Department of the Treasury

Internal Revenue Service

Publication 560

Cat. No. 46574N

Retirement 

Plans

for Small 

Business

(SEP, SIMPLE, and

Qualified Plans)

For use in preparing

2023 Returns

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Contents

What's New ............................... 1

Reminders ............................... 2

Introduction .............................. 3

Chapter 1. Definitions You Need To Know ....... 5

Chapter 2. Simplified Employee 

Pensions (SEPs) ........................ 7

Setting up a SEP ........................ 8

How Much Can I Contribute? ................ 8

Deducting Contributions ................... 9

Salary Reduction Simplified Employee 

Pensions (SARSEPs) .................. 10

Distributions (Withdrawals) ................ 12

Additional Taxes ........................ 12

Reporting and Disclosure Requirements ....... 12

Chapter 3. SIMPLE Plans .................. 12

SIMPLE IRA Plan ....................... 13

SIMPLE 401(k) Plan ..................... 16

Chapter 4. Qualified Plans ................. 17

Kinds of Plans ......................... 18

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 

for 2024.

Elective deferral limits for 2023 and 2024. The limit on 

elective deferrals, other than catch-up contributions, is 

Jul 5, 2024
$22,500 for 2023 and $23,000 for 2024. These limits apply for participants in SARSEPs, 401(k) plans (excluding 

SIMPLE plans), section 403(b) plans, and section 457(b) 

plans.

Defined contribution limits for 2023 and 2024. The 

limit on contributions, other than catch-up contributions, 

for a participant in a defined contribution plan is $66,000 

for 2023 and increases to $69,000 for 2024.

Defined benefit limits for 2023 and 2024. The limit on 

annual benefits for a participant in a defined benefit plan is 

$265,000 for 2023 and increases to $275,000 for 2024.

SIMPLE plan salary reduction contribution limits for 

2023 and 2024. The limit on salary reduction contributions, other than catch-up contributions, is $15,500 for 

2023 and increases to $16,000 for 2024.

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 reduction contributions. The catch-up contribution limit for 

defined contribution plans other than SIMPLE plans is 

$7,500 for 2023 and 2024. The catch-up contribution limit 

for SIMPLE plans is $3,500 for 2023 and 2024.

A participant's catch-up contributions for a year can't 

exceed the lesser of the following amounts.

• The catch-up contribution limit.

• The excess of the participant's compensation over the 

elective deferrals that aren’t catch-up contributions.

See Catch-up contributions under Contribution Limits and 

Limit on Elective Deferrals in chapters 3 and 4, respectively, for more information.

Required minimum distributions (RMDs). 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 turn age 73. This change in the age for 

making these beginning RMDs applies to both IRA owners and participants in a qualified retirement plan.

Plans established after end of taxable year. For 2023 

and later years, a sole-proprietor with no employees can 

adopt a section 401(k) plan after the end of the taxable 

year, provided the plan is adopted by the tax filing deadline (without regard to extensions).

Increased small employer pension plan startup cost 

credit. The Secure 2.0 Act of Division T of the Consolidated Appropriations Act, 2023, P.L. 117-328 (SECURE 2.0 

Act), provides that eligible employers with 1–50 employees are eligible for an increased small employer pension 

plan startup cost credit under section 45E of 100% of 

qualified startup costs, subject to limitation. The credit for 

eligible employers with 51–100 employees remains at 

50% of qualified startup costs, subject to limitation. See 

the instructions to Form 3800 and Form 8881 for more information on the startup cost credit.

Employer contributions credit. The Secure 2.0 Act 

added an additional startup cost credit under section 45E 

available to certain eligible employers, in an amount equal 

to an applicable percentage of the employer’s 

contributions (not including an elective deferral, as defined 

in section 402(g)(3)) to an eligible employer plan, subject 

to limitation. See the instructions to Form 3800 and Form 

8881 for more information on the employer contributions 

credit.

Small employer military spouse participation credit. 

The Secure 2.0 Act added a new military spouse participation credit under section 45AA available to eligible small 

employers who maintain defined contribution plans with 

specific features that benefit military spouses. See the instructions to Form 3800 and Form 8881 for more information on the military spouse participation credit.

Designated Roth nonelective contributions and designated Roth matching contributions. The Secure 2.0 

Act of 2022 permits certain nonelective contributions and 

matching contributions that are made after December 29, 

2022, to be designated as Roth contributions.

Reminders

Small employer automatic enrollment credit. The Further Consolidated Appropriations Act, 2020, P.L. 116-94, 

added section 45T. An eligible employer may claim a tax 

credit if it includes an eligible automatic contribution arrangement under a qualified employer plan. The credit 

equals $500 per year over a 3-year period beginning with 

the first tax year in which it includes the automatic contribution arrangement, and may first be claimed on the employer’s return for the year 2020.

Increase in credit limitation for small employer plan 

startup costs. The Further Consolidated Appropriations 

Act, 2020, P.L. 116-94, amended section 45E. For tax 

years beginning after December 31, 2019, eligible employers can claim a tax credit for the first credit year and 

each of the 2 tax years immediately following. The credit 

equals 50% of qualified startup costs, up to the greater of 

(a) $500; or (b) the lesser of (i) $250 for each employee 

who is not a “highly compensated employee” eligible to 

participate in the employer plan, or (ii) $5,000.

Note. The SECURE 2.0 Act further amended section 

45E to increase the credit for tax years beginning after December 31, 2022. See What’s New.

See the instructions for Form 3800 and Form 8881 for 

more information on the small employer automatic enrollment credit and the small employer startup cost credit.

Restriction on conditions of participation. Effective 

for plan years beginning after December 31, 2020, a 

401(k) plan can’t require, as a condition of participation, 

that an employee complete a period of service that extends beyond the close of the earlier of (a) 1 year of service, or (b) the first period of 3 consecutive 12-month periods (excluding 12-month periods beginning before 

January 1, 2021) during each of which the employee has 

completed at least 500 hours of service. Effective for plan 

years beginning after December 31, 2024, 3 consecutive 

12-month periods are reduced to 2 consecutive 12-month 

periods.

Retirement savings contributions credit. Retirement 

plan participants (including self-employed individuals) 

2 Publication 560 (2023)
who make contributions to their plan may qualify for the retirement savings contribution credit. The maximum contribution eligible for the credit is $2,000. To take the credit, 

use Form 8880, Credit for Qualified Retirement Savings 

Contributions. For more information on who is eligible for 

the credit, retirement plan contributions eligible for the 

credit, and how to figure the credit, see Form 8880 and its 

instructions or go to IRS.gov/Retirement-Plans/PlanParticipant-Employee/Retirement-Savings-ContributionsSavers-Credit.

Photographs of missing children. The IRS is a proud 

partner with the National Center for Missing & Exploited 

Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring 

these children home by looking at the photographs and 

calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Introduction

This publication discusses retirement plans you can set 

up and maintain for yourself and your employees. In this 

publication, “you” refers to the employer. See chapter 1 for 

the definition of the term “employer” and the definitions of 

other terms used in this publication. This publication covers the following types of retirement plans.

• SEP (simplified employee pension) plans.

• SIMPLE (savings incentive match plan for employees) 

plans.

• Qualified plans (also called H.R. 10 plans or Keogh 

plans when covering self-employed individuals), including 401(k) plans.

SEP, SIMPLE, and qualified plans offer you and your 

employees a tax-favored way to save for retirement. You 

can deduct contributions you make to the plan for your 

employees. If you are a sole proprietor, you can deduct 

contributions you make to the plan for yourself. You can 

also deduct trustees' fees if contributions to the plan don't 

cover them. Earnings on the contributions are generally 

tax free until you or your employees receive distributions 

from the plan.

Under a 401(k) plan, employees can have you contribute limited amounts of their before-tax (after-tax, in the 

case of a qualified Roth contribution program) pay to the 

plan. These amounts (and the earnings on them) are generally tax free until your employees receive distributions 

from the plan or, in the case of a qualified distribution from 

a designated Roth account, completely tax free.

What this publication covers. This publication contains 

the information you need to understand the following topics.

• What type of plan to set up.

• How to set up a plan.

• How much you can contribute to a plan.

• How much of your contribution is deductible.

• How to treat certain distributions.

• How to report information about the plan to the IRS 

and your employees.

• Basic features of SEP, SIMPLE, and qualified plans. 

The key rules for SEP, SIMPLE, and qualified plans 

are outlined in Table 1.

SEP plans. SEP plans provide a simplified method for 

you to make contributions to a retirement plan for yourself 

and your employees. Instead of setting up a profit-sharing 

or money purchase plan with a trust, you can adopt a SEP 

agreement and make contributions directly to a traditional 

individual retirement account or a traditional individual retirement annuity (SEP-IRA) set up for yourself and each 

eligible employee.

SIMPLE plans. Generally, if you had 100 or fewer employees who received at least $5,000 in compensation last 

year, you can set up a SIMPLE IRA plan. Under a SIMPLE 

plan, employees can choose to make salary reduction 

contributions rather than receiving these amounts as part 

of their regular pay. In addition, you will contribute matching or nonelective contributions. The two types of SIMPLE 

plans are the SIMPLE IRA plan and the SIMPLE 401(k) 

plan.

Qualified plans. The qualified plan rules are more 

complex than the SEP plan and SIMPLE plan rules. However, there are advantages to qualified plans, such as increased flexibility in designing plans and increased contribution and deduction limits in some cases.

Publication 560 (2023) 3
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 

(including extensions).

Smaller of $66,000 or 25%1

of participant's 

compensation.2

25%1 of all participants' 

compensation.2

Any time up to the due date of 

employer's return (including 

extensions).

SIMPLE

IRA

and

SIMPLE

401(k)

Salary reduction contributions: 30 

days after the end of the month for 

which the contributions are to be made.4

Matching or nonelective 

contributions: Due date of employer's 

return (including extensions).

Employee contribution:

Salary reduction contribution 

up to $15,500; $19,000 if 

age 50 or over.

Employer contribution:

Either dollar-for-dollar 

matching contributions, up to 

3% of employee's 

compensation,3 or fixed 

nonelective contributions of 

2% of compensation.2

Same as maximum 

contribution.

Any time between January 1 

and October 1 of the calendar 

year.

For a new employer coming 

into existence after October 1, 

as soon as administratively 

feasible.

Qualified 

Plan: 

Defined 

Contribution

 Plan

Elective deferral: Due date of 

employer's return (including 

extensions).4

Employer contribution:

Profit-Sharing Plan: Due date of 

employer's return (including 

extensions). Money Purchase Pan: 8 

1/2 months after the end of the plan 

year.

Employee contribution: 

Elective deferral up to 

$22,500; $30,000 if age 50 

or over.

Employer contribution:

Money Purchase Pension 

Plan: Smaller of $66,000 or 

100%1 of participant's 

compensation.2

Profit-Sharing: Smaller of 

$66,000 or 100%1 of 

participant's compensation.2

25%1 of all participants' 

compensation,2 plus 

amount of elective 

deferrals made.

By the employer’s tax-filing 

due date, including 

extensions, for the taxable 

year.

Qualified 

Plan: 

Defined 

Benefit Plan

Contributions must generally be paid in 

quarterly installments, due 15 days 

after the end of each quarter, with a 

final contribution due 8 1/2 months after 

the end of the plan year. See Minimum 

Funding Requirement in chapter 4.

Amount needed to provide 

an annual benefit no larger 

than the smaller of $265,000 

or 100% of the participant's 

average compensation for 

the highest 3 consecutive 

calendar years.

Based on actuarial 

assumptions and 

computations.

By the employer’s tax filing 

due date (although it’s not best 

to set up after the minimum 

funding due date).

1

 Net earnings from self-employment must take the contribution into account. See Deduction Limit for Self-Employed Individuals in chapters 2 and 4.

2

 Compensation is generally limited to $330,000 in 2023.

3

 Under a SIMPLE 401(k) plan, compensation is generally limited to $330,000 in 2023.

4

 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) 

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 purpose of this publication is to provide general information 

about retirement plans you can set up for your employees, 

it doesn't contain all the rules and exceptions that apply to 

these plans. You may need professional help and guidance.

Also, this publication doesn't cover all the rules that 

may be of interest to employees. For example, it doesn't 

cover the following topics.

• The comprehensive IRA rules an employee needs to 

know. These rules are covered in Pub. 590-A, Contributions to Individual Retirement Arrangements (IRAs), 

and Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs).

• The comprehensive rules that apply to distributions 

from retirement plans. These rules are covered in Pub. 

575, Pension and Annuity Income.

• The comprehensive rules that apply to section 403(b) 

plans. These rules are covered in Pub. 571, Tax-Sheltered Annuity Plans (403(b) Plans) For Employees of 

Public Schools and Certain Tax-Exempt Organizations.

Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions.

You can send us comments through IRS.gov/

FormComments. Or you can write to the Internal Revenue 

Service, Tax Forms and Publications, 1111 Constitution 

Ave. NW, IR-6526, Washington, DC 20224.

Although we can’t respond individually to each comment received, we do appreciate your feedback and will 

consider your comments and suggestions as we revise 

our tax forms, instructions, and publications. Don’t send 

tax questions, tax returns, or payments to the above address.

Getting answers to your tax questions. If you have 

a tax question not answered by this publication or the How 

To Get Tax Help section at the end of this publication, go 

to the IRS Interactive Tax Assistant page at IRS.gov/

Help/ITA where you can find topics by using the search 

feature or viewing the categories listed.

Getting tax forms, instructions, and publications. 

Go to IRS.gov/Forms to download current and prior-year 

forms, instructions, and publications.

Ordering forms and publications. Go to IRS.gov/

OrderForms to order current forms, instructions, and 

4 Publication 560 (2023)
publications; call 800-829-3676 to order prior-year forms 

and instructions. The IRS will process your order for forms 

and publications as soon as possible. Don’t resubmit requests you’ve already sent us. You can get forms and publications faster online.

Tax questions. If you have a tax question not answered by this publication, check IRS.gov and How To Get 

Tax Help at the end of this publication.

1.

Definitions

You Need To Know

Certain terms used in this publication are defined below. 

The same term used in another publication may have a 

slightly different meaning.

Annual additions. Annual additions are the total of all 

your contributions in a year, employee contributions (not 

including rollovers), and forfeitures allocated to a participant's account.

Annual benefits. Annual benefits are the benefits to be 

paid yearly in the form of a straight life annuity (with no extra benefits) under a plan to which employees don't contribute and under which no rollover contributions are 

made.

Business. A business is an activity in which a profit motive is present and economic activity is involved. Service 

as a newspaper carrier under age 18 or as a public official 

isn’t a business.

Common-law employee. A common-law employee is 

any individual who, under common law, would have the 

status of an employee. A leased employee can also be a 

common-law employee.

A common-law employee is a person who performs 

services for an employer who has the right to control and 

direct the results of the work and the way in which it is 

done. For example, the employer:

• Provides the employee's tools, materials, and workplace; and

• Can fire the employee.

Common-law employees aren't self-employed and can't 

set up retirement plans for income from their work, even if 

that income is self-employment income for social security 

tax purposes. For example, common-law employees who 

are ministers, members of religious orders, full-time insurance salespeople, and U.S. citizens employed in the United States by foreign governments can't set up retirement 

plans for their earnings from those employments, even 

though their earnings are treated as self-employment income.

However, an individual may be a common-law employee and a self-employed person as well. For example, 

an attorney can be a corporate common-law employee 

during regular working hours and also practice law in the 

evening as a self-employed person. In another example, a 

minister employed by a congregation for a salary is a common-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, baptisms, and other personal services are self-employment 

earnings for qualified plan purposes.

Compensation. Compensation for plan allocations is the 

pay a participant received from you for personal services 

for a year. You can generally define compensation as including all the following payments.

1. Wages and salaries.

2. Fees for professional services.

3. Other amounts received (cash or noncash) for personal services actually rendered by an employee, including, but not limited to, the following items.

a. Commissions and tips.

b. Fringe benefits.

c. Bonuses.

For a self-employed individual, compensation means 

the earned income, discussed later, of that individual.

Compensation generally includes amounts deferred at 

the employee's election in the following employee benefit 

plans.

• Section 401(k) plans.

• Section 403(b) plans.

• SIMPLE IRA plans.

• SARSEPs.

• Section 457 deferred compensation plans.

• Section 125 cafeteria plans.

However, an employer can choose to exclude elective 

deferrals under the above plans from the definition of compensation. The limit on elective deferrals is discussed in 

chapter 2 under Salary Reduction Simplified Employee 

Pension (SARSEP) and in chapter 4.

