because the both the following forms.
! employee has reached a specified age. • A qualified joint and survivor annuity for a vested par-
CAUTION
ticipant who doesn't die before the annuity starting
date.
Leased employee. A leased employee, defined in chap-
ter 1, who performs services for you (recipient of the serv- • A qualified pre-retirement survivor annuity for a vested
ices) is treated as your employee for certain plan qualifica- participant who dies before the annuity starting date
tion rules. These rules include those in all the following and who has a surviving spouse.
areas. The automatic survivor benefit also applies to any par-
• Nondiscrimination in coverage, contributions, and ticipant under a profit-sharing plan unless all the following
benefits. conditions are met.
• Minimum age and service requirements. • The participant doesn't choose benefits in the form of
a life annuity.
• Vesting.
• The plan pays the full vested account balance to the
• Limits on contributions and benefits. participant's surviving spouse (or other beneficiary if
• Top-heavy plan requirements. the surviving spouse consents or if there is no surviv-
ing spouse) if the participant dies.
Contributions or benefits provided by the leasing organiza-
tion for services performed for you are treated as provided • The plan isn't a direct or indirect transferee of a plan
by you. that must provide automatic survivor benefits.
Benefit payment must begin when required. Your plan Loan secured by benefits. If automatic survivor ben-
must provide that, unless the participant chooses other- efits are required for a spouse under a plan, they must
wise, the payment of benefits to the participant must begin consent to a loan that uses as security the accrued bene-
within 60 days after the close of the latest of the following fits in the plan.
periods. Waiver of survivor benefits. Each plan participant
• The plan year in which the participant reaches the ear- may be permitted to waive the joint and survivor annuity or
lier of age 65 or the normal retirement age specified in the pre-retirement survivor annuity (or both), but only if the
the plan. participant has the written consent of the spouse. The
plan must also allow the participant to withdraw the

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waiver. The spouse's consent must be witnessed by a No benefit reduction for social security increases.
plan representative or notary public. Your plan must not permit a benefit reduction for a
post-separation increase in the social security benefit level
Involuntary cash-out of benefits not more than dol-
or wage base for any participant or beneficiary who is re-
lar limit. A plan may provide for the immediate distribu-
ceiving benefits under your plan, or who is separated from
tion of the participant's benefit under the plan if the
service and has nonforfeitable rights to benefits. This rule
present value of the benefit isn't greater than $5,000
also applies to plans supplementing the benefits provided
($7,000 in 2024).
by other federal or state laws.
However, the distribution can't be made after the annu-
ity starting date unless the participant and the spouse or Elective deferrals must be limited. If your plan pro-
surviving spouse of a participant who died (if automatic vides for elective deferrals, it must limit those deferrals to
survivor benefits are required for a spouse under the plan) the amount in effect for that particular year. See Limit on
consents in writing to the distribution. If the present value Elective Deferrals, later in this chapter.
is greater than $5,000 ($7,000 in 2024), the plan must
have the written consent of the participant and the spouse Top-heavy plan requirements. A top-heavy plan is one
or surviving spouse (if automatic survivor benefits are re- that mainly favors partners, sole proprietors, and other key
quired for a spouse under the plan) for any immediate dis- employees.
tribution of the benefit. A plan is top-heavy for a plan year if, for the preceding
Benefits attributable to rollover contributions and earn- plan year, the total value of accrued benefits or account
ings on them can be ignored in determining the present balances of key employees is more than 60% of the total
value of these benefits. value of accrued benefits or account balances of all em-
A plan must provide for the automatic rollover of any ployees. Additional requirements apply to a top-heavy
cash-out distribution of more than $1,000 to an individual plan primarily to provide minimum benefits or contribu-
retirement account or annuity, unless the participant choo- tions for non-key employees covered by the plan.
ses otherwise. A section 402(f) notice must be sent prior Most qualified plans, whether or not top-heavy, must
to an involuntary cash-out of an eligible rollover distribu- contain provisions that meet the top-heavy requirements
tion. See Section 402(f) notice under Distributions, later, and will take effect in plan years in which the plans are
for more details. top-heavy. These qualification requirements for top-heavy
plans are explained in section 416 and its regulations.
Consolidation, merger, or transfer of assets or liabili-
ties. Your plan must provide that, in the case of any SIMPLE and safe harbor 401(k) plan exception.
merger or consolidation with, or transfer of assets or liabili- The top-heavy plan requirements don't apply to SIMPLE
ties to, any other plan, each participant would (if the plan 401(k) plans, discussed earlier in chapter 3, or to safe har-
then terminated) receive a benefit equal to or more than bor 401(k) plans that consist solely of safe harbor contri-
the benefit they would have been entitled to just before the butions, discussed later in this chapter. QACAs (dis-
merger, etc. (if the plan had then terminated). cussed later) also aren't subject to top-heavy
requirements.
Benefits must not be assigned or alienated. Your plan
must provide that a participant's or beneficiary's benefits
under the plan can't be taken away by any legal or equi-
Setting up a Qualified Plan
table proceeding except as provided below or pursuant to
certain judgments or settlements against the participant There are two basic steps in setting up a qualified plan.
for violations of plan rules. First, you adopt a written plan. Then, you invest the plan
Exception for certain loans. A loan from the plan assets.
(not from a third party) to a participant or beneficiary isn't You, the employer, are responsible for setting up and
treated as an assignment or alienation if the loan is se- maintaining the plan.
cured by the participant's accrued nonforfeitable benefit
and is exempt from the tax on prohibited transactions un- If you are self-employed, it isn't necessary to have
der section 4975(d)(1) or would be exempt if the partici- TIP employees besides yourself to sponsor and set
pant were a disqualified person. A disqualified person is up a qualified plan. If you have employees, see
defined later in this chapter under Prohibited Transactions. Participation under Qualification Rules, earlier.

Exception for a qualified domestic relations order
Set-up deadline. To take a deduction for contributions
(QDRO). Compliance with a QDRO doesn't result in a
for a tax year, your plan must be set up (adopted) by the
prohibited assignment or alienation of benefits.
last day of that year. If you are a sole proprietor with a new
Payments to an alternate payee under a QDRO before
section 401(k) plan that you adopted after the end of the
the participant reaches age 59 / aren't subject to the 10% 1 2
taxable year that ends after or with the first plan year, and
additional tax that would otherwise apply under certain cir-
you are the only participant, your elective deferrals must
cumstances. Benefits distributed to an alternate payee un-
be paid to the plan before the time for filing your return for
der a QDRO can be rolled over tax free to an individual re-
that taxable year (determined without regard to any exten-
tirement account or to an individual retirement annuity.
sions) in order for the elective deferrals to be treated as
having been made by the end of the first plan year.

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Adopting a Written Plan • The end of any remedial amendment period for the
plan that begins within the first 5 plan years.
You must adopt a written plan. The plan can be an IRS The request can't be made by the provider of an IRS
pre-approved plan offered by a sponsoring organization. pre-approved plan that intends to market to participating
Or it can be an individually designed plan. employers.
For more information about whether the user fee ap-
Written plan requirement. To qualify, the plan you set
plies, see Revenue Procedure 2020-4, 2020-1 I.R.B. 148,
up must be in writing and must be communicated to your
available at IRS.gov/irb/2020-01_IRB, as may be annually
employees. The plan's provisions must be stated in the
updated; Notice 2017-1, 2017-2 I.R.B. 367, available at
plan. It isn't sufficient for the plan to merely refer to a re-
IRS.gov/irb/2017-02_IRB; and Form 8717.
quirement of the Internal Revenue Code.

IRS pre-approved plans. Most qualified plans follow a Investing Plan Assets
standard form of plan approved by the IRS. An IRS
pre-approved plan is a plan, including a plan covering In setting up a qualified plan, you arrange how the plan's
self-employed individuals, that is made available by a pro- funds will be used to build its assets.
vider for adoption by employers. Under the prior IRS
• You can establish a trust or custodial account to invest
pre-approved plan program, a plan could be a master
the funds.
plan, a prototype plan, or a volume submitter plan. Under
the restructured program, the three plan types were com- • You, the trust, or the custodial account can buy an an-
bined into one type called a pre-approved plan. IRS nuity contract from an insurance company. Life insur-
pre-approved plans include both standardized plans and ance can be included only if it is incidental to the re-
nonstandardized plans. An IRS pre-approved plan may tirement benefits.
use a single funding medium, for example, a trust or cus-
todial account document, for the joint use of all adopting You set up a trust by a legal instrument (written docu-
employers or separate funding mediums established for ment). You may need professional help to do this.
each adopting employer. An IRS pre-approved plan may You can set up a custodial account with a bank, savings
consist of an adoption agreement plan or a single docu- and loan association, credit union, or other person who
ment plan. For more information about IRS pre-approved can act as the plan trustee.
plans, see Revenue Procedure 2017-41, 2017-29 I.R.B.
92, available at IRS.gov/irb/2017-29_IRB#RP-2017-41. You don't need a trust or custodial account, although
Plan providers. The following organizations can gen- you can have one, to invest the plan's funds in annuity
erally provide IRS pre-approved plans. contracts or face-amount certificates. If anyone other than
a trustee holds them, however, the contracts or certificates
• Banks (including some savings and loan associations must state they aren't transferable.
and federally insured credit unions).
Other plan requirements. For information on other im-
• Trade or professional organizations.
portant plan requirements, see Qualification Rules, earlier
• Insurance companies. in this chapter.
• Mutual funds.
• Law firms.
Minimum Funding
• Third-party administrators.
Requirement
Individually designed plan. If you prefer, you can set up
an individually designed plan to meet specific needs. Al- In general, if your plan is a money purchase pension plan
though advance IRS approval is not required, you can ap- or a defined benefit plan, you must actually pay enough
ply for approval by paying a fee and requesting a determi- into the plan to satisfy the minimum funding standard for
nation letter. You may need professional help for this. See each year. Determining the amount needed to satisfy the
Revenue Procedure 2024-4, 2024-1 I.R.B. 160, available minimum funding standard for a defined benefit plan is
at IRS.gov/irb/2024-4_IRB, as annually updated, that may complicated, and you should seek professional help in or-
help you decide whether to apply for approval. der to meet these contribution requirements. For informa-
User fee. The fee mentioned earlier for requesting a tion on this funding requirement, see section 430 and its
determination letter doesn't apply to employers who have regulations.
100 or fewer employees who received at least $5,000 of
Quarterly installments of required contributions. If
compensation from the employer for the preceding year.
your plan is a defined benefit plan subject to the minimum
At least one of them must be a non-highly compensated
funding requirements, you must generally make quarterly
employee participating in the plan. The fee doesn't apply
installment payments of the required contributions. If you
to requests made by the later of the following dates.
don't pay the full installments timely, you may have to pay
• The end of the fifth plan year the plan is in effect. interest on any underpayment for the period of the under-
payment.

