Simple IRAs

[Guest spritcha]

If an independent contractor has only one employee (himself), can they have a Simple IRA plan? If so (I believe it can be done but a Federal tax ID is needed), what unique items are needed and how is the employer contribution handled? Are there any special tax implications on the individual's 1040 or special federal reporting requirements?

[Gary Lesser]

Yes. Pick up copies of a SIMPLE plan and SIMPLE IRA documents from a sponsoring financial organization. See, too, IRS publication 590.

[txdd]

A Simple IRA for a sole proprietor does not require a federal tax id.

[Appleby]

txdd,

A TAX ID is not required but the IRS strongly recommends that one be obtained by the sole proprietor for the business and the plan, as it helps to make a distinction between the individual and his/her business (note: the IRS identification process relies heavily on Tax ID numbers and this helps).