Other options. In figuring the compensation of a participant, you can treat any of the following amounts as the 

employee's compensation.

• The employee's wages as defined for income tax withholding purposes.

• The employee's wages you report in box 1 of Form 

W-2, Wage and Tax Statement.

• The employee's social security wages (including elective deferrals).

Publication 560 (2023) Chapter 1 Definitions You Need To Know 5
Compensation generally can't include either of the following items.

• Nontaxable reimbursements or other expense allowances.

• Deferred compensation (other than elective deferrals).

SIMPLE plans. A special definition of compensation 

applies for SIMPLE plans. See chapter 3.

Contribution. A contribution is an amount you pay into a 

plan for all those participating in the plan, including 

self-employed individuals. Limits apply to how much, under the contribution formula of the plan, can be contributed each year for a participant.

Deduction. A deduction is the plan contribution you can 

subtract from gross income on your federal income tax return. Limits apply to the amount deductible.

Earned income. Earned income is net earnings from 

self-employment, discussed later, from a business in 

which your services materially helped to produce the income.

You can also have earned income from property your 

personal efforts helped create, such as royalties from your 

books or inventions. Earned income includes net earnings 

from selling or otherwise disposing of the property, but it 

doesn't include capital gains. It includes income from licensing the use of property other than goodwill.

Earned income includes amounts received for services 

by self-employed members of recognized religious sects 

opposed to social security benefits who are exempt from 

self-employment tax.

If you have more than one business, but only one has a 

retirement plan, only the earned income from that business is considered for that plan.

Elective deferral. An elective deferral is the contribution 

made by employees to a qualified retirement plan.

• Non-owner employees: The employee salary reduction/elective deferral contributions must be elected/

made by the end of the tax year and deposited into the 

employee’s plan account within 7 business days (safe 

harbor) and no later than 15 days.

• Owner/employees: The employee deferrals must be 

elected by the end of the tax year and can then be 

made by the tax return filing deadline, including extensions.

Employer. An employer is generally any person for whom 

an individual performs or did perform any service, of whatever nature, as an employee. A sole proprietor is treated 

as its own employer for retirement plan purposes. However, a partner isn't an employer for retirement plan purposes. Instead, the partnership is treated as the employer of 

each partner.

Highly compensated employee. A highly compensated 

employee is an individual who:

• Owned more than 5% of the interest in your business 

at any time during the year or the preceding year, regardless of how much compensation that person 

earned or received; or

• For the preceding year, received compensation from 

you of more than $135,000 (if the preceding year is 

2022 and increased to $150,000 for 2023), more than 

$155,000 (if the preceding year is 2024), and, if you so 

choose, was in the top 20% of employees when 

ranked by compensation.

Leased employee. A leased employee who isn't your 

common-law employee must generally be treated as your 

employee for retirement plan purposes if they do all the 

following.

• Provides services to you under an agreement between you and a leasing organization.

• Has performed services for you (or for you and related 

persons) substantially full time for at least 1 year.

• Performs services under your primary direction or control.

Exception. A leased employee isn't treated as your 

employee if all the following conditions are met.

1. Leased employees aren't more than 20% of your 

non-highly compensated workforce.

2. The employee is covered under the leasing organization's qualified pension plan.

3. The leasing organization's plan is a money purchase 

pension plan that has all the following provisions.

a. Immediate participation. (This requirement doesn't 

apply to any individual whose compensation from 

the leasing organization in each plan year during 

the 4-year period ending with the plan year is less 

than $1,000.)

b. Full and immediate vesting.

c. A nonintegrated employer contribution rate of at 

least 10% of compensation for each participant.

However, if the leased employee is your common-law employee, that employee will be your employee for all purposes, regardless of any pension plan of the leasing organization.

Net earnings from self-employment. For SEP and 

qualified plans, net earnings from self-employment are 

your gross income from your trade or business (provided 

your personal services are a material income-producing 

factor) minus allowable business deductions. Allowable 

deductions include contributions to SEP and qualified 

plans for common-law employees and the deduction allowed for the deductible part of your self-employment tax.

Net earnings from self-employment don’t include items 

excluded from gross income (or their related deductions) 

other than foreign earned income and foreign housing 

cost amounts.

For the deduction limits, earned income is net earnings 

for personal services actually rendered to the business. 

You take into account the income tax deduction for the deductible part of self-employment tax and the deduction for 

6 Chapter 1 Definitions You Need To Know Publication 560 (2023)
contributions to the plan made on your behalf when figuring net earnings.

Net earnings include a partner's distributive share of 

partnership income or loss (other than separately stated 

items, such as capital gains and losses). They don’t include income passed through to shareholders of S corporations. Guaranteed payments to limited partners are net 

earnings from self-employment if they are paid for services to or for the partnership. Distributions of other income 

or loss to limited partners aren't net earnings from self-employment.

For SIMPLE plans, net earnings from self-employment 

are the amount on line 4 ofSchedule SE (Form 1040), 

Self-Employment Tax, before subtracting any contributions made to the SIMPLE plan for yourself.

Qualified plan. A qualified plan is a retirement plan that 

offers a tax-favored way to save for retirement. You can 

deduct contributions made to the plan for your employees. 

Earnings on these contributions are generally tax free until 

distributed at retirement. Profit-sharing, money purchase, 

and defined benefit plans are qualified plans. A 401(k) 

plan is also a qualified plan.

Participant. A participant is an eligible employee who is 

covered by your retirement plan. See the discussions, 

later, of the different types of plans for the definition of an 

employee eligible to participate in each type of plan.

Partner. A partner is an individual who shares ownership 

of an unincorporated trade or business with one or more 

persons. For retirement plans, a partner is treated as an 

employee of the partnership.

Self-employed individual. An individual in business for 

himself or herself, and whose business isn't incorporated, 

is self-employed. Sole proprietors and partners are 

self-employed. Self-employment can include part-time 

work.

Not everyone who has net earnings from self-employment for social security tax purposes is self-employed for 

qualified plan purposes. See Common-law employee and 

Net earnings from self-employment, earlier.

In addition, certain fishermen may be considered 

self-employed for setting up a qualified plan. See Pub. 

595, Capital Construction Fund for Commercial Fishermen, for the special rules used to determine whether fishermen are self-employed.

Sole proprietor. A sole proprietor is an individual who 

owns an unincorporated business alone, including a single-member limited liability company that is treated as a 

disregarded entity for tax purposes. For retirement plans, 

a sole proprietor is treated as both an employer and an 

employee.

2.

Simplified Employee

Pensions (SEPs)

Topics

This chapter discusses:

• Setting up a SEP

• How much can I contribute

• Deducting contributions

• Salary reduction simplified employee pensions (SARSEPs)

• Distributions (withdrawals)

• Additional taxes

• Reporting and disclosure requirements

Useful Items

You may want to see:

Publications

Contributions to Individual Retirement 

Arrangements (IRAs)

Distributions from Individual Retirement 

Arrangements (IRAs)

Choosing a Retirement Solution for Your Small 

Business

SEP Checklist

SARSEP Checklist

SEP Retirement Plans for Small Businesses

SARSEP for Small Businesses

4407 SARSEP—Key Issues and Assistance

Forms (and Instructions)

W-2age and Tax Statement

1040 U.S. Individual Income Tax Return

1040-SR U.S. Tax Return for Seniors

30-SEPimplified Employee Pension—Individual 

Retirement Accounts Contribution Agreement

30A-SEPalary Reduction Simplified Employee 

Pension—Individual Retirement Accounts 

Contribution Agreement

8880 Credit for Qualified Retirement Savings 

Contributions

8881 Credit for Small Employer Pension Plan 

Startup Costs

 590-A

 590-B

 3998

 4285

 4286

 4333

 4336

 4407

 W-2

 1040

 1040-SR

 5305-SEP 

 5305A-SEP 

 8880

 8881

Publication 560 (2023) Chapter 2 Simplified Employee Pensions (SEPs) 7
A SEP is a written plan that allows you to make contributions toward your own retirement and your employees' retirement without getting involved in a more complex qualified plan.

Under a SEP, you make contributions to a traditional individual retirement arrangement (called a SEP-IRA) set up 

by or for each eligible employee. A SEP-IRA is owned and 

controlled by the employee, and you make contributions to 

the financial institution where the SEP-IRA is maintained.

SEP-IRAs are set up for, at a minimum, each eligible employee (defined below). A SEP-IRA may have to be set up 

for a leased employee (defined in chapter 1), but doesn't 

need to be set up for excludable employees (defined 

later).

Eligible employee. An eligible employee is an individual 

who meets all the following requirements.

• Has reached age 21.

• Has worked for you in at least 3 of the last 5 years.

• Has received at least $750 in compensation from you 

in 2023. The amount remains the same for 2023.

You can use less restrictive participation requirements than those listed, but not more restrictive 

ones.

Excludable employees. The following employees can 

be excluded from coverage under a SEP.

• Employees covered by a union agreement and whose 

retirement benefits were bargained for in good faith by 

the employees' union and you.

• Nonresident alien employees who have received no 

U.S. source wages, salaries, or other personal services compensation from you. For more information 

about nonresident aliens, see Pub. 519, U.S. Tax 

Guide for Aliens.

Setting up a SEP

There are three basic steps in setting up a SEP.

1. You must execute a formal written agreement to provide benefits to all eligible employees.

2. You must give each eligible employee certain information about the SEP.

3. A SEP-IRA must be set up by or for each eligible employee.

Many financial institutions will help you set up a 

SEP.

Formal written agreement. You must execute a formal 

written agreement to provide benefits to all eligible employees under a SEP. You can satisfy the written agreement requirement by adopting an IRS model SEP using 

Form 5305-SEP. However, see When not to use Form 

5305-SEP, later.

TIP TIP

If you adopt an IRS model SEP using Form 5305-SEP, 

no prior IRS approval or determination letter is required. 

Keep the original form. Don't file it with the IRS. Also, using Form 5305-SEP will usually relieve you from filing annual retirement plan information returns with the IRS and 

the Department of Labor. See the Form 5305-SEP instructions for details. If you choose not to use Form 5305-SEP, 

you should seek professional advice in adopting a SEP.

When not to use Form 5305-SEP. You can't use 

Form 5305-SEP if any of the following apply.

1. You currently maintain any other qualified retirement 

plan other than another SEP.

2. You have any eligible employees for whom IRAs 

haven’t been set up.

3. You use the services of leased employees, who aren't 

your common-law employees (as described in chapter 1).

4. You are a member of any of the following unless all eligible employees of all the members of these groups, 

trades, or businesses participate under the SEP.

a. An affiliated service group described in section 

414(m).

b. A controlled group of corporations described in 

section 414(b).

c. Trades or businesses under common control described in section 414(c).

5. You don't pay the cost of the SEP contributions.

Information you must give to employees. You must 

give each eligible employee a copy of Form 5305-SEP, its 

instructions, and the other information listed in the Form 

5305-SEP instructions. An IRS model SEP isn't considered adopted until you give each employee this information.

Setting up the employee's SEP-IRA. A SEP-IRA must 

be set up by or for each eligible employee. SEP-IRAs can 

be set up with banks, insurance companies, or other qualified financial institutions. You send SEP contributions to 

the financial institution where the SEP-IRA is maintained.

Deadline for setting up a SEP. You can set up a SEP for 

any year as late as the due date (including extensions) of 

your income tax return for that year.

How Much Can I Contribute?

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. 

Contributions must be in the form of money (cash, check, 

or money order). You can't contribute property. However, 

participants may be able to transfer or roll over certain 

property from one retirement plan to another. See Pubs. 

590-A and 590-B for more information about rollovers.

8 Chapter 2 Simplified Employee Pensions (SEPs) Publication 560 (2023)
You don't have to make contributions every year. But if 

you make contributions, they must be based on a written 

allocation formula and must not discriminate in favor of 

highly compensated employees (defined in chapter 1). 

When you contribute, you must contribute to the 

SEP-IRAs of all participants who actually performed personal services during the year for which the contributions 

are made, including employees who die or terminate employment before the contributions are made.

Contributions are deductible within limits, as discussed 

later, and generally aren't taxable to the plan participants.

Employer contributions to a SEP-IRA won’t affect the 

amount an individual can contribute to a Roth or traditional 

IRA.

Unlike regular contributions to a traditional IRA before 

2020, contributions under a SEP can be made to participants over age 701/2. If you are self-employed, you can 

also make contributions under the SEP for yourself even if 

you are over age 701/2. Participants age 72 or over (if age 

701/2 was reached after December 31, 2019) must take 

RMDs.

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.

Time limit for making contributions. To deduct contributions for a year, you must make the contributions by the 

due date (including extensions) of your tax return for the 

year.

Contribution Limits

Contributions you make for 2023 to a common-law employee's SEP-IRA can't exceed the lesser of 25% of the 

employee's compensation or $66,000. Compensation 

generally doesn't include your contributions to the SEP. 

The SEP plan document will specify how the employer 

contribution is determined and how it will be allocated to 

participants.

Example. Your employee has earned $21,000 for 

2023. The maximum contribution you can make to your 

employee’s SEP-IRA is $5,250 (25% (0.25) x $21,000).

Contributions for yourself. The annual limits on your 

contributions to a common-law employee's SEP-IRA also 

apply to contributions you make to your own SEP-IRA. 

However, special rules apply when figuring your maximum 

deductible contribution. See Deduction Limit for Self-Employed Individuals, later.

Annual compensation limit. You can't consider the part 

of an employee's compensation over $330,000 when figuring your contribution limit for that employee. However, 

$66,000 is the maximum contribution for an eligible employee. 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, 

you can only contribute $66,000 to your employee’s 

SEP-IRA.

More than one plan. If you contribute to a defined contribution plan (defined in chapter 4), annual additions to an 

account are limited to the lesser of $66,000 or 100% of the 

participant's compensation. When you figure this limit, you 

must add your contributions to all defined contribution 

plans maintained by you. Because a SEP is considered a 

defined contribution plan for this limit, your contributions to 

a SEP must be added to your contributions to other defined contribution plans you maintain.

Tax treatment of excess contributions. Excess contributions are your contributions to an employee's SEP-IRA 

(or to your own SEP-IRA) for 2023 that exceed the lesser 

of the following amounts.

• 25% of the employee's compensation (or, for you, 

20% of your net earnings from self-employment).

• $66,000.

Excess contributions are included in the employee's income for the year and are treated as contributions by the 

employee to their SEP-IRA. For more information on employee tax treatment of excess contributions, see Pub. 

590-A.

Reporting on Form W-2. Don't include SEP contributions on your employee's Form W-2 unless contributions 

were made under a salary reduction arrangement (discussed later).

Deducting Contributions

Generally, you can deduct the contributions you make 

each year to each employee's SEP-IRA. If you are 

self-employed, you can deduct the contributions you make 

each year to your own SEP-IRA.

Deduction Limit for Contributions for 

Participants

The most you can deduct for your contributions to your or 

your employee's SEP-IRA is the lesser of the following 

amounts.

1. Your contributions (including any excess contributions 

carryover).

2. 25% of the compensation (limited to $330,000 per 

participant) paid to the participants during 2023, from 

the business that has the plan, not to exceed $66,000 

per participant.

In 2024, the amounts in (2) above increase to $345,000 

and $69,000, respectively.

Publication 560 (2023) Chapter 2 Simplified Employee Pensions (SEPs) 9
Deduction Limit for

Self-Employed Individuals

If you contribute to your own SEP-IRA, you must make a 

special computation to figure your maximum deduction for 

these contributions. When figuring the deduction for contributions made to your own SEP-IRA, compensation is 

your net earnings from self-employment (defined in chapter 1), which takes into account both the following deductions.

• The deduction for the deductible part of your self-employment tax.

• The deduction for contributions to your own SEP-IRA.

The deduction for contributions to your own SEP-IRA 

and your net earnings depend on each other. For this reason, you determine the deduction for contributions to your 

own SEP-IRA indirectly by reducing the contribution rate 

called for in your plan. To do this, use the Rate Table for 

Self-Employed or the Rate Worksheet for Self-Employed, 

whichever is appropriate for your plan's contribution rate, 

in chapter 5. Then, figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5.

Carryover of Excess SEP 

Contributions

If you made SEP contributions that are more than the deduction limit (nondeductible contributions), you can carry 

over and deduct the difference in later years. However, the 

carryover, when combined with the contribution for the 

later year, is subject to the deduction limit for that year. If 

you also contributed to a defined benefit plan or defined 

contribution plan, see Carryover of Excess Contributions 

under Employer Deduction in chapter 4 for the carryover 

limit.