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Due dates. The due dates for the installments are 15 1. 100% of the participant's compensation.
days after the end of each quarter. For a calendar-year
2. $66,000 for 2023 ($69,000 for 2024).
plan, the installments are due April 15, July 15, October
15, and January 15 (of the following year). Catch-up contributions (discussed later under Limit on
Elective Deferrals) aren't subject to the above limit.
Installment percentage. Each quarterly installment
must be 25% of the required annual payment.
Employee Contributions
Extended period for making contributions. Addi-
tional contributions required to satisfy the minimum fund- Participants may be permitted to make nondeductible con-
ing requirement for a plan year will be considered timely if tributions to a plan in addition to your contributions. Even
made by 8 / months after the end of that year.1 2 though these employee contributions aren't deductible,
the earnings on them are tax free until distributed in later
years. Also, these contributions must satisfy the actual
Contributions contribution percentage (ACP) test of section 401(m)(2), a
nondiscrimination test that applies to employee contribu-
A qualified plan is generally funded by your contributions. tions and matching contributions. See Regulations sec-
However, employees participating in the plan may be per- tions 1.401(k)-2 and 1.401(m)-2 for further guidance relat-
mitted to make contributions, and you may be permitted to ing to the nondiscrimination rules under sections 401(k)
make contributions on your own behalf. See Employee and 401(m).
Contributions and Elective Deferrals, later.
When Contributions Are Considered
Contributions deadline. You can make deductible con-
tributions for a tax year up to the due date of your return Made

(plus extensions) for that year. You generally apply your plan contributions to the year in
Self-employed individual. You can make contributions which you make them. But you can apply them to the pre-
on behalf of yourself only if you have net earnings (com- vious year if all the following requirements are met.
pensation) from self-employment in the trade or business 1. You make them by the due date of your tax return for
for which the plan was set up. Your net earnings must be the previous year (plus extensions).
from your personal services, not from your investments. If
you have a net loss from self-employment, you can't make 2. The plan was established by the end of the previous
contributions for yourself for the year, even if you can con- year.
tribute for common-law employees based on their com- 3. The plan treats the contributions as though it had re-
pensation. ceived them on the last day of the previous year.
4. You do either of the following.
Employer Contributions
a. You specify in writing to the plan administrator or
There are certain limits on the contributions and other an- trustee that the contributions apply to the previous
nual additions you can make each year for plan partici- year.
pants. There are also limits on the amount you can de- b. You deduct the contributions on your tax return for
duct. See Deduction Limits, later. the previous year. A partnership shows contribu-
tions for partners on Form 1065.
Limits on Contributions and Benefits
Employer's promissory note. Your promissory note
Your plan must provide that contributions or benefits can't made out to the plan isn't a payment that qualifies for the
exceed certain limits. The limits differ depending on deduction. Also, issuing this note is a prohibited transac-
whether your plan is a defined contribution plan or a de- tion subject to tax. See Prohibited Transactions, later.
fined benefit plan.

Defined benefit plan. For 2023, the annual benefit for a
participant under a defined benefit plan can't exceed the Employer Deduction
lesser of the following amounts.
You can usually deduct, subject to limits, contributions you
1. 100% of the participant's average compensation for make to a qualified plan, including those made for your
their highest 3 consecutive calendar years. own retirement. The contributions (and earnings and
gains on them) are generally tax free until distributed by
2. $265,000 for 2023 ($275,000 for 2024).
the plan.
Defined contribution plan. For 2023, a defined contri-
bution plan's annual contributions and other additions (ex-
cluding earnings) to the account of a participant can't ex-
ceed the lesser of the following amounts.

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Table 4-1. Carryover of Excess Contributions Illustrated—Profit-Sharing Plan (000's omitted)
Excess
Excess Total contribution
Deductible contribution deduction carryover
Participants' Employer limit for current year carryover including available at
Year compensation contribution (25% of compensation) used1 carryovers end of year
2020. . . . . . . . . $1,000 $100 $250 $ 0 $100 $ 0
2021. . . . . . . . . 400 165 100 0 100 65
2022. . . . . . . . . 500 100 125 25 125 40
2023. . . . . . . . . 600 100 150 40 140 0
1 There were no carryovers from years before 2016.

Deduction Limits The deductions for your own contributions and your net
earnings depend on each other. For this reason, you de-
The deduction limit for your contributions to a qualified termine the deduction for your own contributions indirectly
plan depends on the kind of plan you have. by reducing the contribution rate called for in your plan. To
do this, use either the Rate Table for Self-Employed or the
Defined contribution plans. The deduction for contribu- Rate Worksheet for Self-Employed in chapter 5. Then, fig-
tions to a defined contribution plan (profit-sharing plan or ure your maximum deduction by using the Deduction
money purchase pension plan) can't be more than 25% of Worksheet for Self-Employed in chapter 5.
the compensation paid (or accrued) during the year to
your eligible employees participating in the plan. If you are
Where To Deduct Contributions
self-employed, you must reduce this limit in figuring the
deduction for contributions you make for your own ac- Deduct the contributions you make for your common-law
count. See Deduction Limit for Self-Employed Individuals, employees on your tax return. For example, sole proprie-
later. tors deduct them on Schedule C (Form 1040) or Sched-
When figuring the deduction limit, the following rules ule F (Form 1040), partnerships deduct them on Form
apply. 1065, and corporations deduct them on Form 1120 or
• Elective deferrals (discussed later) aren't subject to 1120-S.
the limit. Sole proprietors and partners deduct contributions for
• Compensation includes elective deferrals. themselves on line 16 of Schedule 1 (Form 1040). (If you
are a partner, contributions for yourself are shown on the
• The maximum compensation that can be taken into Schedule K-1 (Form 1065) you get from the partnership.)
account for each employee in 2023 is $330,000
($345,000 in 2024).
Carryover of Excess Contributions
Defined benefit plans. The deduction for contributions
to a defined benefit plan is based on actuarial assump- If you contribute more to a plan than you can deduct for
tions and computations. Consequently, an actuary must the year, you can carry over and deduct the difference in
figure your deduction limit. later years, combined with your contributions for those
years. Your combined deduction in a later year is limited to
In figuring the deduction for contributions, you 25% of the participating employees' compensation for that
! can't take into account any contributions or bene- year. For purposes of this limit, a SEP is treated as a
CAUTION fits that are more than the limits discussed earlier
profit-sharing (defined contribution) plan. However, this
under Limits on Contributions and Benefits. percentage limit must be reduced to figure your maximum
deduction for contributions you make for yourself. See De-
duction Limit for Self-Employed Individuals, earlier. The
Deduction Limit for
amount you carry over and deduct may be subject to the
Self-Employed Individuals excise tax discussed next.
If you make contributions for yourself, you need to make a Table 4-1. Carryover of Excess Contributions Illustrated
special computation to figure your maximum deduction for Profit-Sharing Plan illustrates the carryover of excess con-
these contributions. Compensation is your net earnings tributions to a profit-sharing plan.
from self-employment, defined in chapter 1. This definition
takes into account both the following items. Excise Tax for Nondeductible
• The deduction for the deductible part of your self-em- (Excess) Contributions
ployment tax.
If you contribute more than your deduction limit to a retire-
• The deduction for contributions on your behalf to the ment plan, you have made nondeductible contributions
plan. and you may be liable for an excise tax. In general, a 10%
excise tax applies to nondeductible contributions made to
qualified pension and profit-sharing plans and to SEPs.

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Special rule for self-employed individuals. The 10% Nonelective contributions. You can also make contribu-
excise tax doesn't apply to any contribution made to meet tions (other than matching contributions) for your partici-
the minimum funding requirements in a money purchase pating employees without giving them the choice to take
pension plan or a defined benefit plan. Even if that contri- cash instead. These are called nonelective contributions.
bution is more than your earned income from the trade or
business for which the plan is set up, the difference isn't Employee compensation limit. No more than $330,000
subject to this excise tax. See Minimum Funding Require- of the employee's compensation can be taken into ac-
ment, earlier. count when figuring contributions other than elective de-
ferrals in 2023. This limit is $345,000 for 2024.
Reporting the tax. You must report the tax on your non-
deductible contributions on Form 5330. Form 5330 in- SIMPLE 401(k) plan. If you had 100 or fewer employees
cludes a computation of the tax. See the separate instruc- who earned $5,000 or more in compensation during the
tions for completing the form. preceding year, you may be able to set up a SIMPLE
401(k) plan. A SIMPLE 401(k) plan isn't subject to the
nondiscrimination and top-heavy plan requirements dis-
cussed earlier under Qualification Rules. For details about
Elective Deferrals SIMPLE 401(k) plans, see SIMPLE 401(k) Plan in chap-
ter 3.
(401(k) Plans)
Distributions. Certain rules apply to distributions from
Your qualified plan can include a cash or deferred ar- 401(k) plans. See Distributions From 401(k) Plans, later.
rangement under which participants can choose to have
you contribute part of their before-tax compensation to the
plan rather than receive the compensation in cash. A plan Limit on Elective Deferrals
with this type of arrangement is popularly known as a
There is a limit on the amount an employee can defer
401(k) plan. (As a self-employed individual participating in
each year under these plans. This limit applies without re-
the plan, you can contribute part of your before-tax net
gard to community property laws. Your plan must provide
earnings from the business.) This contribution is called an
that your employees can't defer more than the limit that
elective deferral because participants choose (elect) to
applies for a particular year. The basic limit on elective de-
defer receipt of the money.
ferrals is $22,500 for 2023 and increases to $23,000 for
In general, a qualified plan can include a cash or defer- 2024. This limit applies to all salary reduction contribu-
red arrangement only if the qualified plan is one of the fol- tions and elective deferrals. If, in conjunction with other
lowing plans. plans, the deferral limit is exceeded, the difference is in-
cluded in the employee's gross income.
• A profit-sharing plan.
• A money purchase pension plan in existence on June Catch-up contributions. A 401(k) plan can permit par-
27, 1974, that included a salary reduction arrange- ticipants who are age 50 or over at the end of the calendar
ment on that date. year to also make catch-up contributions. The catch-up
contribution limit is $7,500 for 2023 and 2024. Elective de-
Partnership. A partnership can have a 401(k) plan. ferrals aren't treated as catch-up contributions for 2023
until they exceed the $22,500 limit ($23,000 limit for
Restriction on conditions of participation. Effective 2024), the ADP test limit of section 401(k)(3), or the plan
for plan years beginning after December 31, 2020, a limit (if any). However, the catch-up contributions a partici-
401(k) plan can’t require, as a condition of participation, pant can make for a year can't exceed the lesser of the fol-
that an employee complete a period of service that ex- lowing amounts.
tends beyond the close of the earlier of (1) 1 year of serv-
ice, or (2) the first period of 3 consecutive 12-month peri- • The catch-up contribution limit.
ods (excluding 12-month periods beginning before • The excess of the participant's compensation over the
January 1, 2021) during each of which the employee has elective deferrals that aren't catch-up contributions.
completed at least 500 hours of service. Effective for plan
years beginning after December 31, 2024, 3 consecutive Treatment of contributions. Your contributions to your
12-month periods are reduced to 2 consecutive 12-month own 401(k) plan are generally deductible by you for the
periods. year they are contributed to the plan. Matching or non-
elective contributions made to the plan are also deductible
Matching contributions. If your plan permits, you can by you in the year of contribution.
make matching contributions for an employee who makes Your employees' elective deferrals other than designa-
an elective deferral to your 401(k) plan. For example, the ted Roth contributions are tax free until distributed from
plan might provide that you will contribute 50 cents for the plan. Elective deferrals are included in wages for so-
each dollar your participating employees choose to defer cial security, Medicare, and FUTA taxes.
under your 401(k) plan. Matching contributions are gener-
ally subject to the ACP test discussed earlier under Em-
ployee Contributions.

