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Completing Form 5305-SEP

The IRS has developed an extremely helpful tax form that meets all the requirements of a SEP plan. It does not require any special document preparation other than simply filling in a few lines on the form, signing it, and dating it.

Are you eligible to use Form 5305-SEP? To be able to use Form 5305-SEP, you must meet the following requirements:

  • You must not maintain any other retirement plan and must not have maintained a defined benefit plan at any time in the past.
  • Each eligible employee must have established an IRA.
  • You must not use leased employees.
  • You cannot be a member of an affiliated service group, a controlled group of corporations, or trades or businesses under common control, unless all eligible employees of all the members of such groups, trades, or businesses participate in the SEP.
  • You must pay the cost of the SEP contributions (which means that you cannot provide for elective employee contributions).

You should note that even if you fall into one of the categories above, you can still set up a SEP; you just can't use Form 5305-SEP.

Do not file Form 5305-SEP with the IRS. The form is merely intended to help you set up a SEP. You should fill it out, sign it, and date it and keep it with your business records. Once you have filled out the form, you don't have to do anything else with it, which means that you do not have to file Form 5305-SEP with the IRS, and you do not have to file any annual information returns (as most other types of plans are required to do).

Business Tools

In our Business Tools you will find Form 5305-SEP. It is in Adobe Portable Document Format (.pdf), and you will need the free Acrobat Reader to view and print the file.

Once the plan is set up, you must communicate information about the plan to your employees.