Excise tax. If you made nondeductible (excess) contributions to a SEP, you may be subject to a 10% excise tax. 

For information about the excise tax, see Excise Tax for 

Nondeductible (Excess) Contributions under Employer 

Deduction in chapter 4.

When To Deduct Contributions

When you can deduct contributions made for a year depends on the tax year for which the SEP is maintained.

• If the SEP is maintained on a calendar-year basis, you 

deduct the yearly contributions on your tax return for 

the year within which the calendar year ends.

• If you file your tax return and maintain the SEP using a 

fiscal year or short tax year, you deduct contributions 

made for a year on your tax return for that year.

Example. You are a fiscal-year taxpayer whose tax 

year ends June 30. You maintain a SEP on a calendar-year basis. You deduct SEP contributions made for 

calendar year 2023 on your tax return for your tax year 

ending June 30, 2024.

Where To Deduct Contributions

Deduct the contributions you make for your common-law 

employees on your tax return. For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040), Profit or Loss From Farming; partnerships deduct them on Form 1065, U.S. Return of 

Partnership Income; and corporations deduct them on 

Form 1120, U.S. Corporation Income Tax Return, or Form 

1120-S, U.S. Income Tax Return for an S Corporation.

Sole proprietors and partners deduct contributions for 

themselves on line 16 of Schedule 1 (Form 1040). (If you 

are a partner, contributions for yourself are shown on the 

Schedule K-1 (Form 1065), Partner's Share of Income, 

Deductions, Credits, etc., you receive from the partnership.)

Remember that sole proprietors and partners 

can't deduct as a business expense contributions 

made to a SEP for themselves, only those made 

for their common-law employees.

Salary Reduction Simplified 

Employee Pensions 

(SARSEPs)

A SARSEP is a SEP set up before 1997 that includes a 

salary reduction arrangement. (See the Caution next.) Under a SARSEP, your employees can choose to have you 

contribute part of their pay to their SEP-IRAs rather than 

receive it in cash. This contribution is called an elective 

deferral because employees choose (elect) to set aside 

the money, and they defer the tax on the money until it is 

distributed to them.

You aren't allowed to set up a SARSEP after 

1996. However, participants (including employees 

hired after 1996) in a SARSEP set up before 1997 

can continue to have you contribute part of their pay to the 

plan. If you are interested in setting up a retirement plan 

that includes a salary reduction arrangement, see chapter 3.

Who can have a SARSEP? A SARSEP set up before 

1997 is available to you and your eligible employees only if 

all the following requirements are met.

• At least 50% of your employees eligible to participate 

choose to make elective deferrals.

• You have 25 or fewer employees who were eligible to 

participate in the SEP at any time during the preceding 

year.

• The elective deferrals of your highly compensated employees meet the SARSEP average deferral percentage (ADP) test.

SARSEP ADP test. Under the SARSEP ADP test, the 

amount deferred each year by each eligible highly 

CAUTION

!

CAUTION

!

10 Chapter 2 Simplified Employee Pensions (SEPs) Publication 560 (2023)
compensated employee as a percentage of pay (the deferral percentage) can't be more than 125% of the ADP of 

all non-highly compensated employees eligible to participate. A highly compensated employee is defined in chapter 1.

Deferral percentage. The deferral percentage for an 

employee for a year is figured as follows.

The elective employer contributions

(excluding certain catch-up contributions) 

paid to the SEP for the employee for the year

The employee's compensation

(limited to $330,000 in 2023)

The instructions for Form 5305A-SEP have a 

worksheet you can use to determine whether the 

elective deferrals of your highly compensated employees meet the SARSEP ADP test.

Employee compensation. For figuring the deferral 

percentage, compensation is generally the amount you 

pay to the employee for the year. Compensation includes 

the elective deferral and other amounts deferred in certain 

employee benefit plans. See Compensation in chapter 1. 

Elective deferrals under the SARSEP are included in figuring your employees' deferral percentage even though they 

aren't included in the income of your employees for income tax purposes.

Compensation of self-employed individuals. If you 

are self-employed, compensation is your net earnings 

from self-employment as defined in chapter 1.

Compensation doesn't include tax-free items (or deductions related to them) other than foreign earned income and housing cost amounts.

Choice not to treat deferrals as compensation. You 

can choose not to treat elective deferrals (and other 

amounts deferred in certain employee benefit plans) for a 

year as compensation under your SARSEP.

Limit on Elective Deferrals

The most a participant can choose to defer for calendar 

year 2023 is the lesser of the following amounts.

1. 25% of the participant's compensation (limited to 

$330,000 of the participant's compensation).

2. $22,500.

The $22,500 limit applies to the total elective deferrals 

the employee makes for the year to a SEP and any of the 

following.

• Cash or deferred arrangement (section 401(k) plan).

• Salary reduction arrangement under a tax-sheltered 

annuity plan (section 403(b) plan).

• SIMPLE IRA plan.

In 2024, the $330,000 limit increases to $345,000, and 

the $22,500 limit increases to $23,000.

TIP

Catch-up contributions. A SARSEP can permit participants who are age 50 or over at the end of the calendar 

year to also make catch-up contributions. The catch-up 

contribution limit is $7,500 for 2023 and 2024. Elective deferrals aren't treated as catch-up contributions for 2023 

until they exceed the elective deferral limit (the lesser of 

25% of compensation, or $22,500), the SARSEP ADP test 

limit discussed earlier, or the plan limit (if any). However, 

the catch-up contribution a participant can make for a year 

can't exceed the lesser of the following amounts.

• The catch-up contribution limit.

• The excess of the participant's compensation over the 

elective deferrals that aren't catch-up contributions.

Catch-up contributions aren't subject to the elective deferral limit (the lesser of 25% of compensation, or $22,500 

in 2023 and $23,000 in 2024).

Overall limit on SEP contributions. If you also make 

nonelective contributions to a SEP-IRA, the total of the 

nonelective and elective contributions to that SEP-IRA 

can't exceed the lesser of 25% of the employee's compensation, or $66,000 for 2023 ($69,000 for 2024). The same 

rule applies to contributions you make to your own 

SEP-IRA. See Contribution Limits, earlier.

Figuring the elective deferral. For figuring the 25% limit 

on elective deferrals, compensation doesn't include SEP 

contributions, including elective deferrals or other 

amounts deferred in certain employee benefit plans.

Tax Treatment of Deferrals

Elective deferrals that aren't more than the limits discussed earlier under Limit on Elective Deferrals are excluded from your employees' wages subject to federal income tax in the year of deferral. However, these deferrals 

are included in wages for social security, Medicare, and 

federal unemployment (FUTA) taxes.

Excess deferrals. For 2023, excess deferrals are the 

elective deferrals for the year that are more than the 

$22,500 limit discussed earlier. For a participant who is eligible to make catch-up contributions, excess deferrals are 

the elective deferrals that are more than $30,000. The 

treatment of excess deferrals made under a SARSEP is 

similar to the treatment of excess deferrals made under a 

qualified plan. See Treatment of Excess Deferrals under 

Elective Deferrals (401(k) Plans) in chapter 4.

Excess SEP contributions. Excess SEP contributions 

are elective deferrals of highly compensated employees 

that are more than the amount permitted under the SARSEP ADP test. You must notify your highly compensated 

employees within 21/2 months after the end of the plan 

year of their excess SEP contributions. If you don't notify 

them within this time period, you must pay a 10% tax on 

the excess. For an explanation of the notification requirements, see Revenue Procedure 91-44, 1991-2 C.B. 733. If 

you adopted a SARSEP using Form 5305A-SEP, the notification requirements are explained in the instructions for 

that form.

Publication 560 (2023) Chapter 2 Simplified Employee Pensions (SEPs) 11
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 security wages” and “Medicare wages and tips” boxes. You 

must also include them in box 12. Check the “Retirement 

plan” checkbox in box 13. For more information, see the 

Form W-2 instructions.

Distributions (Withdrawals)

As an employer, you can't prohibit distributions from a 

SEP-IRA. Also, you can't make your contributions on the 

condition that any part of them must be kept in the account after you have made your contributions to the employee's accounts.

Distributions are subject to IRA rules. Generally, you or 

your employee must begin to receive distributions from a 

SEP-IRA by April 1 of the first year after the calendar year 

in which you or your employee reaches age 72 (if age 

701/2 was reached after December 31, 2019). For more information about IRA rules, including the tax treatment of 

distributions, rollovers, required distributions, and income 

tax withholding, see Pubs. 590-A and 590-B.

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.

Additional Taxes

The tax advantages of using SEP-IRAs for retirement savings can be offset by additional taxes that may be imposed for all the following actions.

• Making excess contributions.

• Making early withdrawals.

• Not making required withdrawals.

For information about these taxes, see Pubs. 590-A 

and 590-B. Also, a SEP-IRA may be disqualified, or an excise tax may apply, if the account is involved in a prohibited transaction, discussed next.

Prohibited transaction. If an employee improperly uses 

their SEP-IRA, such as by borrowing money from it, the 

employee has engaged in a prohibited transaction. In that 

case, the SEP-IRA will no longer qualify as an IRA. For a 

list of prohibited transactions, see Prohibited Transactions 

in chapter 4.

Effects on employee. If a SEP-IRA is disqualified because of a prohibited transaction, the assets in the account will be treated as having been distributed to the employee on the first day of the year in which the transaction 

occurred. The employee must include in income the fair 

market value of the assets (on the first day of the year) 

that is more than any cost basis in the account. Also, the 

employee may have to pay the additional tax for making 

early withdrawals.

Reporting and Disclosure 

Requirements

If you set up a SEP using Form 5305-SEP, you must give 

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 

year showing any contributions to their SEP-IRAs. You 

must also give them notice of any excess contributions. 

For details about other information you must give them, 

see the instructions for Form 5305-SEP or Form 

5305A-SEP (for a salary SARSEP).

Even if you didn't use Form 5305-SEP or Form 

5305A-SEP to set up your SEP, you must give your employees information similar to that described above. For 

more information, see the instructions for either Form 

5305-SEP or Form 5305A-SEP.

3.

SIMPLE Plans

Topics

This chapter discusses:

• SIMPLE IRA plans

• SIMPLE 401(k) plans

Useful Items

You may want to see:

Publications

Contributions to Individual Retirement 

Arrangements (IRAs)

90-B Distributions from Individual Retirement 

Arrangements (IRAs)

3998 Choosing a Retirement Solution for Your Small 

Business

4284 SIMPLE IRA Plan Checklist

4334 SIMPLE IRA Plans for Small Businesses

Forms (and Instructions)

W-2age and Tax Statement

5304-SIMPLEavings Incentive Match Plan for 

Employees of Small Employers (SIMPLE)—Not 

for Use With a Designated Financial Institution

5305-SIMPLEavings Incentive Match Plan for 

Employees of Small Employers (SIMPLE)—for 

Use With a Designated Financial Institution

 590-A

 590-B

 3998

 4284

 4334

 W-2 

 5304-SIMPLE 

 5305-SIMPLE 

12 Chapter 3 SIMPLE Plans Publication 560 (2023)
Credit for Qualified Retirement Savings 

Contributions

Credit for Small Employer Pension Plan 

Startup Costs and Auto Enrollment

A SIMPLE plan is a written arrangement that provides you 

and your employees with a simplified way to make contributions to provide retirement income. Under a SIMPLE 

plan, employees can choose to make salary reduction 

contributions to the plan rather than receiving these 

amounts as part of their regular pay. In addition, you will 

contribute matching or nonelective contributions.

SIMPLE plans can only be maintained on a calendar-year 

basis.

A SIMPLE plan can be set up in either of the following 

ways.

• Using SIMPLE IRAs (SIMPLE IRA plan).

• As part of a 401(k) plan (SIMPLE 401(k) plan).

Many financial institutions will help you set up a 

SIMPLE plan.

SIMPLE IRA Plan

A SIMPLE IRA plan is a retirement plan that uses a SIMPLE IRA for each eligible employee. Under a SIMPLE IRA 

plan, a SIMPLE IRA must be set up for each eligible employee. For the definition of an eligible employee, see Who 

Can Participate in a SIMPLE IRA Plan, later.

Who Can Set up

a SIMPLE IRA Plan?

You can set up a SIMPLE IRA plan if you meet both the 

following requirements.

• You meet the employee limit.

• You don't maintain another qualified plan unless the 

other plan is for collective bargaining employees.

Employee limit. You can set up a SIMPLE IRA plan only 

if you had 100 or fewer employees who received $5,000 or 

more in compensation from you for the preceding year. 

Under this rule, you must take into account all employees 

employed at any time during the calendar year regardless 

of whether they are eligible to participate. Employees include self-employed individuals who received earned income and leased employees (defined in chapter 1).

Once you set up a SIMPLE IRA plan, you must continue to meet the 100-employee limit each year you maintain the plan.

Grace period for employers who cease to meet the 

100-employee limit. If you maintain the SIMPLE IRA 

plan for at least 1 year and you cease to meet the 100-employee limit in a later year, you will be treated as meeting it 

for the 2 calendar years immediately following the calendar year for which you last met it.

 8880

 8881

TIP

A different rule applies if you don't meet the 100-employee limit because of an acquisition, disposition, or similar transaction. Under this rule, the SIMPLE IRA plan will 

be treated as meeting the 100-employee limit for the year 

of the transaction and the 2 following years if both the following conditions are satisfied.

• Coverage under the plan hasn’t significantly changed 

during the grace period.

• The SIMPLE IRA plan would have continued to qualify 

after the transaction if you had remained a separate 

employer.

The grace period for acquisitions, dispositions, 

and similar transactions also applies if, because 

of these types of transactions, you don't meet the 

rules explained under Other qualified plan or Who Can 

Participate in a SIMPLE IRA Plan, later.

Other qualified plan. The SIMPLE IRA plan must generally be the only retirement plan to which you make contributions, or to which benefits accrue, for service in any 

year beginning with the year the SIMPLE IRA plan becomes effective.

Exception. If you maintain a qualified plan for collective bargaining employees, you are permitted to maintain a 

SIMPLE IRA plan for other employees.

Who Can Participate in a SIMPLE IRA 

Plan?

Eligible employee. Any employee who received at least 

$5,000 in compensation during any 2 years preceding the 

current calendar year and is reasonably expected to receive at least $5,000 during the current calendar year is 

eligible to participate. The term “employee” includes a 

self-employed individual who received earned income.

You can use less restrictive eligibility requirements (but 

not more restrictive ones) by eliminating or reducing the 

prior year compensation requirements, the current year 

compensation requirements, or both. For example, you 

can allow participation for employees who received at 

least $3,000 in compensation during any preceding calendar year. However, you can't impose any other conditions 

for participating in a SIMPLE IRA plan.

Excludable employees. The following employees don't 

need to be covered under a SIMPLE IRA plan.

• Employees who are covered by a union agreement 

and whose retirement benefits were bargained for in 

good faith by the employees' union and you.

• Nonresident alien employees who have received no 

U.S. source wages, salaries, or other personal services compensation from you.

Compensation. Compensation for employees is the total 

wages, tips, and other compensation from the employer 

subject to federal income tax withholding and the amounts 

paid for domestic service in a private home, local college 

club, or local chapter of a college fraternity or sorority. 

CAUTION

!

Publication 560 (2023) Chapter 3 SIMPLE Plans 13
Compensation also includes the employee's salary reduction contributions made under this plan and, if applicable, 

elective deferrals under a section 401(k) plan, a SARSEP, 

or a section 403(b) annuity contract and compensation 

deferred under a section 457 plan required to be reported 

by the employer on Form W-2. If you are self-employed, 

compensation is your net earnings from self-employment 

(line 4 of Schedule SE (Form 1040) before subtracting any 

contributions made to the SIMPLE IRA plan for yourself.

How To Set up a SIMPLE IRA Plan

You can use Form 5304-SIMPLE or Form 5305-SIMPLE to 

set up a SIMPLE IRA plan. Each form is a model SIMPLE 

plan document. Which form you use depends on whether 

you select a financial institution or your employees select 

the institution that will receive the contributions.

Use Form 5304-SIMPLE if you allow each plan participant to select the financial institution for receiving their 

SIMPLE IRA plan contributions. Use Form 5305-SIMPLE 

if you require that all contributions under the SIMPLE IRA 

plan be deposited initially at a designated financial institution.

The SIMPLE IRA plan is adopted when you have completed all appropriate boxes and blanks on the form and 

you (and the designated financial institution, if any) have 

signed it. Keep the original form. Don’t file it with the IRS.