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Forfeiture. Employees have a nonforfeitable right at all employee must be given a reasonable period of time after
times to their accrued benefit attributable to elective receipt of the notice before the first elective contribution is
deferrals. made. The notice must also explain how contributions will
be invested in the absence of an investment election by
Reporting on Form W-2. Don't include elective deferrals the employee.
in the “Wages, tips, other compensation” box of Form
W-2. You must, however, include them in the “Social se- Qualified automatic contribution arrangement
curity wages” and “Medicare wages and tips” boxes. You (QACA). A QACA is a type of safe harbor plan. It contains
must also include them in box 12. Check the “Retirement an automatic enrollment feature, and mandatory employer
plan” checkbox in box 13. For more information, see the contributions are required. If your plan includes a QACA, it
Form W-2 instructions. won't be subject to the ADP test (discussed later) or the
top-heavy requirements (discussed earlier). Additionally,
Automatic Enrollment your plan won't be subject to the ACP test if certain addi-
tional requirements are met. Under a QACA, each em-
Your 401(k) plan can have an automatic enrollment fea- ployee who is eligible to participate in the plan will be trea-
ture. Under this feature, you can automatically reduce an ted as having elected to make elective deferral
employee's pay by a fixed percentage and contribute that contributions equal to a certain default percentage of com-
amount to the 401(k) plan on their behalf unless the em- pensation. In order to not have default elective deferrals
ployee affirmatively chooses not to have their pay reduced made, an employee must make an affirmative election
or chooses to have it reduced by a different percentage. specifying a deferral percentage (including zero, if de-
These contributions are elective deferrals. An automatic sired). If an employee doesn't make an affirmative elec-
enrollment feature will encourage employees' saving for tion, the default deferral percentage must meet the follow-
retirement and will help your plan pass nondiscrimination ing conditions.
testing (if applicable). For more information, see Pub. 1. It must be applied uniformly.
4674.
2. It must not exceed 10%. (After December 31, 2019,
Eligible automatic contribution arrangement (EACA). the maximum default deferral percentage increases to
Under an EACA, a participant is treated as having elected 15%.)
to have the employer make contributions in an amount
equal to a uniform percentage of compensation. This au- 3. It must be at least 3% in the first plan year it applies to
tomatic election will remain in place until the participant an employee and through the end of the following
specifically elects not to have such deferral percentage year.
made (or elects a different percentage). There is no re- 4. It must increase to at least 4% in the following plan
quired deferral percentage. year.
Withdrawals. Under an EACA, you may allow partici- 5. It must increase to at least 5% in the following plan
pants to withdraw their automatic contributions to the plan year.
if certain conditions are met.
6. It must increase to at least 6% in subsequent plan
• The participant must elect the withdrawal no later than years.
90 days after the date of the first elective contributions
under the EACA. Matching or nonelective contributions. Under the
terms of the QACA, you must make either matching or
• The participant must withdraw the entire amount of nonelective contributions according to the following terms.
EACA default contributions, including any earnings
thereon. 1. Matching contributions. You must make matching
contributions on behalf of each non-highly compensa-
If the plan allows withdrawals under the EACA, the
ted employee in the following amounts.
amount of the withdrawal other than the amount of any
designated Roth contributions must be included in the a. An amount equal to 100% of elective deferrals, up
employee's gross income for the tax year in which the dis- to 1% of compensation.
tribution is made. The additional 10% tax on early distribu-
b. An amount equal to 50% of elective deferrals, from
tions won't apply to the distribution.
1% up to 6% of compensation.
Notice requirement. Under an EACA, employees
Other formulas may be used as long as they are at
must be given written notice of the terms of the EACA
least as favorable to non-highly compensated employ-
within a reasonable period of time before each plan year.
ees. The rate of matching contributions for highly
The notice must be written in a manner calculated to be
compensated employees, including yourself, must not
understood by the average employee and be sufficiently
exceed the rates for non-highly compensated employ-
accurate and comprehensive in order to apprise the em-
ees.
ployee of their rights and obligations under the EACA. The
notice must include an explanation of the employee's right 2. Nonelective contributions. You must make nonelec-
to elect not to have elective contributions made on their tive contributions on behalf of every non-highly com-
behalf, or to elect a different percentage, and the pensated employee eligible to participate in the plan,

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regardless of whether they elected to participate, in ployee's cost basis in figuring the taxable amount of any
an amount equal to at least 3% of their compensation. eventual distributions under the plan. In effect, an excess
deferral left in the plan is taxed twice, once when contrib-
Vesting requirements. All accrued benefits attributed
uted and again when distributed. Also, if the employee's
to matching or nonelective contributions under the QACA
excess deferral is allowed to stay in the plan and the em-
must be 100% vested for all employees who complete 2
ployee participates in no other employer's plan, the plan
years of service. These contributions are subject to spe-
can be disqualified.
cial withdrawal restrictions, discussed later.
Notice requirements. Each employee eligible to par- Reporting corrective distributions on Form 1099-R.
ticipate in the QACA must receive written notice of their Report corrective distributions of excess deferrals (includ-
rights and obligations under the QACA within a reasona- ing any earnings) on Form 1099-R. For specific informa-
ble period before each plan year. The notice must be writ- tion about reporting corrective distributions, see the In-
ten in a manner calculated to be understood by the aver- structions for Forms 1099-R and 5498.
age employee, and it must be accurate and
Tax on excess contributions of highly compensated
comprehensive. The notice must explain their right to elect
employees. The law provides tests to detect discrimina-
not to have elective contributions made on their behalf, or
tion in a plan. If tests, such as the ADP test (see section
to have contributions made at a different percentage than
401(k)(3)) and the ACP test (see section 401(m)(2)), show
the default percentage. Additionally, the notice must ex-
that contributions for highly compensated employees are
plain how contributions will be invested in the absence of
more than the test limits for these contributions, the em-
any investment election by the employee. The employee
ployer may have to pay a 10% excise tax. Report the tax
must have a reasonable period of time after receiving the
on Form 5330. The ADP test doesn't apply to a safe har-
notice to make such contribution and investment elections
bor 401(k) plan (discussed next) or to a QACA. Also, the
prior to the first contributions under the QACA.
ACP test doesn't apply to these plans if certain additional
If you make nonelective contributions under the QACA
requirements are met.
and you either don't make any matching contributions or
The tax for the year is 10% of the excess contributions
you make matching contributions that are intended to sat-
for the plan year ending in your tax year. Excess contribu-
isfy the ACP test, then this QACA notice requirement
tions are elective deferrals, employee contributions, or
doesn’t apply. However, this exception doesn’t apply to the
employer matching or nonelective contributions that are
EACA notice requirement, earlier.
more than the amount permitted under the ADP test or the
ACP test.
Treatment of Excess Deferrals See Regulations sections 1.401(k)-2 and 1.401(m)-2
for further guidance relating to the nondiscrimination rules
If the total of an employee's deferrals is more than the limit under sections 401(k) and 401(m).
for 2023, the employee can have the difference (called an
excess deferral) paid out of any of the plans that permit If the plan fails the ADP or ACP testing, and the
these distributions. The employee must notify the plan by ! failure isn't corrected by the end of the next plan
April 15, 2024 (or an earlier date specified in the plan), of CAUTION year, the plan can be disqualified.
the amount to be paid from each plan. The plan must then
pay the employee that amount, plus earnings on the
Safe Harbor 401(k) Plan
amount through the end of 2023, by April 15, 2024.
If you meet the requirements for a safe harbor 401(k) plan,
Excess withdrawn by April 15. If the employee takes
you don't have to satisfy the ADP test or the ACP test if
out the excess deferral by April 15, 2024, it isn't reported
certain additional requirements are met. For your plan to
again by including it in the employee's gross income for
be a safe harbor plan, you must meet the following condi-
2024. However, any income earned in 2023 on the excess
tions.
deferral taken out is taxable in the tax year in which it is
taken out. The distribution isn't subject to the additional 1. Matching or nonelective contributions. You must
10% tax on early distributions. make matching or nonelective contributions according
If the employee takes out part of the excess deferral to one of the following formulas.
and the income on it, the distribution is treated as made
a. Matching contributions. You must make match-
proportionately from the excess deferral and the income.
ing contributions according to the following rules.
Even if the employee takes out the excess deferral by
April 15, the amount will be considered for purposes of i. You must contribute an amount equal to 100%
nondiscrimination testing requirements of the plan, unless of each non-highly compensated employee's
the distributed amount is for a non-highly compensated elective deferrals, up to 3% of compensation.
employee who participates in only one employer's 401(k)
ii. You must contribute an amount equal to 50%
plan or plans.
of each non-highly compensated employee's
Excess not withdrawn by April 15. If the employee elective deferrals, from 3% up to 5% of com-
doesn't take out the excess deferral by April 15, 2024, the pensation.
excess, though taxable in 2023, isn't included in the em-

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iii. The rate of matching contributions for highly employee's elective deferrals not designated as Roth con-
compensated employees, including yourself, tributions.
must not exceed the rates for non-highly com-
Designated Roth contributions are treated the same as
pensated employees.
pre-tax elective deferrals for most purposes, including:
b. Nonelective contributions. You must make non- • The annual individual elective deferral limit (total of all
elective contributions, without regard to whether designated Roth contributions and traditional, pre-tax
the employee made elective deferrals, on behalf of elective deferrals) of $22,500 for 2023 ($23,000 for
all non-highly compensated employees eligible to 2024), with an additional $7,500 if age 50 or over;
participate in the plan, equal to at least 3% of the
employee's compensation. • Determining the maximum employee and employer
annual contributions of the lesser of 100% of compen-
These mandatory matching and nonelective contri- sation or $66,000 for 2023 ($69,000 for 2024);
butions must be immediately 100% vested and are
subject to special withdrawal restrictions. • Nondiscrimination testing;
2. Notice requirement. You must give eligible employ- • Required distributions; and
ees written notice of their rights and obligations with • Elective deferrals not taken into account for purposes
regard to contributions under the plan within a reason- of deduction limits.
able period before the plan year.
Qualified Distributions
If you make nonelective contributions and you either
don't make any matching contributions or you make A qualified distribution is a distribution that is made after
matching contributions that are intended to satisfy the the employee's nonexclusion period and:
ACP test, then this notice requirement doesn’t apply. How-
ever, this exception doesn’t apply to the EACA notice re- • On or after the employee reaches age
quirement, earlier. 59 / ,1 2
• On account of the employee's being disabled, or
The other requirements for a 401(k) plan, including
withdrawal and vesting rules, must also be met for your • On or after the employee's death.
plan to qualify as a safe harbor 401(k) plan. An employee's nonexclusion period for a plan is the
5-tax-year period beginning with the earlier of the follow-
ing tax years.
Qualified Roth Contribution • The first tax year in which a contribution was made to
their Roth account in the plan.
Program
• If a rollover contribution was made to the employee's
Under this program, an eligible employee can designate designated Roth account from a designated Roth ac-
all or a portion of their elective deferrals as after-tax Roth count previously established for the employee under
contributions. These contributions, which are made in lieu another plan, then the first tax year the employee
of elective deferrals, are designated Roth contributions. made a designated Roth contribution to the previously
Unlike other elective deferrals, designated Roth contribu- established account.
tions aren't excluded from an employee's gross income.
Rollover. A rollover from another account can be made to
In addition, an eligible employee may be permitted to a designated Roth account in the same plan. For addi-
designate certain nonelective contributions or matching tional information on these in-plan Roth rollovers, see No-
contributions as Roth contributions. These contributions tice 2010-84, 2010-51 I.R.B. 872, available at IRS.gov/irb/
are also includible in an employee's gross income. 2010-51_IRB/ar11.html; and Notice 2013-74, 2013-52
Designated Roth contributions, designated Roth non- I.R.B. 819, available at IRS.gov/pub/irs-irbs/irb13-52_IRB.
elective contributions, and designated Roth matching con- A distribution from a designated Roth account can only be
tributions must be maintained in a separate Roth account. rolled over to another designated Roth account or a Roth
However, qualified distributions from a Roth account are IRA. Rollover amounts don't apply toward the annual de-
excluded from an employee's gross income. ferral limit.

Elective Deferrals Reporting Requirements

You must report a designated Roth contribution on Form
Under a qualified Roth contribution program, the amount
W-2. See the Form W-2 instructions for detailed informa-
of elective deferrals that an employee may designate as a
tion.
Roth contribution is limited to the maximum amount of
elective deferrals excludable from gross income for the You must report a designated Roth nonelective contri-
year (for 2023, $22,500 if under age 50 and $30,000 if age bution or a designated Roth matching contribution on
50 or over; amounts increase in 2024 to $23,000 and Form 1099-R for the year in which the contribution is
$30,500, respectively) less the total amount of the allocated. You must also report a distribution from a Roth

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account on Form 1099-R. See the Form 1099-R instruc- If the participant is a 5% owner of the employer main-
tions taining the plan, the participant must begin receiving distri-
butions by April 1 of the first year after the calendar year in
which the participant reached age 72 (if age 70 / was 1 2
reached after December 31, 2019). For more information,
Distributions
see Tax on Excess Accumulation in Pub. 575 about distri-
Amounts paid to plan participants from a qualified plan are butions prior to 2020.

called distributions. Distributions may be nonperiodic, Note. Individuals who reach age 72 after December
such as lump-sum distributions, or periodic, such as annu- 31, 2022, may delay receiving their required minimum dis-
ity payments. Also, certain loans may be treated as distri- tribution until April 1 of the year following the year in which
butions. See Loans Treated as Distributions in Pub. 575. they reach age 73.
Distributions after the starting year. The distribution
Required Distributions
required to be made by April 1 is treated as a distribution
A qualified plan must provide that each participant will ei- for the starting year. (The starting year is the year in which
ther: the participant meets (1) or (2) above, whichever applies.)
After the starting year, the participant must receive the re-
• Receive their entire interest (benefits) in the plan by quired distribution for each year by December 31 of that
the required beginning date (defined later), or year. If no distribution is made in the starting year, required
• Begin receiving regular periodic distributions by the distributions for 2 years must be made in the next year
required beginning date in annual amounts figured to (one by April 1 and one by December 31).
distribute the participant's entire interest (benefits)
Distributions after participant's death. See Pub.
over their life expectancy or over the joint life expect-
575 for the special rules covering distributions made after
ancies of the participant and the designated benefi-
the death of a participant.
ciary (or over a shorter period).