Other uses of the forms. If you set up a SIMPLE IRA 

plan using Form 5304-SIMPLE or Form 5305-SIMPLE, 

you can use the form to satisfy other requirements, including the following.

• Meeting employer notification requirements for the 

SIMPLE IRA plan. Form 5304-SIMPLE and Form 

5305-SIMPLE contain a Model Notification to Eligible 

Employees that provides the necessary information to 

the employee.

• Maintaining the SIMPLE IRA plan records and proving 

you set up a SIMPLE IRA plan for employees.

Deadline for setting up a SIMPLE IRA plan. You can 

set up a SIMPLE IRA plan effective on any date from January 1 through October 1 of a year, provided you didn't 

previously maintain a SIMPLE IRA plan. This requirement 

doesn't apply if you are a new employer that comes into 

existence after October 1 of the year the SIMPLE IRA plan 

is set up and you set up a SIMPLE IRA plan as soon as 

administratively feasible after your business comes into 

existence. If you previously maintained a SIMPLE IRA 

plan, you can set up a SIMPLE IRA plan effective only on 

January 1 of a year. A SIMPLE IRA plan can't have an effective date that is before the date you actually adopt the 

plan.

Setting up a SIMPLE IRA. SIMPLE IRAs are the individual retirement accounts or annuities into which the contributions are deposited. A SIMPLE IRA must be set up for 

each eligible employee. Forms 5305-S, SIMPLE Individual 

Retirement Trust Account, and 5305-SA, SIMPLE Individual Retirement Custodial Account, are model trust and 

custodial account documents the participant and the 

trustee (or custodian) can use for this purpose.

Contributions to a SIMPLE IRA won't affect the amount 

an individual can contribute to a Roth or traditional IRA.

Deadline for setting up a SIMPLE IRA. A SIMPLE 

IRA must be set up for an employee before the first date 

by which a contribution is required to be deposited into the 

employee's IRA. See Time limits for contributing funds, 

later, under Contribution Limits.

Notification Requirement

If you adopt a SIMPLE IRA plan, you must notify each employee of the following information before the beginning of 

the election period.

1. The employee's opportunity to make or change a salary reduction choice under a SIMPLE IRA plan.

2. Your decision to make either matching contributions 

or nonelective contributions (discussed later).

3. A summary description provided by the financial institution.

4. Written notice that their balance can be transferred 

without cost or penalty if they use a designated financial institution.

Election period. The election period is generally the 

60-day period immediately preceding January 1 of a calendar year (November 2 to December 31 of the preceding 

calendar year). However, the dates of this period are 

modified if you set up a SIMPLE IRA plan mid-year (for example, on July 1) or if the 60-day period falls before the 

first day an employee becomes eligible to participate in 

the SIMPLE IRA plan.

A SIMPLE IRA plan can provide longer periods for permitting employees to enter into salary reduction agreements or to modify prior agreements. For example, a SIMPLE IRA plan can provide a 90-day election period 

instead of the 60-day period. Similarly, in addition to the 

60-day period, a SIMPLE IRA plan can provide quarterly 

election periods during the 30 days before each calendar 

quarter, other than the first quarter of each year.

Contribution Limits

Contributions are made up of salary reduction contributions and employer contributions. You, as the employer, 

must make either matching contributions or nonelective 

contributions, defined later. No other contributions can be 

made to the SIMPLE IRA plan. These contributions, which 

you can deduct, must be made timely. See Time limits for 

contributing funds, later.

Salary reduction contributions. The amount the employee chooses to have you contribute to a SIMPLE IRA 

on their behalf can't be more than $15,500 for 2023 and 

increases to $16,000 for 2024. These contributions must 

be expressed as a percentage of the employee's compensation unless you permit the employee to express them as 

a specific dollar amount. You can't place restrictions on 

14 Chapter 3 SIMPLE Plans Publication 560 (2023)
the contribution amount (such as limiting the contribution 

percentage), except to comply with the $15,500 limit for 

2023 ($16,000 for 2024).

If you or an employee participates in any other qualified 

plan during the year and you or your employee has salary 

reduction contributions (elective deferrals) under those 

plans, the salary reduction contributions under a SIMPLE 

IRA plan also count toward the overall annual limit 

($22,500 for 2023; $23,000 for 2024) on exclusion of salary reduction contributions and other elective deferrals.

Catch-up contributions. A SIMPLE IRA plan can permit participants who are age 50 or over at the end of the 

calendar year to also make catch-up contributions. The 

catch-up contribution limit for SIMPLE IRA plans is $3,500 

for 2023 and 2024. Salary reduction contributions aren't 

treated as catch-up contributions until they exceed 

$15,500 for 2023 ($16,000 for 2024). However, the 

catch-up contribution a participant can make for a year 

can't exceed the lesser of the following amounts.

• The catch-up contribution limit.

• The excess of the participant's compensation over the 

salary reduction contributions that aren't catch-up 

contributions.

Employer matching contributions. You are generally 

required to match each employee's salary reduction contribution(s) on a dollar-for-dollar basis up to 3% of the employee's compensation, where only employees who have 

elected to make contributions will receive an employer 

matching contribution. This requirement doesn't apply if 

you make nonelective contributions, as discussed later.

Example. In 2023, your employee earned $25,000 and 

chose to defer 5% of their salary. The net earnings from 

self-employment are $40,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. You make 

3% matching contributions. The total contribution made 

for the employee is $2,000, figured as follows.

Salary reduction contributions

($25,000 × 5% (0.05)) ...................... $1,250

Employer matching contribution

($25,000 × 3% (0.03)) ...................... 750

Total contributions ...................... $2,000

The total contribution you make for yourself is $5,200, 

figured as follows.

Salary reduction contributions

($40,000 × 10% (0.10)) ..................... $4,000

Employer matching contribution

($40,000 × 3% (0.03)) ...................... 1,200

Total contributions ...................... $5,200

Lower percentage. If you choose a matching contribution less than 3%, the percentage must be at least 1%. 

You must notify the employees of the lower match within a 

reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. You can't 

choose a percentage less than 3% for more than 2 years 

during the 5-year period that ends with (and includes) the 

year for which the choice is effective.

Nonelective contributions. Instead of matching contributions, you can choose to make nonelective contributions of 2% of compensation on behalf of each eligible 

employee who has at least $5,000 (or some lower amount 

you select) of compensation from you for the year. If you 

make this choice, you must make nonelective contributions whether or not the employee chooses to make salary 

reduction contributions. Only $330,000 of the employee's 

compensation can be taken into account to figure the contribution limit in 2023 ($345,000 in 2024).

If you choose this 2% contribution formula, you must 

notify the employees within a reasonable period of time 

before the 60-day election period (discussed earlier) for 

the calendar year.

Example 1. In 2023, your employee, Jane Wood, 

earned $36,000 and chose to have you contribute 10% of 

her salary. Your net earnings from self-employment are 

$50,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. You make a 2% nonelective 

contribution. Both of you are under age 50. The total contribution you make for Jane is $4,320, figured as follows.

Salary reduction contributions

($36,000 × 10% (0.10)) ..................... $3,600

2% nonelective contributions

($36,000 × 2% (0.02)) ...................... 720

Total contributions ...................... $4,320

The total contribution you make for yourself is $6,000, 

figured as follows.

Salary reduction contributions

($50,000 × 10% (0.10)) ..................... $5,000

2% nonelective contributions

($50,000 × 2% (0.02)) ...................... 1,000

Total contributions ...................... $6,000

Example 2. Using the same facts as in Example 1 

above, the maximum contribution you make for Jane or for 

yourself if you each earned $75,000 is $14,000, figured as 

follows.

Salary reduction contributions

(maximum amount allowed) .................. $12,500

2% nonelective contributions

($75,000 × 2% (0.02)) ...................... 1,500

Total contributions ...................... $14,000

Time limits for contributing funds. You must make the 

salary reduction contributions to the SIMPLE IRA within 

30 days after the end of the month in which the amounts 

would have otherwise have been payable to the employee 

in cash. You must make matching contributions or nonelective contributions by the due date (including extensions) for filing your federal income tax return for the year. 

Certain plans subject to Department of Labor rules may 

have an earlier due date for salary reduction contributions.

Publication 560 (2023) Chapter 3 SIMPLE Plans 15
When To Deduct Contributions

You can deduct SIMPLE IRA contributions in the tax year 

within which the calendar year for which contributions 

were made ends. You can deduct contributions for a particular tax year if they are made for that tax year and are 

made by the due date (including extensions) of your federal income tax return for that year.

The due date for making contributions for 2023 for most 

plans is Monday, April 15, 2024.

Example 1. Your tax year is the fiscal year ending 

June 30. Contributions under a SIMPLE IRA plan for calendar year 2023 (including contributions made by the due 

date for the return for the tax year that ends on June 30, 

2024) are deductible in the tax year ending June 30, 2024.

Example 2. You are a sole proprietor whose tax year is 

the calendar year. Contributions under a SIMPLE IRA plan 

for calendar year 2023 (including contributions made by 

the due date for the return for the 2023 tax year) are deductible in the 2023 tax year.

Where To Deduct Contributions

Deduct the contributions you make for your common-law 

employees on your tax return. For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040), partnerships deduct them on Form 

1065, and corporations deduct them on Form 1120 or 

1120-S.

Sole proprietors and partners deduct contributions for 

themselves on line 16 of Schedule 1 (Form 1040). (If you 

are a partner, contributions for yourself are shown on the 

Schedule K-1 (Form 1065) you receive from the partnership.)

Tax Treatment of Contributions

You can deduct your contributions and your employees 

can exclude these contributions from their gross income. 

SIMPLE IRA plan contributions aren't subject to federal income tax withholding. However, salary reduction contributions are subject to social security, Medicare, and FUTA 

taxes. Matching and nonelective contributions aren't subject to these taxes.

Reporting on Form W-2. Don’t include SIMPLE IRA 

plan contributions in the “Wages, tips, other compensation” box of Form W-2. You must, however, include them in 

the “Social security wages” and “Medicare wages and 

tips” boxes. You must also include them in box 12. Check 

the “Retirement plan” checkbox in box 13. For more information, see the Form W-2 instructions.

Distributions (Withdrawals)

Distributions from a SIMPLE IRA are subject to IRA rules 

and are generally includible in income for the year received. Tax-free rollovers can be made from one SIMPLE 

IRA into another SIMPLE IRA. However, a rollover from a 

SIMPLE IRA to a non-SIMPLE IRA can be made tax free 

only after a 2-year participation in the SIMPLE IRA plan.

Generally, you or your employee must begin to receive 

distributions from a SIMPLE IRA by April 1 of the first year 

after the calendar year in which you or your employee reaches age 72 (if age 701/2 was reached after December 31, 

2019).

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.

Early withdrawals are generally subject to a 10% additional tax. However, the additional tax is increased to 25% 

if funds are withdrawn within 2 years of beginning participation.

More information. See Pubs. 590-A and 590-B for information about IRA rules, including those on the tax treatment of distributions, rollovers, required distributions, and 

income tax withholding.

More Information on SIMPLE IRA 

Plans

If you need help to set up or maintain a SIMPLE IRA plan, 

go to the IRS website and searchSIMPLE IRA Plan.

SIMPLE 401(k) Plan

You can adopt a SIMPLE plan as part of a 401(k) plan if 

you meet the 100-employee limit, as discussed earlier under SIMPLE IRA Plan. A SIMPLE 401(k) plan is a qualified 

retirement plan and must generally satisfy the rules discussed under Qualification Rules in chapter 4, including 

the required distribution rules. However, a SIMPLE 401(k) 

plan isn't subject to the nondiscrimination and top-heavy 

rules discussed in chapter 4 if the plan meets the conditions listed below.

1. Under the plan, an employee can choose to have you 

make salary reduction contributions for the year to a 

trust in an amount expressed as a percentage of the 

employee's compensation, but not more than $15,500 

for 2023 ($16,000 for 2024). If permitted under the 

plan, an employee who is age 50 or over can also 

make a catch-up contribution of up to $3,500 for 2023 

and 2024. See Catch-up contributions, earlier, under 

Contribution Limits.

2. You must make either:

a. Matching contributions up to 3% of compensation 

for the year, or

b. Nonelective contributions of 2% of compensation 

on behalf of each eligible employee who has at 

least $5,000 of compensation from you for the 

year.

3. No other contributions can be made to the trust.

16 Chapter 3 SIMPLE Plans Publication 560 (2023)
4. No contributions are made, and no benefits accrue, 

for services during the year under any other qualified 

retirement plan sponsored by you on behalf of any 

employee eligible to participate in the

SIMPLE 401(k) plan.

5. The employee's rights to any contributions are nonforfeitable.

No more than $330,000 of the employee's compensation can be taken into account in figuring matching contributions and nonelective contributions in 2023 ($345,000 

in 2024). Compensation is defined earlier in this chapter.

Employee notification. The notification requirement that 

applies to SIMPLE IRA plans also applies to SIMPLE 

401(k) plans. See Notification Requirement, earlier in this 

chapter.

Note on forms. Please note that Forms 5304-SIMPLE 

and 5305-SIMPLE can’t be used to establish a SIMPLE 

401(k) plan. To set up a SIMPLE 401(k) plan, see Adopting a Written Plan in chapter 4.

4.

Qualified Plans

Topics

This chapter discusses:

• Kinds of plans

• Qualification rules

• Setting up a qualified plan

• Minimum funding requirement

• Contributions

• Employer deduction

• Elective deferrals (401(k) plans)

• Qualified Roth contribution program

• Distributions

• Prohibited transactions

• Reporting requirements

Useful Items

You may want to see:

Publications

575 Pension and Annuity Income

590-A Contributions to Individual Retirement 

Arrangements (IRAs)

590-B Distributions from Individual Retirement 

Arrangements (IRAs)

 575 

 590-A 

 590-B

Have you had your check-up this year? for 

Retirement Plans

Choosing a Retirement Solution for Your Small 

Business

01(k) Plans for Small Businesses

Designated Roth Accounts under a 401(k), 

403(b) or governmental 457(b) plan

01(k) Plan Checklist

Automatic Enrollment 401(k) Plans for Small 

Businesses

Profit Sharing Plans for Small Businesses

Forms (and Instructions)

age and Tax Statement

Partner's Share of 

Income, Deductions, Credits, etc.

Distributions From Pensions, Annuities, 

Retirement or Profit-Sharing Plans, IRAs, 

Insurance Contracts, etc.

U.S. Individual Income Tax Return

U.S. Tax Return for Seniors

cdu(o) Profit or Loss From 

Business

cdu(o) Profit or Loss From 

Farming

Application for Determination for Employee 

Benefit Plan

Application for Determination for Terminating 

Plan

Additional Taxes on Qualified Plans (Including 

IRAs) and Other Tax-Favored Accounts

Return of Excise Taxes Related to Employee 

Benefit Plans

Annual Return/Report of Employee Benefit 

Plan

Annual Return of A One-Participant 

(Owners/Partners and Their Spouses) 

Retirement Plan or A Foreign Plan

00-SFhort Form Annual Return/Report of Small 

Employee Benefit Plan

8717 User Fee for Employee Plan Determination 

Letter Request

8880 Credit for Qualified Retirement Savings 

Contributions

8881 Credit for Small Employer Pension Plan 

Startup Costs

8955-SSAnnual Registration Statement Identifying 

Separated Participants With Deferred Vested 

Benefits

These qualified retirement plans set up by self-employed 

individuals are sometimes called Keogh or H.R. 10 plans. 

 3066

 3998

 4222

 4530

 4531

 4674

 4806

 W-2 

 Schedule K-1 (Form 1065) 

 1099-R 

 1040 

 1040-SR 

 Schedule C (Form 1040) 

 Schedule F (Form 1040)

 5300

 5310

 5329

 5330 

 5500 

 5500-EZ 

 5500-SF 

 8717

 8880

 8881

 8955-SSA

Publication 560 (2023) Chapter 4 Qualified Plans 17
A sole proprietor or a partnership can set up one of these 

plans. A common-law employee or a partner can't set up 

one of these plans. The plans described here can also be 

set up and maintained by employers that are corporations. 

All of the rules discussed here apply to corporations except where specifically limited to the self-employed.

The plan must be for the exclusive benefit of employees or 

their beneficiaries. These qualified plans can include coverage for a self-employed individual.

As an employer, you can usually deduct, subject to limits, 

contributions you make to a qualified plan, including those 

made for your own retirement. The contributions (and 

earnings and gains on them) are generally tax free until 

distributed by the plan.