These distribution rules apply individually to each quali- Distributions From 401(k) Plans
fied plan. You can't satisfy the requirement for one plan by
taking a distribution from another. The plan must provide Generally, distributions can't be made until one of the fol-
that these rules override any inconsistent distribution op- lowing occurs.
tions previously offered.
• The employee retires, dies, becomes disabled, or oth-
Minimum distribution. If the account balance of a quali- erwise severs employment.
fied plan participant is to be distributed (other than as an The plan ends and no other defined contribution plan
•
annuity), the plan administrator must figure the minimum is established or continued.
amount required to be distributed each distribution calen-
dar year. This minimum is figured by dividing the account • In the case of a 401(k) plan that is part of a profit-shar-
balance by the applicable life expectancy. The plan ad- ing plan, the employee reaches age 59 / or suffers fi-1 2
ministrator can use the life expectancy tables in Pub. nancial hardship. For the rules on hardship distribu-
590-B for this purpose. For more information on figuring tions, including the limits on them, see Regulations
the minimum distribution, see Tax on Excess Accumula- section 1.401(k)-1(d).
tion in Pub. 575. • The employee becomes eligible for a qualified reserv-
ist distribution (defined next).
Required beginning date. Generally, each participant
must receive their entire benefits in the plan or begin to re- Certain distributions listed above may be subject
ceive periodic distributions of benefits from the plan by the ! to the tax on early distributions discussed later.
required beginning date. CAUTION
A participant must begin to receive distributions from
their qualified retirement plan by April 1 of the first year af- Qualified reservist distributions. A qualified reservist
ter the later of the following years. distribution is a distribution from an IRA or an elective de-
ferral account made after September 11, 2001, to a mili-
1. The calendar year in which the participant reaches tary reservist or a member of the National Guard who has
age 72 (if age 70 / was reached after December 31, 1 2 been called to active duty for at least 180 days or for an
2019). indefinite period. All or part of a qualified reservist distribu-
2. The calendar year in which he or she retires from em- tion can be repaid to an IRA. The additional 10% tax on
ployment with the employer maintaining the plan. early distributions doesn't apply to a qualified reservist
distribution.
However, the plan may require the participant to begin re-
ceiving distributions by April 1 of the year after the partici-
pant reaches age 72 (if age 70 / was reached after De-1 2 Tax Treatment of Distributions
cember 31, 2019) even if the participant has not retired.
Distributions from a qualified plan minus a prorated part of
any cost basis are subject to income tax in the year they

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are distributed. Because most recipients have no cost ba- Note. A distribution from a designated Roth account
sis, a distribution is generally fully taxable. An exception is can be rolled over to another designated Roth account or
a distribution that is properly rolled over as discussed un- to a Roth IRA. If the rollover is to a Roth IRA, it can be rol-
der Rollover next. led over by any rollover method, but if the rollover is to an-
other designated Roth account, it must be rolled over di-
The tax treatment of distributions depends on whether
rectly (trustee-to-trustee).
they are made periodically over several years or life (peri-
odic distributions) or are nonperiodic distributions. See More information. For more information about roll-
Taxation of Periodic Payments and Taxation of Nonperi- overs, see Rollovers in Pubs. 575 and 590-A. For rules on
odic Payments in Pub. 575 for a detailed description of rolling over distributions that contain nontaxable amounts,
how distributions are taxed, including the 10-year tax op- see Notice 2014-54, 2014-41 I.R.B. 670, available at
tion or capital gain treatment of a lump-sum distribution. IRS.gov/irb/2014-41_IRB/ar11.html. For guidance on roll-
ing money into a qualified plan, see Revenue Ruling
Note. A recipient of a distribution from a designated 2014-9, 2014-17 I.R.B. 975, available at IRS.gov/irb/
Roth account will have a cost basis because designated 2014-17_IRB/ar05.html.
Roth contributions are made on an after-tax basis. Also, a
distribution from a designated Roth account is entirely tax Withholding requirement. If, during a year, a qualified
free if certain conditions are met. See Qualified distribu- plan pays to a participant one or more eligible rollover dis-
tions under Qualified Roth Contribution Program, earlier. tributions (defined earlier) that are reasonably expected to
total $200 or more, the payor must withhold 20% of the
Rollover. The recipient of an eligible rollover distribution taxable portion of each distribution for federal income tax.
from a qualified plan can defer the tax on it by rolling it
over into a traditional IRA or another eligible retirement Exceptions. If, instead of having the distribution paid
plan. However, it may be subject to withholding, as dis- to them, the participant chooses to have the plan pay it di-
cussed under Withholding requirement, later. A rollover rectly to an IRA or another eligible retirement plan (a direct
can also be made to a Roth IRA, in which case any previ- rollover), no withholding is required.
ously untaxed amounts are includible in gross income un- If the distribution isn't an eligible rollover distribution,
less the rollover is from a designated Roth account. defined earlier, the 20% withholding requirement doesn't
apply. Other withholding rules apply to distributions that
Eligible rollover distribution. This is a distribution of aren't eligible rollover distributions, such as long-term peri-
all or any part of an employee's balance in a qualified re- odic distributions and required distributions (periodic or
tirement plan that isn't any of the following. nonperiodic). However, the participant can choose not to
1. An RMD. See Required Distributions, earlier. have tax withheld from these distributions. If the partici-
pant doesn't make this choice, the following withholding
2. Any of a series of substantially equal payments made rules apply.
at least once a year over any of the following periods.
• For periodic distributions, withholding is based on their
a. The employee's life or life expectancy. treatment as wages.
b. The joint lives or life expectancies of the employee • For nonperiodic distributions, 10% of the taxable part
and beneficiary. is withheld.
c. A period of 10 years or longer. Estimated tax payments. If no income tax is withheld
or not enough tax is withheld, the recipient of a distribution
3. A hardship distribution.
may have to make estimated tax payments. For more in-
4. Loans treated as distributions. formation, see Withholding Tax and Estimated Tax in Pub.
575.
5. Dividends on employer securities.
6. The cost of any life insurance coverage provided un- Section 402(f) notice. If a distribution is an eligible roll-
der a qualified retirement plan. over distribution, as defined earlier, you must provide a
written notice to the recipient that explains the following
7. Similar items designated by the IRS in published guid- rules regarding such distributions.
ance. See, for example, the Instructions for Forms
1099-R and 5498. 1. That the distribution may be directly transferred to an
eligible retirement plan and information about which
Rollover of nontaxable amounts. You may be able to distributions are eligible for this direct transfer.
roll over the nontaxable part of a distribution to another
2. That tax will be withheld from the distribution if it isn't
qualified retirement plan or a section 403(b) plan, or to an
directly transferred to an eligible retirement plan.
IRA. If the rollover is to a qualified retirement plan or a sec-
tion 403(b) plan that separately accounts for the taxable 3. That the distribution won't be subject to tax if transfer-
and nontaxable parts of the rollover, the transfer must be red to an eligible retirement plan within 60 days after
made through a direct (trustee-to-trustee) rollover. If the the date the recipient receives the distribution.
rollover is to an IRA, the transfer can be made by any roll-
4. Certain other rules that may be applicable.
over method.

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Notice 2020-62, 2020-35 I.R.B. 476, available at, • Timely made to reduce excess elective deferrals.
IRS.gov/irb/2023–15_IRB, contains two updated safe har-
• Made because of an IRS levy on the plan.
bor section 402(f) notices that plan administrators may
provide recipients of eligible rollover distributions. • Made as a qualified reservist distribution.
Timing of notice. The notice must generally be provi- • Made as a permissible withdrawal from an EACA.
ded no less than 30 days and no more than 180 days be- • Made as a qualified birth or adoption distribution.
fore the date of a distribution.
• Made as a qualified disaster distribution.
Method of notice. The written notice must be provi-
ded individually to each distributee of an eligible rollover • Made to an individual who has been certified by a
physician as having a terminal illness.
distribution. Posting of the notice isn't sufficient. However,
the written requirement may be satisfied through the use • Timely made to reduce excess IRA contributions pur-
of electronic media if certain additional conditions are met. suant to section 408(d)(4).
See Regulations section 1.401(a)-21.
Reporting the tax. To report the tax on early distribu-
Tax on failure to give notice. Failure to give a 402(f) tions, file Form 5329. See the form instructions for addi-
notice will result in a tax of $100 for each failure, with a to- tional information about this tax.
tal not exceeding $50,000 per calendar year. The tax
won't be imposed if it is shown that such failure is due to
reasonable cause and not to willful neglect. Tax on Excess Benefits

If you are or have been a 5% owner of the business main-
Tax on Early Distributions taining the plan, amounts you receive at any age that are
more than the benefits provided for you under the plan for-
If a distribution is made to an employee under the plan be-
fore they reache age 59 / , the employee may have to pay 1 2 mula are subject to an additional tax. This tax also applies
to amounts received by your successor. The tax is 10% of
a 10% additional tax on the distribution. This tax applies to
the excess benefit includible in income.
the amount received that the employee must include in in-
come. To determine whether or not you are a 5% owner, see
section 416.
Exceptions. The 10% tax won't apply if distributions be-
fore age 59 / are made in any of the following circumstan-1 2 Reporting the tax. Include on Schedule 2 (Form 1040),
ces. Part II, line 17j, any tax you owe for an excess benefit.
• Made to a beneficiary (or to the estate of the em-
ployee) on or after the death of the employee. Lump-sum distribution. The amount subject to the ad-
ditional tax isn't eligible for the optional methods of figur-
• Made due to the employee having a qualifying disabil- ing income tax on a lump-sum distribution. The optional
ity. methods are discussed under Lump-Sum Distributions in
• Made as part of a series of substantially equal peri- Pub. 575.
odic payments beginning after separation from service
and made at least annually for the life or life expect- Excise Tax on Reversion of Plan
ancy of the employee or the joint lives or life expectan-
Assets
cies of the employee and their designated beneficiary.
(The payments under this exception, except in the
A 20% or 50% excise tax is generally imposed on the
case of death or disability, must continue for at least 5
cash and fair market value of other property an employer
years or until the employee reaches age 59 / , which-1 2
receives directly or indirectly from a qualified plan. If you
ever is the longer period.)
owe this tax, report it on Schedule I of Form 5330. See the
• Made to an employee after separation from service if form instructions for more information.
the separation occurred during or after the calendar
year in which the employee reached age 55. Notification of Significant
• Made to an alternate payee under a QDRO. Benefit Accrual Reduction
• Made to an employee for medical care up to the
amount allowable as a medical expense deduction An employer or the plan will have to pay an excise tax if
(determined without regard to whether the employee both of the following occur.
itemizes deductions). • A defined benefit plan or money purchase pension
• Timely made to reduce excess contributions under a plan is amended to provide for a significant reduction
401(k) plan. in the rate of future benefit accrual.
• Timely made to reduce excess employee or matching • The plan administrator fails to notify the affected indi-
employer contributions (excess aggregate contribu- viduals and the employee organizations representing
tions). them of the reduction in writing.

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A plan amendment that eliminates or reduces any early 4. An employee organization, any of whose members
retirement benefit or retirement-type subsidy reduces the are covered by the plan.
rate of future benefit accrual.
5. Any direct or indirect owner of 50% or more of any of
The notice must be written in a manner calculated to be the following.
understood by the average plan participant and must pro- a. The combined voting power of all classes of stock
vide enough information to allow each individual to under- entitled to vote, or the total value of shares of all
stand the effect of the plan amendment. It must be provi- classes of stock of a corporation that is an em-
ded within a reasonable time before the amendment takes ployer or employee organization described in (3)
effect. or (4).
The tax is $100 per participant or alternate payee for b. The capital interest or profits interest of a partner-
each day the notice is late. The total tax can't be more ship that is an employer or employee organization
than $500,000 during the tax year. It is imposed on the described in (3) or (4).
employer or, in the case of a multiemployer plan, on the
c. The beneficial interest of a trust or unincorporated
plan.
enterprise that is an employer or an employee or-
ganization described in (3) or (4).
6. A member of the family of any individual described in
Prohibited Transactions
(1), (2), (3), or (5). (A member of a family is the
Prohibited transactions are transactions between the plan spouse, ancestor, or lineal descendant, or any spouse
and a disqualified person that are prohibited by law. (How- of a lineal descendant.)
ever, see Exemption later.) If you are a disqualified person 7. A corporation, partnership, trust, or estate of which (or
who takes part in a prohibited transaction, you must pay a in which) any direct or indirect owner described in (1)
tax (discussed later). through (5) holds 50% or more of any of the following.
Prohibited transactions generally include the following a. The combined voting power of all classes of stock
transactions. entitled to vote or the total value of shares of all
classes of stock of a corporation.
1. A transfer of plan income or assets to, or use of them
by or for the benefit of, a disqualified person. b. The capital interest or profits interest of a partner-
ship.
2. Any act of a fiduciary by which they deal with plan in-
come or assets in the fiduciary own interest. c. The beneficial interest of a trust or estate.
3. The receipt of consideration by a fiduciary for their 8. An officer, a director (or an individual having powers
own account from any party dealing with the plan in a or responsibilities similar to those of officers or direc-
transaction that involves plan income or assets. tors), a 10%-or more shareholder, or a highly com-
pensated employee (earning 10%-or-more of the
4. Any of the following acts between the plan and a dis- yearly wages of an employer) of a person described in
qualified person. (3), (4), (5), or (7).
a. Selling, exchanging, or leasing property. 9. A 10%-or more (in capital or profits) partner or joint
b. Lending money or extending credit. venturer of a person described in (3), (4), (5), or (7).
c. Furnishing goods, services, or facilities. 10. Any disqualified person, as described in (1) through
(9) above, who is a disqualified person with respect to
Exemption. Certain transactions are exempt from being any plan to which a section 501(c)(22) trust is permit-
treated as prohibited transactions. For example, a prohibi- ted to make payments under section 4223 of ERISA.
ted transaction doesn't take place if you are a disqualified
person and receive any benefit to which you are entitled
Tax on Prohibited Transactions
as a plan participant or beneficiary. However, the benefit
must be figured and paid under the same terms as for all
The initial tax on a prohibited transaction is 15% of the
other participants and beneficiaries. For other transactions
amount involved for each year (or part of a year) in the tax
that are exempt, see section 4975 and the related regula-
period. If the transaction isn't corrected within the tax pe-
tions.
riod, an additional tax of 100% of the amount involved is
Disqualified person. You are a disqualified person if you imposed. For information on correcting the transaction,
are any of the following. see Correcting a prohibited transaction, later.

1. A fiduciary of the plan. Both taxes are payable by any disqualified person who
participated in the transaction (other than a fiduciary act-
2. A person providing services to the plan.
ing only as such). If more than one person takes part in
3. An employer, any of whose employees are covered by the transaction, each person can be jointly and severally
the plan. liable for the entire tax.

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Amount involved. The amount involved in a prohibited • The plan has 100% of its assets invested in certain se-
transaction is the greater of the following amounts. cure investments with a readily determinable fair
value.
• The money and fair market value of any property
given. • The plan holds no employer securities.
• The money and fair market value of any property re- • The plan isn't a multiemployer plan.
ceived. If your plan is required to file an annual return/report but
If services are performed, the amount involved is any isn't eligible to file Form 5500-SF, the plan must file Form
excess compensation given or received. 5500 or 5500-EZ, as appropriate. For more details, see
the Instructions for Form 5500-SF.
Tax period. The tax period starts on the transaction date
and ends on the earliest of the following days. Form 5500-EZ. You may be able to use Form 5500-EZ if
the plan is a one-participant plan, as defined below.
• The day the IRS mails a notice of deficiency for the
tax. One-participant plan. Your plan is a one-participant
• The day the IRS assesses the tax. plan if either of the following is true.
• The day the correction of the transaction is completed. • The plan covers only you (or you and your spouse)
and you (or you and your spouse) own the entire busi-
Payment of the 15% tax. Pay the 15% tax with Form ness (whether incorporated or unincorporated).
5330. • The plan covers only one or more partners (or part-
ner(s) and spouse(s)) in a business partnership.
Correcting a prohibited transaction. If you are a dis-
qualified person who participated in a prohibited transac- A one-participant plan may not file an annual re-
tion, you can avoid the 100% tax by correcting the trans- ! turn on Form 5500. Every one-participant plan re-
action as soon as possible. Correcting the transaction CAUTION quired to file an annual return must file either
means undoing it as much as you can without putting the Form 5500-EZ or 5500-SF. See the Instructions for Form
plan in a worse financial position than if you had acted un- 5500-EZ.
der the highest fiduciary standards.
Form 5500-EZ not required. If your one-participant
Correction period. If the prohibited transaction isn't plan (or plans) had total assets of $250,000 or less at the
corrected during the tax period, you usually have an addi- end of the plan year, then you don't have to file Form
tional 90 days after the day the IRS mails a notice of defi- 5500-EZ for that plan year. All plans should file a Form
ciency for the 100% tax to correct the transaction. This 5500-EZ for the final plan year to show that all plan assets
correction period (the tax period plus the 90 days) can be have been distributed.
extended if either of the following occurs.
• The IRS grants reasonable time needed to correct the Example. You are a sole proprietor and your plan
transaction. meets all the conditions for filing Form 5500-EZ. The total
plan assets are more than $250,000. You must file Form
• You petition the Tax Court. 5500-EZ or 5500-SF.
If you correct the transaction within this period, the IRS will All one-participant plans should file Form
abate, credit, or refund the 100% tax. ! 5500-EZ for their final plan year. The final plan
CAUTION year is the year in which distribution of all plan as-
sets is completed.
Reporting Requirements
Form 5500. If you don't meet the requirements for fil-
You may have to file an annual return/report by the last day ing Form 5500-EZ or 5500-SF and a return/report is re-
of the seventh month after the plan year ends. See the fol- quired, you must file Form 5500.
lowing list of forms to choose the right form for your plan.
Electronic filing of Forms 5500 and 5500-SF. All
Form 5500-SF. Form 5500-SF is a simplified annual re- Forms 5500 and 5500-SF are required to be filed electron-
porting form. You can use Form 5500-SF if the plan meets ically with the Department of Labor through EFAST2.
all the following conditions. One-participant plans have the option of filing Form
5500-SF electronically rather than filing a Form 5500-EZ
• The plan is a small plan (generally, fewer than 100 on paper with the IRS. For more information, see the in-
participants at the beginning of the plan year). structions for Forms 5500 and 5500-SF, available at
• The plan meets the conditions for being exempt from EFAST.dol.gov.
the requirements that the plan's books and records be
audited by an independent qualified public account- Form 5310. If you terminate your plan and are the plan
ant. sponsor or plan administrator, you can file Form 5310.
Your application must be accompanied by the appropriate
user fee and Form 8717.

32 Chapter 4 Qualified Plans Publication 560 (2023)

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Form 8955-SSA. Form 8955-SSA is used to report par-         More information. For more information about reporting 
ticipants who are no longer covered by the plan but have a  requirements, see the forms and their instructions.
deferred vested benefit under the plan.
Form 8955-SSA is filed with the IRS and can be filed 
electronically through the FIRE (Filing Information Returns 
Electronically) system.

Publication 560 (2023)                 Chapter 4            Qualified Plans                                              33

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from Columnin step 4 of the Deduction Worksheet for
Self-Employed on this page.
5.
Example. You are a sole proprietor with no employees.
If your plan's contribution rate is 10% of a participant's
compensation, your rate is 0.090909. Enter this rate on
Table and Worksheets
step 4 of the Deduction Worksheet for Self-Employed on
this page.
for the Self-Employed
Rate Worksheet for Self-Employed. If your plan's con-
As discussed in chapters 2 and 4, if you are self-em- tribution rate isn't a whole percentage (for example,
ployed, you must use the rate table or rate worksheet and 10 / %), you can't use the Rate Table for Self-Employed. 1 2
deduction worksheet to figure your deduction for contribu- Use the following worksheet instead.
tions you made for yourself to a SEP-IRA or qualified plan.
First, use either the rate table or rate worksheet to find Rate Worksheet for Self-Employed
your reduced contribution rate. Then, complete the deduc- 1) Plan contribution rate as a decimal (for example, 10 / % = 1 2
tion worksheet to figure your deduction for contributions. 0.105). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2) Rate in line 1 plus 1 (for example, 0.105 + 1 = 1.105). . . . .
The table and the worksheets in chapter 5 apply 3) Self-employed rate as a decimal rounded to at least 3
! only to self-employed individuals who have only decimal places (line 1 ÷ line 2) (for example, 0.105 ÷ 1.105 =
CAUTION one defined contribution plan, such as a 0.095). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
profit-sharing plan. A SEP plan is treated as a profit-shar-
ing plan. However, don't use this worksheet for SARSEPs. Figuring your deduction. Now that you have your
self-employed rate from either the rate table or rate work-
Rate Table for Self-Employed. If your plan's contribution sheet, you can figure your maximum deduction for contri-
rate is a whole percentage (for example, 12% rather than butions for yourself by completing the Deduction Work-
12 / %), you can use the Rate Table for Self-Employed on 1 2 sheet for Self-Employed.
the next page to find your reduced contribution rate. Oth- Community property laws. If you reside in a com-
erwise, use the Rate Worksheet for Self-Employed provi- munity property state and you are married and filing a
ded below. separate return, disregard community property laws for
First, find your plan contribution rate (the contribution step 1 of the Deduction Worksheet for Self-Employed. En-
rate stated in your plan) in Column A of the table. Then, ter on step 1 the total net profit you actually earned.
read across to the rate under Column A. Enter the rate

34 Chapter 5 Table and Worksheets for the Self-Employed Publication 560 (2023)

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                                      Deduction Worksheet for Self-Employed
Step 1
      Enter your net profit from Schedule C (Form 1040), line 31; Schedule F (Form 1040), line 34;* or Schedule K-1 (Form 1065),* box 14, 
      code A.** For information on other income included in net profit from self-employment, see the Instructions for Schedule SE (Form 
      1040). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
      * Reduce this amount by any amount reported on Schedule SE (Form 1040), line 1b.
      ** General partners should reduce this amount by the same additional expenses
      subtracted from box 14, code A, to determine the amount on line 1a or line 2 of
      Schedule SE (Form 1040). 
Step 2
      Enter your deduction for self-employment tax from Schedule 1 (Form 1040), line 15         . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Step 3
      Net earnings from self-employment. Subtract step 2 from step 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         
Step 4
      Enter your rate from the Rate Table for Self-Employed or Rate Worksheet for Self-Employed . . . . . . . . . . . . . . . . . . . . . . . .              
Step 5
      Multiply step 3 by step 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
Step 6
      Multiply $330,000 by your plan contribution rate (not the reduced rate). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       
Step 7
      Enter the smaller of step 5 or step 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Step 8
      Contribution dollar limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $66,000  
      •    If you made any elective deferrals to your self-employed plan, go to step 9.
      •    Otherwise, skip steps 9 through 20 and enter the smaller of step 7 or step 8 on step 21.
Step 9
      Enter your allowable elective deferrals (including designated Roth contributions) made to your self-employed plan for the 2023 plan year. 
      Don't enter more than $22,500. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       
Step 10
      Subtract step 9 from step 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Step 11
      Subtract step 9 from step 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              
Step 12
      Enter one-half of step 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Step 13
      Enter the smallest of step 7, step 10, or step 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      
Step 14
      Subtract step 13 from step 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Step 15
      Enter the smaller of step 9 or step 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      
      •    If you made catch-up contributions, go to step 16.
      •    Otherwise, skip steps 16 through 18 and go to step 19.
Step 16
      Subtract step 15 from step 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     
Step 17
      Enter your catch-up contributions (including designated Roth contributions), if any. Don't enter more than $7,500. . . . . . . . . . . . .             
Step 18
      Enter the smaller of step 16 or step 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     
Step 19
      Add steps 13, 15, and 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     
Step 20
      Enter the amount of designated Roth contributions included on steps 9 and 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           
Step 21
      Subtract step 20 from step 19. This is your maximum deductible contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               
Next: Enter your actual contribution, not to exceed your maximum deductible contribution, on Schedule 1 (Form 1040), line 16.