Kinds of Plans

There are two basic kinds of qualified plans—defined contribution plans and defined benefit plans—and different 

rules apply to each. You can have more than one qualified 

plan, but your contributions to all the plans must not total 

more than the overall limits discussed under Contributions 

and Employer Deduction, later.

Defined Contribution Plan

A defined contribution plan provides an individual account 

for each participant in the plan. It provides benefits to a 

participant largely based on the amount contributed to that 

participant's account. Benefits are also affected by any income, expenses, gains, losses, and forfeitures of other accounts that may be allocated to an account. A defined 

contribution plan can be either a profit-sharing plan or a 

money purchase pension plan.

Profit-sharing plan. Although it is called a profit-sharing 

plan, you don’t actually have to make a business profit for 

the year in order to make a contribution (except for yourself if you are self-employed, as discussed under Self-employed individual, later). A profit-sharing plan can be set 

up to allow for discretionary employer contributions, 

meaning the amount contributed each year to the plan 

isn't fixed. An employer may even make no contribution to 

the plan for a given year.

The plan must provide a definite formula for allocating 

the contribution among the participants and for distributing 

the accumulated funds to the employees after they reach 

a certain age, after a fixed number of years, or upon certain other occurrences.

In general, you can be more flexible in making contributions to a profit-sharing plan than to a money purchase 

pension plan (discussed next) or a defined benefit plan 

(discussed later).

Money purchase pension plan. Contributions to a 

money purchase pension plan are fixed and aren't based 

on your business profits. For example, a money purchase 

pension plan may require that contributions be 10% of the 

participants' compensation without regard to whether you 

have profits (or the self-employed person has earned income).

Defined Benefit Plan

A defined benefit plan is any plan that isn't a defined contribution plan. Contributions to a defined benefit plan are 

based on what is needed to provide definitely determinable benefits to plan participants. Actuarial assumptions 

and computations are required to figure these contributions. Generally, you will need continuing professional help 

to have a defined benefit plan.

Qualification Rules

To qualify for the tax benefits available to qualified plans, a 

plan must meet certain requirements (qualification rules) 

of the tax law. Generally, unless you write your own plan, 

the financial institution that provided your plan will take the 

continuing responsibility for meeting qualification rules 

that are later changed. The following is a brief overview of 

important qualification rules that generally haven't yet 

been discussed. It isn't intended to be all-inclusive. See 

Setting Up a Qualified Plan, later.

Generally, the following qualification rules also apply to a SIMPLE 401(k) retirement plan. A SIMPLE 401(k) plan is, however, not subject to the 

top-heavy plan rules and nondiscrimination rules if the 

plan satisfies the provisions discussed in chapter 3 under 

SIMPLE 401(k) Plan.

Plan assets must not be diverted. Your plan must 

make it impossible for its assets to be used for, or diverted 

to, purposes other than the exclusive benefit of employees 

and their beneficiaries. As a general rule, the assets can't 

be diverted to the employer.

Minimum coverage requirement must be met. To be a 

qualified plan, a defined benefit plan must benefit at least 

the lesser of the following.

1. 50 employees.

2. The greater of:

a. 40% of all employees, or

b. Two employees.

If there is only one employee, the plan must benefit that 

employee.

Contributions or benefits must not discriminate. Under the plan, contributions or benefits to be provided must 

not discriminate in favor of highly compensated employees.

Contributions and benefits must not be more than 

certain limits. Your plan must not provide for contributions or benefits that are more than certain limits. The limits apply to the annual contributions and other additions to 

the account of a participant in a defined contribution plan 

TIP

18 Chapter 4 Qualified Plans Publication 560 (2023)
and to the annual benefit payable to a participant in a defined benefit plan. These limits are discussed later in this 

chapter under Contributions.

Minimum vesting standard must be met. Your plan 

must satisfy certain requirements regarding when benefits 

vest. A benefit is vested (you have a fixed right to it) when 

it becomes nonforfeitable. A benefit is nonforfeitable if it 

can't be lost upon the happening, or failure to happen, of 

any event. Special rules apply to forfeited benefit 

amounts. In defined contribution plans, forfeitures can be 

allocated to the accounts of remaining participants in a 

nondiscriminatory way, or they can be used to reduce your 

contributions.

Forfeitures under a defined benefit plan can't be used 

to increase the benefits any employee would otherwise receive under the plan. Forfeitures must be used instead to 

reduce employer contributions.

Participation. In general, an employee must be allowed 

to participate in your plan if they meet both the following 

requirements.

• Has reached age 21.

• Has at least 1 year of service (2 years if the plan isn't a 

401(k) plan and provides that after not more than 2 

years of service the employee has a nonforfeitable 

right to all their accrued benefit).

See Elective Deferrals )401(k) Plans, later, for additional information regarding conditions of participation in a 

401(k) plan.

A plan can't exclude an employee because the 

employee has reached a specified age.

Leased employee. A leased employee, defined in chapter 1, who performs services for you (recipient of the services) is treated as your employee for certain plan qualification rules. These rules include those in all the following 

areas.

• Nondiscrimination in coverage, contributions, and 

benefits.

• Minimum age and service requirements.

• Vesting.

• Limits on contributions and benefits.

• Top-heavy plan requirements.

Contributions or benefits provided by the leasing organization for services performed for you are treated as provided 

by you.

Benefit payment must begin when required. Your plan 

must provide that, unless the participant chooses otherwise, the payment of benefits to the participant must begin 

within 60 days after the close of the latest of the following 

periods.

• The plan year in which the participant reaches the earlier of age 65 or the normal retirement age specified in 

the plan.

CAUTION

!

• The plan year in which the 10th anniversary of the 

year in which the participant began participating in the 

plan occurs.

• The plan year in which the participant separates from 

service.

Early retirement. Your plan can provide for payment 

of retirement benefits before the normal retirement age. If 

your plan offers an early retirement benefit, a participant 

who separates from service before satisfying the early retirement age requirement is entitled to that benefit if the 

participant meets both the following requirements.

• Satisfies the service requirement for the early retirement benefit.

• Separates from service with a nonforfeitable right to 

an accrued benefit. The benefit, which may be actuarially reduced, is payable when the early retirement age 

requirement is met.

Required minimum distributions (RMDs). Special 

rules require minimum annual distributions from qualified 

plans, generally beginning after age 72 (if age 701/2 was 

reached after December 31, 2019). See Required Distributions under Distributions, later.

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.

Survivor benefits. Defined benefit and money purchase 

pension plans must provide automatic survivor benefits in 

both the following forms.

• A qualified joint and survivor annuity for a vested participant who doesn't die before the annuity starting 

date.

• A qualified pre-retirement survivor annuity for a vested 

participant who dies before the annuity starting date 

and who has a surviving spouse.

The automatic survivor benefit also applies to any participant under a profit-sharing plan unless all the following 

conditions are met.

• The participant doesn't choose benefits in the form of 

a life annuity.

• The plan pays the full vested account balance to the 

participant's surviving spouse (or other beneficiary if 

the surviving spouse consents or if there is no surviving spouse) if the participant dies.

• The plan isn't a direct or indirect transferee of a plan 

that must provide automatic survivor benefits.

Loan secured by benefits. If automatic survivor benefits are required for a spouse under a plan, they must 

consent to a loan that uses as security the accrued benefits in the plan.

Waiver of survivor benefits. Each plan participant 

may be permitted to waive the joint and survivor annuity or 

the pre-retirement survivor annuity (or both), but only if the 

participant has the written consent of the spouse. The 

plan must also allow the participant to withdraw the 

Publication 560 (2023) Chapter 4 Qualified Plans 19
waiver. The spouse's consent must be witnessed by a 

plan representative or notary public.

Involuntary cash-out of benefits not more than dollar limit. A plan may provide for the immediate distribution of the participant's benefit under the plan if the 

present value of the benefit isn't greater than $5,000 

($7,000 in 2024).

However, the distribution can't be made after the annuity starting date unless the participant and the spouse or 

surviving spouse of a participant who died (if automatic 

survivor benefits are required for a spouse under the plan) 

consents in writing to the distribution. If the present value 

is greater than $5,000 ($7,000 in 2024), the plan must 

have the written consent of the participant and the spouse 

or surviving spouse (if automatic survivor benefits are required for a spouse under the plan) for any immediate distribution of the benefit.

Benefits attributable to rollover contributions and earnings on them can be ignored in determining the present 

value of these benefits.

A plan must provide for the automatic rollover of any 

cash-out distribution of more than $1,000 to an individual 

retirement account or annuity, unless the participant chooses otherwise. A section 402(f) notice must be sent prior 

to an involuntary cash-out of an eligible rollover distribution. See Section 402(f) notice under Distributions, later, 

for more details.

Consolidation, merger, or transfer of assets or liabilities. Your plan must provide that, in the case of any 

merger or consolidation with, or transfer of assets or liabilities to, any other plan, each participant would (if the plan 

then terminated) receive a benefit equal to or more than 

the benefit they would have been entitled to just before the 

merger, etc. (if the plan had then terminated).

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 equitable proceeding except as provided below or pursuant to 

certain judgments or settlements against the participant 

for violations of plan rules.

Exception for certain loans. A loan from the plan 

(not from a third party) to a participant or beneficiary isn't 

treated as an assignment or alienation if the loan is secured by the participant's accrued nonforfeitable benefit 

and is exempt from the tax on prohibited transactions under section 4975(d)(1) or would be exempt if the participant were a disqualified person. A disqualified person is 

defined later in this chapter under Prohibited Transactions.

Exception for a qualified domestic relations order 

(QDRO). Compliance with a QDRO doesn't result in a 

prohibited assignment or alienation of benefits.

Payments to an alternate payee under a QDRO before 

the participant reaches age 591/2 aren't subject to the 10% 

additional tax that would otherwise apply under certain circumstances. Benefits distributed to an alternate payee under a QDRO can be rolled over tax free to an individual retirement account or to an individual retirement annuity.

No benefit reduction for social security increases. 

Your plan must not permit a benefit reduction for a 

post-separation increase in the social security benefit level 

or wage base for any participant or beneficiary who is receiving benefits under your plan, or who is separated from 

service and has nonforfeitable rights to benefits. This rule 

also applies to plans supplementing the benefits provided 

by other federal or state laws.

Elective deferrals must be limited. If your plan provides for elective deferrals, it must limit those deferrals to 

the amount in effect for that particular year. See Limit on 

Elective Deferrals, later in this chapter.

Top-heavy plan requirements. A top-heavy plan is one 

that mainly favors partners, sole proprietors, and other key 

employees.

A plan is top-heavy for a plan year if, for the preceding 

plan year, the total value of accrued benefits or account 

balances of key employees is more than 60% of the total 

value of accrued benefits or account balances of all employees. Additional requirements apply to a top-heavy 

plan primarily to provide minimum benefits or contributions for non-key employees covered by the plan.

Most qualified plans, whether or not top-heavy, must 

contain provisions that meet the top-heavy requirements 

and will take effect in plan years in which the plans are 

top-heavy. These qualification requirements for top-heavy 

plans are explained in section 416 and its regulations.

SIMPLE and safe harbor 401(k) plan exception. 

The top-heavy plan requirements don't apply to SIMPLE 

401(k) plans, discussed earlier in chapter 3, or to safe harbor 401(k) plans that consist solely of safe harbor contributions, discussed later in this chapter. QACAs (discussed later) also aren't subject to top-heavy 

requirements.

Setting up a Qualified Plan

There are two basic steps in setting up a qualified plan. 

First, you adopt a written plan. Then, you invest the plan 

assets.

You, the employer, are responsible for setting up and 

maintaining the plan.

If you are self-employed, it isn't necessary to have 

employees besides yourself to sponsor and set 

up a qualified plan. If you have employees, see 

Participation under Qualification Rules, earlier.

Set-up deadline. To take a deduction for contributions 

for a tax year, your plan must be set up (adopted) by the 

last day of that year. If you are a sole proprietor with a new 

section 401(k) plan that you adopted after the end of the 

taxable year that ends after or with the first plan year, and 

you are the only participant, your elective deferrals must 

be paid to the plan before the time for filing your return for 

that taxable year (determined without regard to any extensions) in order for the elective deferrals to be treated as 

having been made by the end of the first plan year.

TIP

20 Chapter 4 Qualified Plans Publication 560 (2023)
Adopting a Written Plan

You must adopt a written plan. The plan can be an IRS 

pre-approved plan offered by a sponsoring organization. 

Or it can be an individually designed plan.

Written plan requirement. To qualify, the plan you set 

up must be in writing and must be communicated to your 

employees. The plan's provisions must be stated in the 

plan. It isn't sufficient for the plan to merely refer to a requirement of the Internal Revenue Code.

IRS pre-approved plans. Most qualified plans follow a 

standard form of plan approved by the IRS. An IRS 

pre-approved plan is a plan, including a plan covering 

self-employed individuals, that is made available by a provider for adoption by employers. Under the prior IRS 

pre-approved plan program, a plan could be a master 

plan, a prototype plan, or a volume submitter plan. Under 

the restructured program, the three plan types were combined into one type called a pre-approved plan. IRS 

pre-approved plans include both standardized plans and 

nonstandardized plans. An IRS pre-approved plan may 

use a single funding medium, for example, a trust or custodial account document, for the joint use of all adopting 

employers or separate funding mediums established for 

each adopting employer. An IRS pre-approved plan may 

consist of an adoption agreement plan or a single document plan. For more information about IRS pre-approved 

plans, see Revenue Procedure 2017-41, 2017-29 I.R.B. 

92, available at IRS.gov/irb/2017-29_IRB#RP-2017-41.

Plan providers. The following organizations can generally provide IRS pre-approved plans.

• Banks (including some savings and loan associations 

and federally insured credit unions).

• Trade or professional organizations.

• Insurance companies.

• Mutual funds.

• Law firms.

• Third-party administrators.

Individually designed plan. If you prefer, you can set up 

an individually designed plan to meet specific needs. Although advance IRS approval is not required, you can apply for approval by paying a fee and requesting a determination letter. You may need professional help for this. See 

Revenue Procedure 2024-4, 2024-1 I.R.B. 160, available 

at IRS.gov/irb/2024-4_IRB, as annually updated, that may 

help you decide whether to apply for approval.

User fee. The fee mentioned earlier for requesting a 

determination letter doesn't apply to employers who have 

100 or fewer employees who received at least $5,000 of 

compensation from the employer for the preceding year. 

At least one of them must be a non-highly compensated 

employee participating in the plan. The fee doesn't apply 

to requests made by the later of the following dates.

• The end of the fifth plan year the plan is in effect.

• The end of any remedial amendment period for the 

plan that begins within the first 5 plan years.

The request can't be made by the provider of an IRS 

pre-approved plan that intends to market to participating 

employers.

For more information about whether the user fee applies, see Revenue Procedure 2020-4, 2020-1 I.R.B. 148, 

available at IRS.gov/irb/2020-01_IRB, as may be annually 

updated; Notice 2017-1, 2017-2 I.R.B. 367, available at 

IRS.gov/irb/2017-02_IRB; and Form 8717.

Investing Plan Assets

In setting up a qualified plan, you arrange how the plan's 

funds will be used to build its assets.

• You can establish a trust or custodial account to invest 

the funds.

• You, the trust, or the custodial account can buy an annuity contract from an insurance company. Life insurance can be included only if it is incidental to the retirement benefits.

You set up a trust by a legal instrument (written document). You may need professional help to do this.

You can set up a custodial account with a bank, savings 

and loan association, credit union, or other person who 

can act as the plan trustee.

You don't need a trust or custodial account, although 

you can have one, to invest the plan's funds in annuity 

contracts or face-amount certificates. If anyone other than 

a trustee holds them, however, the contracts or certificates 

must state they aren't transferable.

Other plan requirements. For information on other important plan requirements, see Qualification Rules, earlier 

in this chapter.

Minimum Funding 

Requirement

In general, if your plan is a money purchase pension plan 

or a defined benefit plan, you must actually pay enough 

into the plan to satisfy the minimum funding standard for 

each year. Determining the amount needed to satisfy the 

minimum funding standard for a defined benefit plan is 

complicated, and you should seek professional help in order to meet these contribution requirements. For information on this funding requirement, see section 430 and its 

regulations.

Quarterly installments of required contributions. If 

your plan is a defined benefit plan subject to the minimum 

funding requirements, you must generally make quarterly 

installment payments of the required contributions. If you 

don't pay the full installments timely, you may have to pay 

interest on any underpayment for the period of the underpayment.

Publication 560 (2023) Chapter 4 Qualified Plans 21
Due dates. The due dates for the installments are 15 

days after the end of each quarter. For a calendar-year 

plan, the installments are due April 15, July 15, October 

15, and January 15 (of the following year).

Installment percentage. Each quarterly installment 

must be 25% of the required annual payment.

Extended period for making contributions. Additional contributions required to satisfy the minimum funding requirement for a plan year will be considered timely if 

made by 81/2 months after the end of that year.

Contributions

A qualified plan is generally funded by your contributions. 

However, employees participating in the plan may be permitted to make contributions, and you may be permitted to 

make contributions on your own behalf. See Employee 

Contributions and Elective Deferrals, later.

Contributions deadline. You can make deductible contributions for a tax year up to the due date of your return 

(plus extensions) for that year.

Self-employed individual. You can make contributions 

on behalf of yourself only if you have net earnings (compensation) from self-employment in the trade or business 

for which the plan was set up. Your net earnings must be 

from your personal services, not from your investments. If 

you have a net loss from self-employment, you can't make 

contributions for yourself for the year, even if you can contribute for common-law employees based on their compensation.

Employer Contributions

There are certain limits on the contributions and other annual additions you can make each year for plan participants. There are also limits on the amount you can deduct. See Deduction Limits, later.

Limits on Contributions and Benefits

Your plan must provide that contributions or benefits can't 

exceed certain limits. The limits differ depending on 

whether your plan is a defined contribution plan or a defined benefit plan.

Defined benefit plan. For 2023, the annual benefit for a 

participant under a defined benefit plan can't exceed the 

lesser of the following amounts.

1. 100% of the participant's average compensation for 

their highest 3 consecutive calendar years.

2. $265,000 for 2023 ($275,000 for 2024).

Defined contribution plan. For 2023, a defined contribution plan's annual contributions and other additions (excluding earnings) to the account of a participant can't exceed the lesser of the following amounts.

1. 100% of the participant's compensation.

2. $66,000 for 2023 ($69,000 for 2024).

Catch-up contributions (discussed later under Limit on 

Elective Deferrals) aren't subject to the above limit.

Employee Contributions

Participants may be permitted to make nondeductible contributions to a plan in addition to your contributions. Even 

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 

contribution percentage (ACP) test of section 401(m)(2), a 

nondiscrimination test that applies to employee contributions and matching contributions. See Regulations sections 1.401(k)-2 and 1.401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) 

and 401(m).

When Contributions Are Considered 

Made

You generally apply your plan contributions to the year in 

which you make them. But you can apply them to the previous year if all the following requirements are met.

1. You make them by the due date of your tax return for 

the previous year (plus extensions).

2. The plan was established by the end of the previous 

year.

3. The plan treats the contributions as though it had received them on the last day of the previous year.

4. You do either of the following.

a. You specify in writing to the plan administrator or 

trustee that the contributions apply to the previous 

year.

b. You deduct the contributions on your tax return for 

the previous year. A partnership shows contributions for partners on Form 1065.

Employer's promissory note. Your promissory note 

made out to the plan isn't a payment that qualifies for the 

deduction. Also, issuing this note is a prohibited transaction subject to tax. See Prohibited Transactions, later.

Employer Deduction

You can usually deduct, subject to limits, contributions you 

make to a qualified plan, including those made for your 

own retirement. The contributions (and earnings and 

gains on them) are generally tax free until distributed by 

the plan.

22 Chapter 4 Qualified Plans Publication 560 (2023)
Deduction Limits

The deduction limit for your contributions to a qualified 

plan depends on the kind of plan you have.

Defined contribution plans. The deduction for contributions to a defined contribution plan (profit-sharing plan or 

money purchase pension plan) can't be more than 25% of 

the compensation paid (or accrued) during the year to 

your eligible employees participating in the plan. If you are 

self-employed, you must reduce this limit in figuring the 

deduction for contributions you make for your own account. See Deduction Limit for Self-Employed Individuals, 

later.

When figuring the deduction limit, the following rules 

apply.

• Elective deferrals (discussed later) aren't subject to 

the limit.

• Compensation includes elective deferrals.

• The maximum compensation that can be taken into 

account for each employee in 2023 is $330,000 

($345,000 in 2024).

Defined benefit plans. The deduction for contributions 

to a defined benefit plan is based on actuarial assumptions and computations. Consequently, an actuary must 

figure your deduction limit.

In figuring the deduction for contributions, you 

can't take into account any contributions or benefits that are more than the limits discussed earlier 

under Limits on Contributions and Benefits.

Deduction Limit for

Self-Employed Individuals

If you make contributions for yourself, you need to make a 

special computation to figure your maximum deduction for 

these contributions. Compensation is your net earnings 

from self-employment, defined in chapter 1. This definition 

takes into account both the following items.

• The deduction for the deductible part of your self-employment tax.

• The deduction for contributions on your behalf to the 

plan.

CAUTION

!

The deductions for your own contributions and your net 

earnings depend on each other. For this reason, you determine the deduction for your own contributions indirectly 

by reducing the contribution rate called for in your plan. To 

do this, use either the Rate Table for Self-Employed or the 

Rate Worksheet for Self-Employed in chapter 5. Then, figure your maximum deduction by using the Deduction 

Worksheet for Self-Employed in chapter 5.

Where To Deduct Contributions

Deduct the contributions you make for your common-law 

employees on your tax return. For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040), partnerships deduct them on Form 

1065, and corporations deduct them on Form 1120 or 

1120-S.

Sole proprietors and partners deduct contributions for 

themselves on line 16 of Schedule 1 (Form 1040). (If you 

are a partner, contributions for yourself are shown on the 

Schedule K-1 (Form 1065) you get from the partnership.)

Carryover of Excess Contributions

If you contribute more to a plan than you can deduct for 

the year, you can carry over and deduct the difference in 

later years, combined with your contributions for those 

years. Your combined deduction in a later year is limited to 

25% of the participating employees' compensation for that 

year. For purposes of this limit, a SEP is treated as a 

profit-sharing (defined contribution) plan. However, this 

percentage limit must be reduced to figure your maximum 

deduction for contributions you make for yourself. See Deduction Limit for Self-Employed Individuals, earlier. The 

amount you carry over and deduct may be subject to the 

excise tax discussed next.

Table 4-1. Carryover of Excess Contributions Illustrated 

Profit-Sharing Plan illustrates the carryover of excess contributions to a profit-sharing plan.

Excise Tax for Nondeductible 

(Excess) Contributions

If you contribute more than your deduction limit to a retirement plan, you have made nondeductible contributions 

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.

Table 4-1. Carryover of Excess Contributions Illustrated—Profit-Sharing Plan (000's omitted)

Year 

Participants' 

compensation

Employer 

contribution

Deductible 

limit for current year 

(25% of compensation)

Excess 

contribution 

carryover

used1

Total

 deduction 

including 

carryovers

Excess 

contribution 

carryover 

available at

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.

Publication 560 (2023) Chapter 4 Qualified Plans 23
Special rule for self-employed individuals. The 10% 

excise tax doesn't apply to any contribution made to meet 

the minimum funding requirements in a money purchase 

pension plan or a defined benefit plan. Even if that contribution is more than your earned income from the trade or 

business for which the plan is set up, the difference isn't 

subject to this excise tax. See Minimum Funding Requirement, earlier.

Reporting the tax. You must report the tax on your nondeductible contributions on Form 5330. Form 5330 includes a computation of the tax. See the separate instructions for completing the form.

Elective Deferrals

(401(k) Plans)

Your qualified plan can include a cash or deferred arrangement 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 

with this type of arrangement is popularly known as a 

401(k) plan. (As a self-employed individual participating in 

the plan, you can contribute part of your before-tax net 

earnings from the business.) This contribution is called an 

elective deferral because participants choose (elect) to 

defer receipt of the money.

In general, a qualified plan can include a cash or deferred arrangement only if the qualified plan is one of the following plans.

• A profit-sharing plan.

• A money purchase pension plan in existence on June 

27, 1974, that included a salary reduction arrangement on that date.

Partnership. A partnership can have a 401(k) plan.

Restriction on conditions of participation. Effective 

for plan years beginning after December 31, 2020, a 

401(k) plan can’t require, as a condition of participation, 

that an employee complete a period of service that extends beyond the close of the earlier of (1) 1 year of service, or (2) the first period of 3 consecutive 12-month periods (excluding 12-month periods beginning before 

January 1, 2021) during each of which the employee has 

completed at least 500 hours of service. Effective for plan 

years beginning after December 31, 2024, 3 consecutive 

12-month periods are reduced to 2 consecutive 12-month 

periods.

Matching contributions. If your plan permits, you can 

make matching contributions for an employee who makes 

an elective deferral to your 401(k) plan. For example, the 

plan might provide that you will contribute 50 cents for 

each dollar your participating employees choose to defer 

under your 401(k) plan. Matching contributions are generally subject to the ACP test discussed earlier under Employee Contributions.

Nonelective contributions. You can also make contributions (other than matching contributions) for your participating employees without giving them the choice to take 

cash instead. These are called nonelective contributions.

Employee compensation limit. No more than $330,000 

of the employee's compensation can be taken into account when figuring contributions other than elective deferrals in 2023. This limit is $345,000 for 2024.

SIMPLE 401(k) plan. If you had 100 or fewer employees 

who earned $5,000 or more in compensation during the 

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 discussed earlier under Qualification Rules. For details about 

SIMPLE 401(k) plans, see SIMPLE 401(k) Plan in chapter 3.

Distributions. Certain rules apply to distributions from 

401(k) plans. See Distributions From 401(k) Plans, later.

Limit on Elective Deferrals

There is a limit on the amount an employee can defer 

each year under these plans. This limit applies without regard to community property laws. Your plan must provide 

that your employees can't defer more than the limit that 

applies for a particular year. The basic limit on elective deferrals is $22,500 for 2023 and increases to $23,000 for 

2024. This limit applies to all salary reduction contributions and elective deferrals. If, in conjunction with other 

plans, the deferral limit is exceeded, the difference is included in the employee's gross income.

Catch-up contributions. A 401(k) plan can permit participants who are age 50 or over at the end of the calendar 

year to also make catch-up contributions. The catch-up 

contribution limit is $7,500 for 2023 and 2024. Elective deferrals aren't treated as catch-up contributions for 2023 

until they exceed the $22,500 limit ($23,000 limit for 

2024), the ADP test limit of section 401(k)(3), or the plan 

limit (if any). However, the catch-up contributions a participant can make for a year can't exceed the lesser of the following amounts.

• The catch-up contribution limit.

• The excess of the participant's compensation over the 

elective deferrals that aren't catch-up contributions.

Treatment of contributions. Your contributions to your 

own 401(k) plan are generally deductible by you for the 

year they are contributed to the plan. Matching or nonelective contributions made to the plan are also deductible 

by you in the year of contribution.

Your employees' elective deferrals other than designated Roth contributions are tax free until distributed from 

the plan. Elective deferrals are included in wages for social security, Medicare, and FUTA taxes.

24 Chapter 4 Qualified Plans Publication 560 (2023)
Forfeiture. Employees have a nonforfeitable right at all 

times to their accrued benefit attributable to elective 

deferrals.

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 security wages” and “Medicare wages and tips” boxes. You 

must also include them in box 12. Check the “Retirement 

plan” checkbox in box 13. For more information, see the 

Form W-2 instructions.

Automatic Enrollment

Your 401(k) plan can have an automatic enrollment feature. Under this feature, you can automatically reduce an 

employee's pay by a fixed percentage and contribute that 

amount to the 401(k) plan on their behalf unless the employee affirmatively chooses not to have their pay reduced 

or chooses to have it reduced by a different percentage. 

These contributions are elective deferrals. An automatic 

enrollment feature will encourage employees' saving for 

retirement and will help your plan pass nondiscrimination 

testing (if applicable). For more information, see Pub. 

4674.

Eligible automatic contribution arrangement (EACA). 

Under an EACA, a participant is treated as having elected 

to have the employer make contributions in an amount 

equal to a uniform percentage of compensation. This automatic election will remain in place until the participant 

specifically elects not to have such deferral percentage 

made (or elects a different percentage). There is no required deferral percentage.

Withdrawals. Under an EACA, you may allow participants to withdraw their automatic contributions to the plan 

if certain conditions are met.

• The participant must elect the withdrawal no later than 

90 days after the date of the first elective contributions 

under the EACA.

• The participant must withdraw the entire amount of 

EACA default contributions, including any earnings 

thereon.

If the plan allows withdrawals under the EACA, the 

amount of the withdrawal other than the amount of any 

designated Roth contributions must be included in the 

employee's gross income for the tax year in which the distribution is made. The additional 10% tax on early distributions won't apply to the distribution.

Notice requirement. Under an EACA, employees 

must be given written notice of the terms of the EACA 

within a reasonable period of time before each plan year. 

The notice must be written in a manner calculated to be 

understood by the average employee and be sufficiently 

accurate and comprehensive in order to apprise the employee of their rights and obligations under the EACA. The 

notice must include an explanation of the employee's right 

to elect not to have elective contributions made on their 

behalf, or to elect a different percentage, and the 

employee must be given a reasonable period of time after 

receipt of the notice before the first elective contribution is 

made. The notice must also explain how contributions will 

be invested in the absence of an investment election by 

the employee.

Qualified automatic contribution arrangement 

(QACA). A QACA is a type of safe harbor plan. It contains 

an automatic enrollment feature, and mandatory employer 

contributions are required. If your plan includes a QACA, it 

won't be subject to the ADP test (discussed later) or the 

top-heavy requirements (discussed earlier). Additionally, 

your plan won't be subject to the ACP test if certain additional requirements are met. Under a QACA, each employee who is eligible to participate in the plan will be treated as having elected to make elective deferral 

contributions equal to a certain default percentage of compensation. In order to not have default elective deferrals 

made, an employee must make an affirmative election 

specifying a deferral percentage (including zero, if desired). If an employee doesn't make an affirmative election, the default deferral percentage must meet the following conditions.

1. It must be applied uniformly.

2. It must not exceed 10%. (After December 31, 2019, 

the maximum default deferral percentage increases to 

15%.)

3. It must be at least 3% in the first plan year it applies to 

an employee and through the end of the following 

year.

4. It must increase to at least 4% in the following plan 

year.

5. It must increase to at least 5% in the following plan 

year.

6. It must increase to at least 6% in subsequent plan 

years.

Matching or nonelective contributions. Under the 

terms of the QACA, you must make either matching or 

nonelective contributions according to the following terms.

1. Matching contributions. You must make matching 

contributions on behalf of each non-highly compensated employee in the following amounts.

a. An amount equal to 100% of elective deferrals, up 

to 1% of compensation.

b. An amount equal to 50% of elective deferrals, from 

1% up to 6% of compensation.

Other formulas may be used as long as they are at 

least as favorable to non-highly compensated employees. The rate of matching contributions for highly 

compensated employees, including yourself, must not 

exceed the rates for non-highly compensated employees.

2. Nonelective contributions. You must make nonelective contributions on behalf of every non-highly compensated employee eligible to participate in the plan, 

Publication 560 (2023) Chapter 4 Qualified Plans 25
regardless of whether they elected to participate, in 

an amount equal to at least 3% of their compensation.

Vesting requirements. All accrued benefits attributed 

to matching or nonelective contributions under the QACA 

must be 100% vested for all employees who complete 2 

years of service. These contributions are subject to special withdrawal restrictions, discussed later.

Notice requirements. Each employee eligible to participate in the QACA must receive written notice of their 

rights and obligations under the QACA within a reasonable period before each plan year. The notice must be written in a manner calculated to be understood by the average employee, and it must be accurate and 

comprehensive. The notice must explain their right to elect 

not to have elective contributions made on their behalf, or 

to have contributions made at a different percentage than 

the default percentage. Additionally, the notice must explain how contributions will be invested in the absence of 

any investment election by the employee. The employee 

must have a reasonable period of time after receiving the 

notice to make such contribution and investment elections 

prior to the first contributions under the QACA.

If you make nonelective contributions under the QACA 

and you either don't make any matching contributions or 

you make matching contributions that are intended to satisfy the ACP test, then this QACA notice requirement 

doesn’t apply. However, this exception doesn’t apply to the 

EACA notice requirement, earlier.

Treatment of Excess Deferrals

If the total of an employee's deferrals is more than the limit 

for 2023, the employee can have the difference (called an 

excess deferral) paid out of any of the plans that permit 

these distributions. The employee must notify the plan by 

April 15, 2024 (or an earlier date specified in the plan), of 

the amount to be paid from each plan. The plan must then 

pay the employee that amount, plus earnings on the 

amount through the end of 2023, by April 15, 2024.