Publication 560 (2023)                    Chapter 5           Table and Worksheets for the Self-Employed                                                    35

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                   Rate Table for Self-Employed                                            Example.     You are a sole proprietor with no employees. 
                                                                                           The terms of your plan provide that you contribute 8 / % 1 2
                   Column A                  Column B
          If the plan contri-                         Your                                 (0.085) of your compensation to your plan. Your net profit 
            bution rate is:                           rate is:                             from Schedule C (Form 1040), line 31, is $200,000. You 
            (shown as %)                     (shown as decimal)                            have no elective deferrals or catch-up contributions. Your 
1. . . . . . . . . . . . . . . . . . . . . . 0.009901                                      self-employment  tax  deduction  on  line  15  of  Schedule  1 
2. . . . . . . . . . . . . . . . . . . . . . 0.019608                                      (Form 1040) is $11,792. See the filled-in portions of both 
3. . . . . . . . . . . . . . . . . . . . . . 0.029126                                      Schedule SE (Form 1040), and Form 1040, later.
4. . . . . . . . . . . . . . . . . . . . . . 0.038462
5. . . . . . . . . . . . . . . . . . . . . . 0.047619                                      You  figure  your  self-employed  rate  and  maximum  de-
6. . . . . . . . . . . . . . . . . . . . . . 0.056604                                      duction for employer contributions you made for yourself 
7. . . . . . . . . . . . . . . . . . . . . . 0.065421                                      as follows.
8. . . . . . . . . . . . . . . . . . . . . . 0.074074                                      See  the  filled-in  Deduction  Worksheet  for  Self-Em-
9. . . . . . . . . . . . . . . . . . . . . . 0.082569                                      ployed later.
10. . . . . . . . . . . . . . . . . . . . .  0.090909
11. . . . . . . . . . . . . . . . . . . . .  0.099099                                              Rate Worksheet for Self-Employed
12. . . . . . . . . . . . . . . . . . . . .  0.107143
13. . . . . . . . . . . . . . . . . . . . .  0.115044                                      1) Plan contribution rate as a decimal (for example, 10 / % = 1 2
14. . . . . . . . . . . . . . . . . . . . .  0.122807                                      0.105). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  0.085
15. . . . . . . . . . . . . . . . . . . . .  0.130435                                      2) Rate in line 1 plus 1 (for example, 0.105 + 1 = 1.105). . . . . 1.085
16. . . . . . . . . . . . . . . . . . . . .  0.137931                                      3) Self-employed rate as a decimal rounded to at least 3 
17. . . . . . . . . . . . . . . . . . . . .  0.145299                                      decimal places (line 1 ÷ line 2) (for example, 0.105 ÷ 1.105 = 
18. . . . . . . . . . . . . . . . . . . . .  0.152542                                      0.095). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  0.078
19. . . . . . . . . . . . . . . . . . . . .  0.159664
20. . . . . . . . . . . . . . . . . . . . .  0.166667
21. . . . . . . . . . . . . . . . . . . . .  0.173554
22. . . . . . . . . . . . . . . . . . . . .  0.180328
23. . . . . . . . . . . . . . . . . . . . .  0.186992
24. . . . . . . . . . . . . . . . . . . . .  0.193548
25*. . . . . . . . . . . . . . . . . . . .   0.200000*
* The deduction for annual employer contributions (other than elective deferrals) to a SEP 
plan, a profit-sharing plan, or a money purchase pension plan can't be more than 20% of 
your net earnings (figured without deducting contributions for yourself) from the business 
that has the plan. 

36                                          Chapter 5 Table and Worksheets for the Self-Employed                                       Publication 560 (2023)

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                                      Deduction Worksheet for Self-Employed
Step 1
      Enter your net profit from Schedule C (Form 1040), line 31; Schedule F (Form 1040), line 34;* or Schedule K-1 (Form 1065),* box 14, 
      code A.** For information on other income included in net profit from self-employment, see the Instructions for Schedule SE (Form 
      1040). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $200,000 
      * Reduce this amount by any amount reported on Schedule SE (Form 1040), line 1b.
      ** General partners should reduce this amount by the same additional expenses
       subtracted from box 14, code A, to determine the amount on line 1a or line 2 of
       Schedule SE (Form 1040). 
Step 2
      Enter your deduction for self-employment tax from Schedule 1 (Form 1040), line 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . .            12,611
Step 3
      Net earnings from self-employment. Subtract step 2 from step 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          187,389
Step 4
      Enter your rate from the Rate Table for Self-Employed or Rate Worksheet for Self-Employed . . . . . . . . . . . . . . . . . . . . . . . .             0.078
Step 5
      Multiply step 3 by step 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   14,616
Step 6
      Multiply $330,000 by your plan contribution rate (not the reduced rate). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        28,055
Step 7
      Enter the smaller of step 5 or step 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     14,616
Step 8
      Contribution dollar limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $66,000 
      •    If you made any elective deferrals to your self-employed plan, go to step 9.
      •    Otherwise, skip steps 9 through 20 and enter the smaller of step 7 or step 8 on step 21.
Step 9
      Enter your allowable elective deferrals (including designated Roth contributions) made to your self-employed plan for the 2023 plan 
      year. Don't enter more than $22,500. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      N/A
Step 10
      Subtract step 9 from step 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      
Step 11
      Subtract step 9 from step 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              
Step 12
      Enter one-half of step 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Step 13
      Enter the smallest of step 7, step 10, or step 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      
Step 14
      Subtract step 13 from step 3  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Step 15
      Enter the smaller of step 9 or step 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      
•          If you made catch-up contributions, go to step 16.
      •    Otherwise, skip steps 16 through 18 and go to step 19.
Step 16
      Subtract step 15 from step 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       
Step 17
      Enter your catch-up contributions (including designated Roth contributions), if any. Don't enter more than $7,500. . . . . . . . . . . . .             
Step 18
      Enter the smaller of step 16 or step 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       
Step 19
      Add steps 13, 15, and 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     
Step 20
      Enter the amount of designated Roth contributions included on steps 9 and 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              
Step 21
      Subtract step 20 from step 19. This is your maximum deductible contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                $14,616
      Next: Enter your actual contribution, not to exceed your maximum deductible contribution, on Schedule 1 (Form 1040), line 16.

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SCHEDULE SE                                                                                                                         OMB No. 1545-0074
(Form 1040)                                     Self-Employment Tax
Department of the Treasury               Attach to Form 1040, 1040-SR, 1040-SS, or 1040-NR.                                          Attachment  2023
Internal Revenue Service        Go to www.irs.gov/ScheduleSE for instructions and the latest information.                            Sequence No. 17
Name of person with self-employment income (as shown on Form 1040, 1040-SR, 1040-SS, or 1040-NR) Social security number of person 
                                                                                                 with self-employment income
Part I        Self-Employment Tax 
Note:  If your only income subject to self-employment tax is church employee income, see instructions for how to report your income 
and the denition of church employee income.
A      If you are a minister, member of a religious order, or Christian Science practitioner              and    you led Form 4361, but you had 
       $400 or more of other net earnings from self-employment, check here and continue with Part I                    . .    ....   ...
Skip lines 1a and 1b if you use the farm optional method in Part II. See instructions.
   1 a Net farm prot or (loss) from Schedule F, line 34, and farm partnerships, Schedule K-1 (Form 1065), 
       box 14, code A  .    . ....       .............                            .              .    .....          ...          1a 
   b   If you received social security retirement or disability benets, enter the amount of Conservation Reserve 
       Program payments included on Schedule F, line 4b, or listed on Schedule K-1 (Form 1065), box 20, code AQ                   1b (                            ) 
Skip line 2 if you use the nonfarm optional method in Part II. See instructions.
   2   Net prot or (loss) from Schedule C, line 31; and Schedule K-1 (Form 1065), box 14, code A (other than 
       farming). See instructions for other income to report or if you are a minister or member of a religious order              2  200,000
   3   Combine lines 1a, 1b, and 2 .  .  ...    .  ...       ....          .    . ..........                                      3  200,000
   4 a If line 3 is more than zero, multiply line 3 by 92.35% (0.9235). Otherwise, enter amount from line 3              .        4a 184,700
       Note: If line 4a is less than $400 due to Conservation Reserve Program payments on line 1b, see instructions.
   b   If you elect one or both of the optional methods, enter the total of lines 15 and 17 here                 . . ...          4b 
   c   Combine lines 4a and 4b. If less than $400, stop; you don’t owe self-employment tax.                      Exception: If
       less than $400 and you had church employee income, enter -0- and continue .                      .  ...       ...          4c 184,700
   5 a Enter  your  church  employee  income  from  Form  W-2.  See  instructions  for 
       denition of church employee income   .  ...      .   .     ....         . .              .      5a 
   b   Multiply line 5a by 92.35% (0.9235). If less than $100, enter -0- . .    ...                   . .  .....         .        5b 
   6   Add lines 4c and 5b    . . ....       .............                                            . .  .....         .        6  184,700
   7   Maximum amount of combined wages and self-employment earnings subject to social security tax or 
       the 6.2% portion of the 7.65% railroad retirement (tier 1) tax for 2023 .  .              ...       ...       ...          7  160,200
   8 a Total social security wages and tips (total of boxes 3 and 7 on Form(s) W-2) 
       and railroad retirement (tier 1) compensation. If $160,200 or more, skip lines
       8b through 10, and go to line 11  . . ......                ...     ....                         8a 
   b   Unreported tips subject to social security tax from Form 4137, line 10  .  .              .      8b 
   c   Wages subject to social security tax from Form 8919, line 10 . .    ...                   .      8c 
   d   Add lines 8a, 8b, and 8c . .   ...    .  ...      ....         .    .    ...........                                       8d 
   9   Subtract line 8d from line 7. If zero or less, enter -0- here and on line 10 and go to line 11              . . . .        9  160,200
10     Multiply the smaller of line 6 or line 9 by 12.4% (0.124) . .  ...       . .              .........                        10 19,865
11     Multiply line 6 by 2.9% (0.029) . . ....    .     ............                                            . . ...          11               5,356
12     Self-employment tax.   Add lines 10 and 11. Enter here and on Schedule 2 (Form 1040), line 4, or
       Form 1040-SS, Part I, line 3   .  . ....    .     ............                                            . . ...          12 25,221
13     Deduction for one-half of self-employment tax. 
       Multiply line 12 by 50% (0.50). Enter here and on Schedule 1 (Form 1040), 
       line 15    . .     . .........           .  ....            ....         ...                     13           12,611
For Paperwork Reduction Act Notice, see your tax return instructions.                            Cat. No. 11358Z              Schedule SE (Form 1040) 2023 

38                                Chapter 5    Table and Worksheets for the Self-Employed                                   Publication 560 (2023)