Excess withdrawn by April 15. If the employee takes 

out the excess deferral by April 15, 2024, it isn't reported 

again by including it in the employee's gross income for 

2024. However, any income earned in 2023 on the excess 

deferral taken out is taxable in the tax year in which it is 

taken out. The distribution isn't subject to the additional 

10% tax on early distributions.

If the employee takes out part of the excess deferral 

and the income on it, the distribution is treated as made 

proportionately from the excess deferral and the income.

Even if the employee takes out the excess deferral by 

April 15, the amount will be considered for purposes of 

nondiscrimination testing requirements of the plan, unless 

the distributed amount is for a non-highly compensated 

employee who participates in only one employer's 401(k) 

plan or plans.

Excess not withdrawn by April 15. If the employee 

doesn't take out the excess deferral by April 15, 2024, the 

excess, though taxable in 2023, isn't included in the employee's cost basis in figuring the taxable amount of any 

eventual distributions under the plan. In effect, an excess 

deferral left in the plan is taxed twice, once when contributed and again when distributed. Also, if the employee's 

excess deferral is allowed to stay in the plan and the employee participates in no other employer's plan, the plan 

can be disqualified.

Reporting corrective distributions on Form 1099-R. 

Report corrective distributions of excess deferrals (including any earnings) on Form 1099-R. For specific information about reporting corrective distributions, see the Instructions for Forms 1099-R and 5498.

Tax on excess contributions of highly compensated 

employees. The law provides tests to detect discrimination in a plan. If tests, such as the ADP test (see section 

401(k)(3)) and the ACP test (see section 401(m)(2)), show 

that contributions for highly compensated employees are 

more than the test limits for these contributions, the employer may have to pay a 10% excise tax. Report the tax 

on Form 5330. The ADP test doesn't apply to a safe harbor 401(k) plan (discussed next) or to a QACA. Also, the 

ACP test doesn't apply to these plans if certain additional 

requirements are met.

The tax for the year is 10% of the excess contributions 

for the plan year ending in your tax year. Excess contributions are elective deferrals, employee contributions, or 

employer matching or nonelective contributions that are 

more than the amount permitted under the ADP test or the 

ACP test.

See Regulations sections 1.401(k)-2 and 1.401(m)-2 

for further guidance relating to the nondiscrimination rules 

under sections 401(k) and 401(m).

If the plan fails the ADP or ACP testing, and the 

failure isn't corrected by the end of the next plan 

year, the plan can be disqualified.

Safe Harbor 401(k) Plan

If you meet the requirements for a safe harbor 401(k) plan, 

you don't have to satisfy the ADP test or the ACP test if 

certain additional requirements are met. For your plan to 

be a safe harbor plan, you must meet the following conditions.

1. Matching or nonelective contributions. You must 

make matching or nonelective contributions according 

to one of the following formulas.

a. Matching contributions. You must make matching contributions according to the following rules.

i. You must contribute an amount equal to 100% 

of each non-highly compensated employee's 

elective deferrals, up to 3% of compensation.

ii. You must contribute an amount equal to 50% 

of each non-highly compensated employee's 

elective deferrals, from 3% up to 5% of compensation.

CAUTION

!

26 Chapter 4 Qualified Plans Publication 560 (2023)
iii. The rate of matching contributions for highly 

compensated employees, including yourself, 

must not exceed the rates for non-highly compensated employees.

b. Nonelective contributions. You must make nonelective contributions, without regard to whether 

the employee made elective deferrals, on behalf of 

all non-highly compensated employees eligible to 

participate in the plan, equal to at least 3% of the 

employee's compensation.

These mandatory matching and nonelective contributions must be immediately 100% vested and are 

subject to special withdrawal restrictions.

2. Notice requirement. You must give eligible employees written notice of their rights and obligations with 

regard to contributions under the plan within a reasonable period before the plan year.

If you make nonelective contributions and you either 

don't make any matching contributions or you make 

matching contributions that are intended to satisfy the 

ACP test, then this notice requirement doesn’t apply. However, this exception doesn’t apply to the EACA notice requirement, earlier.

The other requirements for a 401(k) plan, including 

withdrawal and vesting rules, must also be met for your 

plan to qualify as a safe harbor 401(k) plan.

Qualified Roth Contribution 

Program

Under this program, an eligible employee can designate 

all or a portion of their elective deferrals as after-tax Roth 

contributions. These contributions, which are made in lieu 

of elective deferrals, are designated Roth contributions. 

Unlike other elective deferrals, designated Roth contributions aren't excluded from an employee's gross income.

In addition, an eligible employee may be permitted to 

designate certain nonelective contributions or matching 

contributions as Roth contributions. These contributions 

are also includible in an employee's gross income.

Designated Roth contributions, designated Roth nonelective contributions, and designated Roth matching contributions must be maintained in a separate Roth account. 

However, qualified distributions from a Roth account are 

excluded from an employee's gross income.

Elective Deferrals

Under a qualified Roth contribution program, the amount 

of elective deferrals that an employee may designate as a 

Roth contribution is limited to the maximum amount of 

elective deferrals excludable from gross income for the 

year (for 2023, $22,500 if under age 50 and $30,000 if age 

50 or over; amounts increase in 2024 to $23,000 and 

$30,500, respectively) less the total amount of the 

employee's elective deferrals not designated as Roth contributions.

Designated Roth contributions are treated the same as 

pre-tax elective deferrals for most purposes, including:

• The annual individual elective deferral limit (total of all 

designated Roth contributions and traditional, pre-tax 

elective deferrals) of $22,500 for 2023 ($23,000 for 

2024), with an additional $7,500 if age 50 or over;

• Determining the maximum employee and employer 

annual contributions of the lesser of 100% of compensation or $66,000 for 2023 ($69,000 for 2024);

• Nondiscrimination testing;

• Required distributions; and

• Elective deferrals not taken into account for purposes 

of deduction limits.

Qualified Distributions

A qualified distribution is a distribution that is made after 

the employee's nonexclusion period and:

• On or after the employee reaches age

591/2,

• On account of the employee's being disabled, or

• On or after the employee's death.

An employee's nonexclusion period for a plan is the 

5-tax-year period beginning with the earlier of the following tax years.

• The first tax year in which a contribution was made to 

their Roth account in the plan.

• If a rollover contribution was made to the employee's 

designated Roth account from a designated Roth account previously established for the employee under 

another plan, then the first tax year the employee 

made a designated Roth contribution to the previously 

established account.

Rollover. A rollover from another account can be made to 

a designated Roth account in the same plan. For additional information on these in-plan Roth rollovers, see Notice 2010-84, 2010-51 I.R.B. 872, available at IRS.gov/irb/

2010-51_IRB/ar11.html; and Notice 2013-74, 2013-52 

I.R.B. 819, available at IRS.gov/pub/irs-irbs/irb13-52_IRB. 

A distribution from a designated Roth account can only be 

rolled over to another designated Roth account or a Roth 

IRA. Rollover amounts don't apply toward the annual deferral limit.

Reporting Requirements

You must report a designated Roth contribution on Form 

W-2. See the Form W-2 instructions for detailed information.

You must report a designated Roth nonelective contribution or a designated Roth matching contribution on 

Form 1099-R for the year in which the contribution is 

allocated. You must also report a distribution from a Roth 

Publication 560 (2023) Chapter 4 Qualified Plans 27
account on Form 1099-R. See the Form 1099-R instructions

Distributions

Amounts paid to plan participants from a qualified plan are 

called distributions. Distributions may be nonperiodic, 

such as lump-sum distributions, or periodic, such as annuity payments. Also, certain loans may be treated as distributions. See Loans Treated as Distributions in Pub. 575.

Required Distributions

A qualified plan must provide that each participant will either:

• Receive their entire interest (benefits) in the plan by 

the required beginning date (defined later), or

• Begin receiving regular periodic distributions by the 

required beginning date in annual amounts figured to 

distribute the participant's entire interest (benefits) 

over their life expectancy or over the joint life expectancies of the participant and the designated beneficiary (or over a shorter period).

These distribution rules apply individually to each qualified plan. You can't satisfy the requirement for one plan by 

taking a distribution from another. The plan must provide 

that these rules override any inconsistent distribution options previously offered.

Minimum distribution. If the account balance of a qualified plan participant is to be distributed (other than as an 

annuity), the plan administrator must figure the minimum 

amount required to be distributed each distribution calendar year. This minimum is figured by dividing the account 

balance by the applicable life expectancy. The plan administrator can use the life expectancy tables in Pub. 

590-B for this purpose. For more information on figuring 

the minimum distribution, see Tax on Excess Accumulation in Pub. 575.

Required beginning date. Generally, each participant 

must receive their entire benefits in the plan or begin to receive periodic distributions of benefits from the plan by the 

required beginning date.

A participant must begin to receive distributions from 

their qualified retirement plan by April 1 of the first year after the later of the following years.

1. The calendar year in which the participant reaches 

age 72 (if age 701/2 was reached after December 31, 

2019).

2. The calendar year in which he or she retires from employment with the employer maintaining the plan.

However, the plan may require the participant to begin receiving distributions by April 1 of the year after the participant reaches age 72 (if age 701/2 was reached after December 31, 2019) even if the participant has not retired.

If the participant is a 5% owner of the employer maintaining the plan, the participant must begin receiving distributions by April 1 of the first year after the calendar year in 

which the participant reached age 72 (if age 701/2 was 

reached after December 31, 2019). For more information, 

see Tax on Excess Accumulation in Pub. 575 about distributions prior to 2020.

Note. Individuals who reach age 72 after December 

31, 2022, may delay receiving their required minimum distribution until April 1 of the year following the year in which 

they reach age 73.

Distributions after the starting year. The distribution 

required to be made by April 1 is treated as a distribution 

for the starting year. (The starting year is the year in which 

the participant meets (1) or (2) above, whichever applies.) 

After the starting year, the participant must receive the required distribution for each year by December 31 of that 

year. If no distribution is made in the starting year, required 

distributions for 2 years must be made in the next year 

(one by April 1 and one by December 31).

Distributions after participant's death. See Pub. 

575 for the special rules covering distributions made after 

the death of a participant.

Distributions From 401(k) Plans

Generally, distributions can't be made until one of the following occurs.

• The employee retires, dies, becomes disabled, or otherwise severs employment.

• The plan ends and no other defined contribution plan 

is established or continued.

• In the case of a 401(k) plan that is part of a profit-sharing plan, the employee reaches age 591/2 or suffers financial hardship. For the rules on hardship distributions, including the limits on them, see Regulations 

section 1.401(k)-1(d).

• The employee becomes eligible for a qualified reservist distribution (defined next).

Certain distributions listed above may be subject 

to the tax on early distributions discussed later.

Qualified reservist distributions. A qualified reservist 

distribution is a distribution from an IRA or an elective deferral account made after September 11, 2001, to a military reservist or a member of the National Guard who has 

been called to active duty for at least 180 days or for an 

indefinite period. All or part of a qualified reservist distribution can be repaid to an IRA. The additional 10% tax on 

early distributions doesn't apply to a qualified reservist 

distribution.

Tax Treatment of Distributions

Distributions from a qualified plan minus a prorated part of 

any cost basis are subject to income tax in the year they 

CAUTION

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28 Chapter 4 Qualified Plans Publication 560 (2023)
are distributed. Because most recipients have no cost basis, a distribution is generally fully taxable. An exception is 

a distribution that is properly rolled over as discussed under Rollover next.

The tax treatment of distributions depends on whether 

they are made periodically over several years or life (periodic distributions) or are nonperiodic distributions. See 

Taxation of Periodic Payments and Taxation of Nonperiodic Payments in Pub. 575 for a detailed description of 

how distributions are taxed, including the 10-year tax option or capital gain treatment of a lump-sum distribution.

Note. A recipient of a distribution from a designated 

Roth account will have a cost basis because designated 

Roth contributions are made on an after-tax basis. Also, a 

distribution from a designated Roth account is entirely tax 

free if certain conditions are met. See Qualified distributions under Qualified Roth Contribution Program, earlier.

Rollover. The recipient of an eligible rollover distribution 

from a qualified plan can defer the tax on it by rolling it 

over into a traditional IRA or another eligible retirement 

plan. However, it may be subject to withholding, as discussed under Withholding requirement, later. A rollover 

can also be made to a Roth IRA, in which case any previously untaxed amounts are includible in gross income unless the rollover is from a designated Roth account.

Eligible rollover distribution. This is a distribution of 

all or any part of an employee's balance in a qualified retirement plan that isn't any of the following.

1. An RMD. See Required Distributions, earlier.

2. Any of a series of substantially equal payments made 

at least once a year over any of the following periods.

a. The employee's life or life expectancy.

b. The joint lives or life expectancies of the employee 

and beneficiary.

c. A period of 10 years or longer.

3. A hardship distribution.

4. Loans treated as distributions.

5. Dividends on employer securities.

6. The cost of any life insurance coverage provided under a qualified retirement plan.

7. Similar items designated by the IRS in published guidance. See, for example, the Instructions for Forms 

1099-R and 5498.

Rollover of nontaxable amounts. You may be able to 

roll over the nontaxable part of a distribution to another 

qualified retirement plan or a section 403(b) plan, or to an 

IRA. If the rollover is to a qualified retirement plan or a section 403(b) plan that separately accounts for the taxable 

and nontaxable parts of the rollover, the transfer must be 

made through a direct (trustee-to-trustee) rollover. If the 

rollover is to an IRA, the transfer can be made by any rollover method.

Note. A distribution from a designated Roth account 

can be rolled over to another designated Roth account or 

to a Roth IRA. If the rollover is to a Roth IRA, it can be rolled over by any rollover method, but if the rollover is to another designated Roth account, it must be rolled over directly (trustee-to-trustee).

More information. For more information about rollovers, see Rollovers in Pubs. 575 and 590-A. For rules on 

rolling over distributions that contain nontaxable amounts, 

see Notice 2014-54, 2014-41 I.R.B. 670, available at 

IRS.gov/irb/2014-41_IRB/ar11.html. For guidance on rolling money into a qualified plan, see Revenue Ruling 

2014-9, 2014-17 I.R.B. 975, available at IRS.gov/irb/

2014-17_IRB/ar05.html.

Withholding requirement. If, during a year, a qualified 

plan pays to a participant one or more eligible rollover distributions (defined earlier) that are reasonably expected to 

total $200 or more, the payor must withhold 20% of the 

taxable portion of each distribution for federal income tax.

Exceptions. If, instead of having the distribution paid 

to them, the participant chooses to have the plan pay it directly to an IRA or another eligible retirement plan (a direct 

rollover), no withholding is required.

If the distribution isn't an eligible rollover distribution, 

defined earlier, the 20% withholding requirement doesn't 

apply. Other withholding rules apply to distributions that 

aren't eligible rollover distributions, such as long-term periodic distributions and required distributions (periodic or 

nonperiodic). However, the participant can choose not to 

have tax withheld from these distributions. If the participant doesn't make this choice, the following withholding 

rules apply.

• For periodic distributions, withholding is based on their 

treatment as wages.

• For nonperiodic distributions, 10% of the taxable part 

is withheld.

Estimated tax payments. If no income tax is withheld 

or not enough tax is withheld, the recipient of a distribution 

may have to make estimated tax payments. For more information, see Withholding Tax and Estimated Tax in Pub. 

575.

Section 402(f) notice. If a distribution is an eligible rollover distribution, as defined earlier, you must provide a 

written notice to the recipient that explains the following 

rules regarding such distributions.

1. That the distribution may be directly transferred to an 

eligible retirement plan and information about which 

distributions are eligible for this direct transfer.

2. That tax will be withheld from the distribution if it isn't 

directly transferred to an eligible retirement plan.

3. That the distribution won't be subject to tax if transferred to an eligible retirement plan within 60 days after 

the date the recipient receives the distribution.

4. Certain other rules that may be applicable.

Publication 560 (2023) Chapter 4 Qualified Plans 29
Notice 2020-62, 2020-35 I.R.B. 476, available at, 

IRS.gov/irb/2023–15_IRB, contains two updated safe harbor section 402(f) notices that plan administrators may 

provide recipients of eligible rollover distributions.

Timing of notice. The notice must generally be provided no less than 30 days and no more than 180 days before the date of a distribution.