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Schedule 1 (Form 1040) 2023                                                                                              Page 2
Part II Adjustments to Income
11  Educator expenses  .. . ........ . .............. .                                            11
12  Certain  business  expenses  of  reservists,  performing  artists,  and  fee-basis  government 
    ofcials. Attach Form 2106  .. . ........ . ........... .                                      12
13  Health savings account deduction. Attach Form 8889  ..... . ....... .                          13
14  Moving expenses for members of the Armed Forces. Attach Form 3903             ..... . .        14
15  Deductible part of self-employment tax. Attach Schedule SE ..... . .... .                      15                    12,611
16  Self-employed SEP, SIMPLE, and qualied plans  ..... . ......... .                             16                    14,616
17  Self-employed health insurance deduction  ..... . ........... .                                17
18  Penalty on early withdrawal of savings  . . ......... . ....... .                              18
19a Alimony paid  .. . ........ . ................ .                                               19a
b   Recipient’s SSN  .. . ........ . ......... .
c   Date of original divorce or separation agreement (see instructions):
20  IRA deduction .. . ........ . ................ .                                               20
21  Student loan interest deduction  .. . ........ . ......... .                                   21
22  Reserved for future use  ..... .. ................. .                                          22
23  Archer MSA deduction      .. . ........ . ............ .                                       23
24  Other adjustments:
a   Jury duty pay (see instructions)  .. . ........ . . .                         24a
b   Deductible  expenses  related  to  income  reported  on  line  8l  from  the 
    rental of personal property engaged in for prot  ..... . . .                 24b
c   Nontaxable  amount  of  the  value  of  Olympic  and  Paralympic  medals 
    and USOC prize money reported on line 8m ......... .                          24c
d   Reforestation amortization and expenses . ......... .                         24d
e   Repayment of supplemental unemployment benets under the Trade 
    Act of 1974 ..... . ..... . ......... .                                       24e
f   Contributions to section 501(c)(18)(D) pension plans  ..... . .               24f
g   Contributions by certain chaplains to section 403(b) plans ... .              24g
h   Attorney  fees  and  court  costs  for  actions  involving  certain  unlawful 
    discrimination claims (see instructions) . . ......... .                      24h
i   Attorney fees and court costs you paid in connection with an award 
    from the IRS for information you provided that helped the IRS detect 
    tax law violations      ..... . .. . ......... .                              24i
j   Housing deduction from Form 2555 .. . ........ . .                            24j
k   Excess deductions of section 67(e) expenses from Schedule K-1 (Form 
    1041)  . .. . .. . . . .. . . .. . .. . . . . . .                             24k
z   Other adjustments. List type and amount:
                                                                                  24z
25  Total other adjustments. Add lines 24a through 24z  ..... . ........ .                         25
26  Add lines 11 through 23 and 25. These are your adjustments to income. Enter here and on 
    Form 1040, 1040-SR, or 1040-NR, line 10 ........... . ..... .                                  26
                                                                                                   Schedule 1 (Form 1040) 2023

                                                             compensation statements (by mail or in a digital format) or 
                                                             other  government  payment  statements  (Form  1099-G); 
6.                                                           and  interest,  dividend,  and  retirement  statements  from 
                                                             banks and investment firms (Forms 1099), you have sev-
                                                             eral options to choose from to prepare and file your tax re-
How To Get Tax Help                                          turn.  You  can  prepare  the  tax  return  yourself,  see  if  you 
                                                             qualify for free tax preparation, or hire a tax professional to 
If you have questions about a tax issue, need help prepar-   prepare your return.
ing your tax return, or want to download free publications, 
forms, or instructions, go to IRS.gov to find resources that Free options for tax preparation.     Your options for pre-
can help you right away.                                     paring  and  filing  your  return  online  or  in  your  local  com-
                                                             munity, if you qualify, include the following.
Preparing and filing your tax return.  After receiving all   • Free File. This program lets you prepare and file your 
your wage and earnings statements (Forms W-2, W-2G,            federal individual income tax return for free using soft-
1099-R,  1099-MISC,  1099-NEC,  etc.);  unemployment           ware or Free File Fillable Forms. However, state tax 

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preparation may not be available through Free File. Go • IRS.gov/Forms: Find forms, instructions, and publica-
to IRS.gov/FreeFile to see if you qualify for free online tions. You will find details on the most recent tax
federal tax preparation, e-filing, and direct deposit or changes and interactive links to help you find answers
payment options. to your questions.
• VITA. The Volunteer Income Tax Assistance (VITA) • You may also be able to access tax information in your
program offers free tax help to people with e-filing software.
low-to-moderate incomes, persons with disabilities,
and limited-English-speaking taxpayers who need
Need someone to prepare your tax return? There are
help preparing their own tax returns. Go to IRS.gov/
various types of tax return preparers, including enrolled
VITA, download the free IRS2Go app, or call
agents, certified public accountants (CPAs), accountants,
800-906-9887 for information on free tax return prepa-
and many others who don’t have professional credentials.
ration.
If you choose to have someone prepare your tax return,
• TCE. The Tax Counseling for the Elderly (TCE) pro- choose that preparer wisely. A paid tax preparer is:
gram offers free tax help for all taxpayers, particularly
those who are 60 years of age and older. TCE volun- • Primarily responsible for the overall substantive accu-
racy of your return,
teers specialize in answering questions about pen-
sions and retirement-related issues unique to seniors. • Required to sign the return, and
Go to IRS.gov/TCE, download the free IRS2Go app, or Required to include their preparer tax identification
•
call 888-227-7669 for information on free tax return number (PTIN).
preparation.
Although the tax preparer always signs the return,
• MilTax. Members of the U.S. Armed Forces and quali- ! you're ultimately responsible for providing all the
fied veterans may use MilTax, a free tax service of- CAUTION information required for the preparer to accurately
fered by the Department of Defense through Military prepare your return and for the accuracy of every item re-
OneSource. For more information, go to ported on the return. Anyone paid to prepare tax returns
MilitaryOneSource (MilitaryOneSource.Mil/Tax). for others should have a thorough understanding of tax
Also, the IRS offers Free Fillable Forms, which can matters. For more information on how to choose a tax pre-
be completed online and then e-filed regardless of in- parer, go to Tips for Choosing a Tax Preparer on IRS.gov.
come.
Using online tools to help prepare your return. Go to Employers can register to use Business Services On-
IRS.gov/Tools for the following. line. The Social Security Administration (SSA) offers on-
line service at SSA.gov/employer for fast, free, and secure
• The Earned Income Tax Credit Assistant IRS.gov/ ( online W-2 filing options to CPAs, accountants, enrolled
EITCAssistant) determines if you’re eligible for the agents, and individuals who process Form W-2, Wage
earned income credit (EIC). and Tax Statement, and Form W-2c, Corrected Wage and
• The Online EIN Application IRS.gov/EIN ( ) helps you Tax Statement.
get an employer identification number (EIN) at no
cost. IRS social media. Go to IRS.gov/SocialMedia to see the
various social media tools the IRS uses to share the latest
• The Tax Withholding Estimator IRS.gov/W4App ( ) information on tax changes, scam alerts, initiatives, prod-
makes it easier for you to estimate the federal income ucts, and services. At the IRS, privacy and security are our
tax you want your employer to withhold from your pay- highest priority. We use these tools to share public infor-
check. This is tax withholding. See how your withhold- mation with you. Don’t post your social security number
ing affects your refund, take-home pay, or tax due. (SSN) or other confidential information on social media
• The First-Time Homebuyer Credit Account Look-up sites. Always protect your identity when using any social
(IRS.gov/HomeBuyer) tool provides information on networking site.
your repayments and account balance. The following IRS YouTube channels provide short, in-
formative videos on various tax-related topics in English,
• The Sales Tax Deduction Calculator IRS.gov/ (
Spanish, and ASL.
SalesTax) figures the amount you can claim if you
itemize deductions on Schedule A (Form 1040). • Youtube.com/irsvideos.
Getting answers to your tax questions. On • Youtube.com/irsvideosmultilingua.
IRS.gov, you can get up-to-date information on • Youtube.com/irsvideosASL.
current events and changes in tax law.
• IRS.gov/Help: A variety of tools to help you get an- Watching IRS videos. The IRS Video portal
swers to some of the most common tax questions. (IRSVideos.gov) contains video and audio presentations
for individuals, small businesses, and tax professionals.
• IRS.gov/ITA: The Interactive Tax Assistant, a tool that
will ask you questions and, based on your input, pro- Online tax information in other languages. You can
vide answers on a number of tax law topics. find information on IRS.gov/MyLanguage if English isn’t
your native language.

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Free Over-the-Phone Interpreter (OPI) Service. The • Approve or reject authorization requests from tax pro-
IRS is committed to serving taxpayers with limited-English fessionals.
proficiency (LEP) by offering OPI services. The OPI Serv-
• View your address on file or manage your communica-
ice is a federally funded program and is available at Tax-
tion preferences.
payer Assistance Centers (TACs), other IRS offices, and
every VITA/TCE return site. The OPI Service is accessible Get a transcript of your return. With an online account,
in more than 350 languages. you can access a variety of information to help you during
the filing season. You can get a transcript, review your
Accessibility Helpline available for taxpayers with
most recently filed tax return, and get your adjusted gross
disabilities. Taxpayers who need information about ac-
income. Create or access your online account at IRS.gov/
cessibility services can call 833-690-0598. The Accessi-
Account.
bility Helpline can answer questions related to current and
future accessibility products and services available in al- Tax Pro Account. This tool lets your tax professional
ternative media formats (for example, braille, large print, submit an authorization request to access your individual
audio, etc.). The Accessibility Helpline does not have ac- taxpayer IRS online account. For more information, go to
cess to your IRS account. For help with tax law, refunds, or IRS.gov/TaxProAccount.
account-related issues, go to IRS.gov/LetUsHelp.
Using direct deposit. The safest and easiest way to re-
Note. Form 9000, Alternative Media Preference, or ceive a tax refund is to e-file and choose direct deposit,
Form 9000(SP) allows you to elect to receive certain types which securely and electronically transfers your refund di-
of written correspondence in the following formats. rectly into your financial account. Direct deposit also
• Standard Print. avoids the possibility that your check could be lost, stolen,
destroyed, or returned undeliverable to the IRS. Eight in
• Large Print. 10 taxpayers use direct deposit to receive their refunds. If
• Braille. you don’t have a bank account, go toIRS.gov/
DirectDeposit for more information on where to find a bank
• Audio (MP3).
or credit union that can open an account online.
• Plain Text File (TXT).
Reporting and resolving your tax-related identity
• Braille Ready File (BRF). theft issues.
Disasters. Go to IRS.gov/DisasterRelief to review the • Tax-related identity theft happens when someone
available disaster tax relief. steals your personal information to commit tax fraud.
Your taxes can be affected if your SSN is used to file a
Getting tax forms and publications. Go to IRS.gov/ fraudulent return or to claim a refund or credit.
Forms to view, download, or print all of the forms, instruc-
tions, and publications you may need. Or you can go to • The IRS doesn’t initiate contact with taxpayers by
IRS.gov/OrderForms to place an order. email, text messages (including shortened links), tele-
phone calls, or social media channels to request or
Getting tax publications and instructions in eBook verify personal or financial information. This includes
format. Download and view most tax publications and in- requests for personal identification numbers (PINs),
structions (including the Instructions for Form 1040) on passwords, or similar information for credit cards,
mobile devices as eBooks at IRS.gov/eBooks. banks, or other financial accounts.
IRS eBooks have been tested using Apple's iBooks for • Go to IRS.gov/IdentityTheft, the IRS Identity Theft
iPad. Our eBooks haven’t been tested on other dedicated Central webpage, for information on identity theft and
eBook readers, and eBook functionality may not operate data security protection for taxpayers, tax professio-
as intended. nals, and businesses. If your SSN has been lost or
stolen or you suspect you’re a victim of tax-related
Access your online account (individual taxpayers
identity theft, you can learn what steps you should
only). Go to IRS.gov/Account to securely access infor-
take.
mation about your federal tax account.
• View the amount you owe and a breakdown by tax • Get an Identity Protection PIN (IP PIN). IP PINs are
six-digit numbers assigned to eligible taxpayers to
year.
help prevent the misuse of their SSNs on fraudulent
• See payment plan details or apply for a new payment federal income tax returns. When you have an IP PIN,
plan. it prevents someone else from filing a tax return with
• Make a payment or view 5 years of payment history your SSN. To learn more, go to IRS.gov/IPPIN.
and any pending or scheduled payments.
Ways to check on the status of your refund.
• Access your tax records, including key data from your
• Go to IRS.gov/Refunds.
most recent tax return, and transcripts.
• Download the official IRS2Go app to your mobile de-
• View digital copies of select notices from the IRS.
vice to check your refund status.

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• Call the automated refund hotline at 800-829-1954. Understanding an IRS notice or letter you’ve re-
ceived. Go to IRS.gov/Notices to find additional informa-
The IRS can’t issue refunds before mid-February
tion about responding to an IRS notice or letter.
! for returns that claimed the EIC or the additional
CAUTION child tax credit (ACTC). This applies to the entire
Responding to an IRS notice or letter. You can now
refund, not just the portion associated with these credits. upload responses to all notices and letters using the
Document Upload Tool. For notices that require additional
Making a tax payment. Payments of U.S. tax must be action, taxpayers will be redirected appropriately on
remitted to the IRS in U.S. dollars. Digital assets are not IRS.gov to take further action. To learn more about the
accepted. Go to IRS.gov/Payments for information on how tool, go to IRS.gov/Upload.
to make a payment using any of the following options.
Note. You can use Schedule LEP (Form 1040), Re-
• IRS Direct Pay: Pay your individual tax bill or estimated
quest for Change in Language Preference, to state a pref-
tax payment directly from your checking or savings ac-
erence to receive notices, letters, or other written commu-
count at no cost to you.
nications from the IRS in an alternative language. You may
• Debit Card, Credit Card, or Digital Wallet: Choose an not immediately receive written communications in the re-
approved payment processor to pay online or by quested language. The IRS’s commitment to LEP taxpay-
phone. ers is part of a multi-year timeline that began providing
• Electronic Funds Withdrawal: Schedule a payment translations in 2023. You will continue to receive communi-
when filing your federal taxes using tax return prepara- cations, including notices and letters, in English until they
tion software or through a tax professional. are translated to your preferred language.

• Electronic Federal Tax Payment System: Best option Contacting your local TAC office. Keep in mind, many
for businesses. Enrollment is required. questions can be answered on IRS.gov without visiting an
IRS TAC. Go to IRS.gov/LetUsHelp for the topics people
• Check or Money Order: Mail your payment to the ad-
ask about most. If you still need help, IRS TACs provide
dress listed on the notice or instructions.
tax help when a tax issue can’t be handled online or by
• Cash: You may be able to pay your taxes with cash at phone. All TACs now provide service by appointment, so
a participating retail store. you’ll know in advance that you can get the service you
• Same-Day Wire: You may be able to do same-day need without long wait times. Before you visit, go to
wire from your financial institution. Contact your finan- IRS.gov/TACLocator to find the nearest TAC and to check
cial institution for availability, cost, and time frames. hours, available services, and appointment options. Or, on
the IRS2Go app, under the Stay Connected tab, choose
Note. The IRS uses the latest encryption technology to the Contact Us option and click on “Local Offices.”
ensure that the electronic payments you make online, by
phone, or from a mobile device using the IRS2Go app are
safe and secure. Paying electronically is quick, easy, and The Taxpayer Advocate
faster than mailing in a check or money order.
Service (TAS) Is Here To Help
What if I can’t pay now? Go to IRS.gov/Payments for
more information about your options. You
• Apply for an online payment agreement IRS.gov/ (
OPA) to meet your tax obligation in monthly install- What is TAS? TAS is an independent organization
ments if you can’t pay your taxes in full today. Once within the IRS that helps taxpayers and protects taxpayer
you complete the online process, you will receive im- rights. Their job is to ensure that every taxpayer is treated
mediate notification of whether your agreement has fairly and that you know and understand your rights under
been approved. the Taxpayer Bill of Rights.

• Use the Offer in Compromise Pre-Qualifier to see if How can you learn about your taxpayer rights? The
you can settle your tax debt for less than the full Taxpayer Bill of Rights describes 10 basic rights that all
amount you owe. For more information on the Offer in taxpayers have when dealing with the IRS. Go to
Compromise program, go to IRS.gov/OIC. TaxpayerAdvocate.IRS.gov to help you understand what
these rights mean to you and how they apply. These are
Filing an amended return. Go to IRS.gov/Form1040X your rights. Know them. Use them.
for information and updates.
What can TAS do for you? TAS can help you resolve
Checking the status of your amended return. Go to problems that you can’t resolve with the IRS. And their
IRS.gov/WMAR to track the status of Form 1040-X amen- service is free. If you qualify for their assistance, you will
ded returns. be assigned to one advocate who will work with you
It can take up to 3 weeks from the date you filed
! your amended return for it to show up in our sys-
CAUTION tem, and processing it can take up to 16 weeks.

42 Chapter 6 How To Get Tax Help Publication 560 (2023)

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throughout the process and will do everything possible to             • Call TAS toll free at 877-777-4778.
resolve your issue. TAS can help you if:
                                                                   How else does TAS help taxpayers?        TAS works to re-
 • Your problem is causing financial difficulty for you,           solve large-scale problems that affect many taxpayers. If 
   your family, or your business;                                  you know of one of these broad issues, report it to TAS at 
 • You face (or your business is facing) an immediate              IRS.gov/SAMS. Be sure to not include any personal tax-
   threat of adverse action; or                                    payer information.
 • You’ve tried repeatedly to contact the IRS but no one 
   has responded, or the IRS hasn’t responded by the               Low Income Taxpayer Clinics (LITCs)
   date promised.
                                                                   LITCs are independent from the IRS and TAS. LITCs rep-
How  can  you  reach  TAS?  TAS  has  offices          in  every   resent individuals whose income is below a certain level 
state,  the  District  of  Columbia,  and  Puerto  Rico.  To  find and  need  to  resolve  tax  problems  with  the  IRS,  such  as 
your advocate’s number:                                            audits,  appeals,  and  tax  collection  disputes.  In  addition, 
                                                                   LITCs can provide information about taxpayer rights and 
 • Go to TaxpayerAdvocate.IRS.gov/Contact-Us;
                                                                   responsibilities  in  different  languages  for  individuals  who 
 • Download Pub. 1546, The Taxpayer Advocate Service               speak English as a second language. Services are offered 
   Is Your Voice at the IRS, available at IRS.gov/pub/irs-         for  free  or  a  small  fee  for  eligible  taxpayers.  To  find  an 
   pdf/p1546.pdf;                                                  LITC  near  you,  go  to TaxpayerAdvocate.IRS.gov/LITC  or 
 • Call the IRS toll free at 800-TAX-FORM                          see  IRS  Pub.  4134, Low  Income  Taxpayer  Clinic  List,  at 
   (800-829-3676) to order a copy of Pub. 1546;                    IRS.gov/pub/irs-pdf/p4134.pdf.
 • Check your local directory; or

                  To help us develop a more useful index, please let us know if you have ideas for index entries.
Index             See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.
 
                                           Deduction limits        23
401(k) Plan:                               Eligible automatic contribution           F
 Elective Deferrals 24                     arrangement             25                Form:
 Safe harbor  26                           Forfeitures   25                              1040 23 30, 
                                           Limits on contributions       22              1099-R 26
A                                          Money purchase pension plan       18          5304–SIMPLE   14
Annual additions  5                        Profit-sharing plan       18                  5305–S 14
Annual benefits 5                          Qualified automatic contribution              5305–SA 14
Assistance (See Tax help)                  arrangement             25                    5305–SEP 8
Automatic Enrollment   25                 Definitions you need to know       5           5305–SIMPLE   14
                                          Disqualified person         31                 5310 32
B                                         Distributions (withdrawals)       16           5329 30
Business, definition 5                                                                   5330 24 26 30 32, , , 
                                          E
                                                                                         5500 32
C                                         EACA 25                                        5500-EZ 32
Common-law employee      5                Earned income    6                             Form W-2 16
Compensation  5                           Eligible automatic contribution                Schedule K (Form 1065) 23
Contribution:                              arrangement      25
 Defined 6                                Employees:                                 H
 Limits:                                   Eligible    8
                                                                                     Highly compensated employee           6
   Qualified plans  22                     Excludable    8
   SEP-IRAs   9                            Highly compensated         6              K
   SIMPLE IRA plan    14                   Leased      6
                                                                                     Keogh plans (See Qualified plans)
                                          Employer:
D                                          Defined     6                             L
Deduction:                                Excess Deferrals         26
                                                                                     Leased employee       6
 Defined 6                                Excise tax   30
Deduction Worksheet for                    Nondeductible (excess)                    N
 Self-Employed    34                       contributions           23
Defined benefit plan:                      Reduced benefit accrual       30          Net earnings from 
                                                                                         self-employment    6
 Deduction limits 23                       SEP excess contributions        10
                                                                                     Notification requirements           14
 Limits on contributions 22               Excludable employees           13
Defined contribution plan:                                                           P
 Automatic Enrollment  25
                                                                                     Participant, definition   7

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Participation 19                   Rate Worksheet for                     Eligible employee 8
Partner, definition 7              Self-Employed     34                   Excludable employees  8
Publications (See Tax help)        Reporting requirements  32            SIMPLE IRA plan:
                                   Setting up 20                          Compensation  13
Q                                Qualified Plans:                         Contributions 14
QACA 25                            Survivor benefits 19                   Deductions 15
Qualified automatic contribution Qualified Roth Contribution              Distributions(withdrawals)                     16
arrangement     25                 Program  27                            Employee election period                       14
Qualified Plan, definition 7                                              Employer matching 
Qualified plans 17               R                                        contributions  15
Assignment of benefits   20      Rate Table for Self-Employed         34  Excludable employees  13
Benefits starting date 19        Rate Worksheet for                       Notification requirements                      14
Contributions  22 23,              Self-Employed   34                     When to deduct contributions                     16
Deduction limits  23             Required distributions 28               SIMPLE plans 13 16, 
Deduction Worksheet for          Rollovers 29                             SIMPLE 401(k) 16
   Self-Employed    34                                                    SIMPLE IRA plan   13
Deductions    22                 S                                       Simplified employee pension 
Deferrals 24 25,                 Safe harbor 401(k) plan 26               (SEP)   10
Defined benefit plan  18         Salary reduction arrangement         11  Salary reduction arrangement:
Defined contribution plan  18    Salary Reduction Simplified              Compensation of self-employed 
Distributions 28                   Employee Pension(SARSEP)           10  individuals    11
   Minimum    28                 SARSEP:                                  Employee compensation                           11
   Required beginning date   28    ADP test 10                            Who can have a SARSEP                            10
   Rollover 29                   Section 402(f) notice  29                SEP-IRA contributions 8
   Tax on excess benefits  30    Self-employed individual   7             Setting up a SEP 8
   Tax on premature   30         SEP plans:                              Sixty-day employee election 
   Tax treatment  28               Deduction Worksheet for                period  14
Elective Deferrals  24             Self-Employed     34                  Sole proprietor, definition                     7
   Limits 24                       Rate Table for Self-Employed       34
Employee nondeductible             Rate Worksheet for                    T
   contributions 22                Self-Employed     34                  Tax help 39
Excess Deferrals    26             Reporting and Disclosure 12
Investing plan assets  21        SEP-IRAs:                               U
Kinds of plans  18                 Contributions 9                       User fee 21
Leased employees      19           Deductible contributions 9 10, 
Minimum requirements:              Carryover of excess                   W
                                   contributions     10
   Coverage   18                                                         Worksheets:
                                   Deduction limits  9
   Funding  21                                                            Deduction Worksheet for 
                                   Limits for self-employed         10
   Vesting  19                                                            Self-Employed     34
                                   When to deduct    10
Prohibited transactions  31                                               Rate Worksheet for 
                                   Where to deduct    10
Qualification rules 18                                                    Self-Employed     34
                                   Distributions (withdrawals)      12
Rate Table for Self-Employed  34

44                                                                                  Publication 560 (2023)

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