Method of notice. The written notice must be provided individually to each distributee of an eligible rollover 

distribution. Posting of the notice isn't sufficient. However, 

the written requirement may be satisfied through the use 

of electronic media if certain additional conditions are met. 

See Regulations section 1.401(a)-21.

Tax on failure to give notice. Failure to give a 402(f) 

notice will result in a tax of $100 for each failure, with a total 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 Early Distributions

If a distribution is made to an employee under the plan before they reache age 591/2, the employee may have to pay 

a 10% additional tax on the distribution. This tax applies to 

the amount received that the employee must include in income.

Exceptions. The 10% tax won't apply if distributions before age 591/2 are made in any of the following circumstances.

• Made to a beneficiary (or to the estate of the employee) on or after the death of the employee.

• Made due to the employee having a qualifying disability.

• Made as part of a series of substantially equal periodic payments beginning after separation from service 

and made at least annually for the life or life expectancy of the employee or the joint lives or life expectancies of the employee and their designated beneficiary. 

(The payments under this exception, except in the 

case of death or disability, must continue for at least 5 

years or until the employee reaches age 591/2, whichever is the longer period.)

• Made to an employee after separation from service if 

the separation occurred during or after the calendar 

year in which the employee reached age 55.

• Made to an alternate payee under a QDRO.

• Made to an employee for medical care up to the 

amount allowable as a medical expense deduction 

(determined without regard to whether the employee 

itemizes deductions).

• Timely made to reduce excess contributions under a 

401(k) plan.

• Timely made to reduce excess employee or matching 

employer contributions (excess aggregate contributions).

• Timely made to reduce excess elective deferrals.

• Made because of an IRS levy on the plan.

• Made as a qualified reservist distribution.

• Made as a permissible withdrawal from an EACA.

• Made as a qualified birth or adoption distribution.

• Made as a qualified disaster distribution.

• Made to an individual who has been certified by a 

physician as having a terminal illness.

• Timely made to reduce excess IRA contributions pursuant to section 408(d)(4).

Reporting the tax. To report the tax on early distributions, file Form 5329. See the form instructions for additional information about this tax.

Tax on Excess Benefits

If you are or have been a 5% owner of the business maintaining the plan, amounts you receive at any age that are 

more than the benefits provided for you under the plan formula are subject to an additional tax. This tax also applies 

to amounts received by your successor. The tax is 10% of 

the excess benefit includible in income.

To determine whether or not you are a 5% owner, see 

section 416.

Reporting the tax. Include on Schedule 2 (Form 1040), 

Part II, line 17j, any tax you owe for an excess benefit.

Lump-sum distribution. The amount subject to the additional tax isn't eligible for the optional methods of figuring income tax on a lump-sum distribution. The optional 

methods are discussed under Lump-Sum Distributions in 

Pub. 575.

Excise Tax on Reversion of Plan 

Assets

A 20% or 50% excise tax is generally imposed on the 

cash and fair market value of other property an employer 

receives directly or indirectly from a qualified plan. If you 

owe this tax, report it on Schedule I of Form 5330. See the 

form instructions for more information.

Notification of Significant

Benefit Accrual Reduction

An employer or the plan will have to pay an excise tax if 

both of the following occur.

• A defined benefit plan or money purchase pension 

plan is amended to provide for a significant reduction 

in the rate of future benefit accrual.

• The plan administrator fails to notify the affected individuals and the employee organizations representing 

them of the reduction in writing.

30 Chapter 4 Qualified Plans Publication 560 (2023)
A plan amendment that eliminates or reduces any early 

retirement benefit or retirement-type subsidy reduces the 

rate of future benefit accrual.

The notice must be written in a manner calculated to be 

understood by the average plan participant and must provide enough information to allow each individual to understand the effect of the plan amendment. It must be provided within a reasonable time before the amendment takes 

effect.

The tax is $100 per participant or alternate payee for 

each day the notice is late. The total tax can't be more 

than $500,000 during the tax year. It is imposed on the 

employer or, in the case of a multiemployer plan, on the 

plan.

Prohibited Transactions

Prohibited transactions are transactions between the plan 

and a disqualified person that are prohibited by law. (However, see Exemption later.) If you are a disqualified person 

who takes part in a prohibited transaction, you must pay a 

tax (discussed later).

Prohibited transactions generally include the following 

transactions.

1. A transfer of plan income or assets to, or use of them 

by or for the benefit of, a disqualified person.

2. Any act of a fiduciary by which they deal with plan income or assets in the fiduciary own interest.

3. The receipt of consideration by a fiduciary for their 

own account from any party dealing with the plan in a 

transaction that involves plan income or assets.

4. Any of the following acts between the plan and a disqualified person.

a. Selling, exchanging, or leasing property.

b. Lending money or extending credit.

c. Furnishing goods, services, or facilities.

Exemption. Certain transactions are exempt from being 

treated as prohibited transactions. For example, a prohibited transaction doesn't take place if you are a disqualified 

person and receive any benefit to which you are entitled 

as a plan participant or beneficiary. However, the benefit 

must be figured and paid under the same terms as for all 

other participants and beneficiaries. For other transactions 

that are exempt, see section 4975 and the related regulations.

Disqualified person. You are a disqualified person if you 

are any of the following.

1. A fiduciary of the plan.

2. A person providing services to the plan.

3. An employer, any of whose employees are covered by 

the plan.

4. An employee organization, any of whose members 

are covered by the plan.

5. Any direct or indirect owner of 50% or more of any of 

the following.

a. The combined voting power of all classes of stock 

entitled to vote, or the total value of shares of all 

classes of stock of a corporation that is an employer or employee organization described in (3) 

or (4).

b. The capital interest or profits interest of a partnership that is an employer or employee organization 

described in (3) or (4).

c. The beneficial interest of a trust or unincorporated 

enterprise that is an employer or an employee organization described in (3) or (4).

6. A member of the family of any individual described in 

(1), (2), (3), or (5). (A member of a family is the 

spouse, ancestor, or lineal descendant, or any spouse 

of a lineal descendant.)

7. A corporation, partnership, trust, or estate of which (or 

in which) any direct or indirect owner described in (1) 

through (5) holds 50% or more of any of the following.

a. The combined voting power of all classes of stock 

entitled to vote or the total value of shares of all 

classes of stock of a corporation.

b. The capital interest or profits interest of a partnership.

c. The beneficial interest of a trust or estate.

8. An officer, a director (or an individual having powers 

or responsibilities similar to those of officers or directors), a 10%-or more shareholder, or a highly compensated employee (earning 10%-or-more of the 

yearly wages of an employer) of a person described in 

(3), (4), (5), or (7).

9. A 10%-or more (in capital or profits) partner or joint 

venturer of a person described in (3), (4), (5), or (7).

10. Any disqualified person, as described in (1) through 

(9) above, who is a disqualified person with respect to 

any plan to which a section 501(c)(22) trust is permitted to make payments under section 4223 of ERISA.

Tax on Prohibited Transactions

The initial tax on a prohibited transaction is 15% of the 

amount involved for each year (or part of a year) in the tax 

period. If the transaction isn't corrected within the tax period, an additional tax of 100% of the amount involved is 

imposed. For information on correcting the transaction, 

see Correcting a prohibited transaction, later.

Both taxes are payable by any disqualified person who 

participated in the transaction (other than a fiduciary acting only as such). If more than one person takes part in 

the transaction, each person can be jointly and severally 

liable for the entire tax.

Publication 560 (2023) Chapter 4 Qualified Plans 31
Amount involved. The amount involved in a prohibited 

transaction is the greater of the following amounts.

• The money and fair market value of any property 

given.

• The money and fair market value of any property received.

If services are performed, the amount involved is any 

excess compensation given or received.

Tax period. The tax period starts on the transaction date 

and ends on the earliest of the following days.

• The day the IRS mails a notice of deficiency for the 

tax.

• The day the IRS assesses the tax.

• The day the correction of the transaction is completed.

Payment of the 15% tax. Pay the 15% tax with Form 

5330.

Correcting a prohibited transaction. If you are a disqualified person who participated in a prohibited transaction, you can avoid the 100% tax by correcting the transaction as soon as possible. Correcting the transaction 

means undoing it as much as you can without putting the 

plan in a worse financial position than if you had acted under the highest fiduciary standards.

Correction period. If the prohibited transaction isn't 

corrected during the tax period, you usually have an additional 90 days after the day the IRS mails a notice of deficiency for the 100% tax to correct the transaction. This 

correction period (the tax period plus the 90 days) can be 

extended if either of the following occurs.

• The IRS grants reasonable time needed to correct the 

transaction.

• You petition the Tax Court.

If you correct the transaction within this period, the IRS will 

abate, credit, or refund the 100% tax.

Reporting Requirements

You may have to file an annual return/report by the last day 

of the seventh month after the plan year ends. See the following list of forms to choose the right form for your plan.

Form 5500-SF. Form 5500-SF is a simplified annual reporting form. You can use Form 5500-SF if the plan meets 

all the following conditions.

• The plan is a small plan (generally, fewer than 100 

participants at the beginning of the plan year).

• The plan meets the conditions for being exempt from 

the requirements that the plan's books and records be 

audited by an independent qualified public accountant.

• The plan has 100% of its assets invested in certain secure investments with a readily determinable fair 

value.

• The plan holds no employer securities.

• The plan isn't a multiemployer plan.

If your plan is required to file an annual return/report but 

isn't eligible to file Form 5500-SF, the plan must file Form 

5500 or 5500-EZ, as appropriate. For more details, see 

the Instructions for Form 5500-SF.

Form 5500-EZ. You may be able to use Form 5500-EZ if 

the plan is a one-participant plan, as defined below.

One-participant plan. Your plan is a one-participant 

plan if either of the following is true.

• The plan covers only you (or you and your spouse) 

and you (or you and your spouse) own the entire business (whether incorporated or unincorporated).

• The plan covers only one or more partners (or partner(s) and spouse(s)) in a business partnership.

A one-participant plan may not file an annual return on Form 5500. Every one-participant plan required to file an annual return must file either 

Form 5500-EZ or 5500-SF. See the Instructions for Form 

5500-EZ.

Form 5500-EZ not required. If your one-participant 

plan (or plans) had total assets of $250,000 or less at the 

end of the plan year, then you don't have to file Form 

5500-EZ for that plan year. All plans should file a Form 

5500-EZ for the final plan year to show that all plan assets 

have been distributed.

Example. You are a sole proprietor and your plan 

meets all the conditions for filing Form 5500-EZ. The total 

plan assets are more than $250,000. You must file Form 

5500-EZ or 5500-SF.

All one-participant plans should file Form 

5500-EZ for their final plan year. The final plan 

year is the year in which distribution of all plan assets is completed.

Form 5500. If you don't meet the requirements for filing Form 5500-EZ or 5500-SF and a return/report is required, you must file Form 5500.

Electronic filing of Forms 5500 and 5500-SF. All 

Forms 5500 and 5500-SF are required to be filed electronically with the Department of Labor through EFAST2. 

One-participant plans have the option of filing Form 

5500-SF electronically rather than filing a Form 5500-EZ 

on paper with the IRS. For more information, see the instructions for Forms 5500 and 5500-SF, available at 

EFAST.dol.gov.

Form 5310. If you terminate your plan and are the plan 

sponsor or plan administrator, you can file Form 5310. 

Your application must be accompanied by the appropriate 

user fee and Form 8717.

CAUTION

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CAUTION

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32 Chapter 4 Qualified Plans Publication 560 (2023)
Form 8955-SSA. Form 8955-SSA is used to report participants who are no longer covered by the plan but have a 

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.

More information. For more information about reporting 

requirements, see the forms and their instructions.

Publication 560 (2023) Chapter 4 Qualified Plans 33
5.

Table and Worksheets

for the Self-Employed

As discussed in chapters 2 and 4, if you are self-employed, you must use the rate table or rate worksheet and 

deduction worksheet to figure your deduction for contributions you made for yourself to a SEP-IRA or qualified plan.

First, use either the rate table or rate worksheet to find 

your reduced contribution rate. Then, complete the deduction worksheet to figure your deduction for contributions.

The table and the worksheets in chapter 5 apply 

only to self-employed individuals who have only 

one defined contribution plan, such as a 

profit-sharing plan. A SEP plan is treated as a profit-sharing plan. However, don't use this worksheet for SARSEPs.

Rate Table for Self-Employed. If your plan's contribution 

rate is a whole percentage (for example, 12% rather than 

121/2%), you can use the Rate Table for Self-Employed on 

the next page to find your reduced contribution rate. Otherwise, use the Rate Worksheet for Self-Employed provided below.

First, find your plan contribution rate (the contribution 

rate stated in your plan) in Column A of the table. Then, 

read across to the rate under Column A. Enter the rate 

CAUTION

!

from Columnin step 4 of the Deduction Worksheet for 

Self-Employed on this page.

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 

step 4 of the Deduction Worksheet for Self-Employed on 

this page.

Rate Worksheet for Self-Employed. If your plan's contribution rate isn't a whole percentage (for example, 

101/2%), you can't use the Rate Table for Self-Employed. 

Use the following worksheet instead.

Rate Worksheet for Self-Employed

1) Plan contribution rate as a decimal (for example, 101/2% = 

0.105) ..............................

2) Rate in line 1 plus 1 (for example, 0.105 + 1 = 1.105) .....

3) Self-employed rate as a decimal rounded to at least 3 

decimal places (line 1 ÷ line 2) (for example, 0.105 ÷ 1.105 = 

0.095) ..............................

Figuring your deduction. Now that you have your 

self-employed rate from either the rate table or rate worksheet, you can figure your maximum deduction for contributions for yourself by completing the Deduction Worksheet for Self-Employed.

Community property laws. If you reside in a community property state and you are married and filing a 

separate return, disregard community property laws for 

step 1 of the Deduction Worksheet for Self-Employed. Enter on step 1 the total net profit you actually earned.

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

Column A

If the plan contribution rate is:

(shown as %)

Column B

Your

rate is:

(shown as decimal)

1 ...................... 0.009901

2 ...................... 0.019608

3 ...................... 0.029126

4 ...................... 0.038462

5 ...................... 0.047619

6 ...................... 0.056604

7 ...................... 0.065421

8 ...................... 0.074074

9 ...................... 0.082569

10 ..................... 0.090909

11 ..................... 0.099099

12 ..................... 0.107143

13 ..................... 0.115044

14 ..................... 0.122807

15 ..................... 0.130435

16 ..................... 0.137931

17 ..................... 0.145299

18 ..................... 0.152542

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. 

Example. You are a sole proprietor with no employees. 

The terms of your plan provide that you contribute 81/2% 

(0.085) of your compensation to your plan. Your net profit 

from Schedule C (Form 1040), line 31, is $200,000. You 

have no elective deferrals or catch-up contributions. Your 

self-employment tax deduction on line 15 of Schedule 1 

(Form 1040) is $11,792. See the filled-in portions of both 

Schedule SE (Form 1040), and Form 1040, later.

You figure your self-employed rate and maximum deduction for employer contributions you made for yourself 

as follows.

See the filled-in Deduction Worksheet for Self-Employed later.

Rate Worksheet for Self-Employed

1) Plan contribution rate as a decimal (for example, 101/2% = 

0.105) ..............................

0.085

2) Rate in line 1 plus 1 (for example, 0.105 + 1 = 1.105) ..... 1.085

3) Self-employed rate as a decimal rounded to at least 3 

decimal places (line 1 ÷ line 2) (for example, 0.105 ÷ 1.105 = 

0.095) ..............................

0.078

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

Publication 560 (2023) Chapter 5 Table and Worksheets for the Self-Employed 37
SCHEDULE SE 

(Form 1040)

Department of the Treasury 

Internal Revenue Service 

Self-Employment Tax

Attach to Form 1040, 1040-SR, 1040-SS, or 1040-NR. 

Go to www.irs.gov/ScheduleSE for instructions and the latest information.

OMB No. 1545-0074

2023

Attachment 

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 

3 Combine lines 1a, 1b, and 2 . . . . . . . . . ... . . . ..... . . . . . 3 

4 a If line 3 is more than zero, multiply line 3 by 92.35% (0.9235). Otherwise, enter amount from line 3 . 4a 

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 

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 

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 

10 Multiply the smaller of line 6 or line 9 by 12.4% (0.124) . . . . . . . .... . . . . . 10 

11 Multiply line 6 by 2.9% (0.029) . . ... . . .... . . ..... . . . . . . 11 

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 

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 

For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 11358Z Schedule SE (Form 1040) 2023 

184,700

200,000

200,000

184,700

184,700

160,200

19,865

5,356

25,221

12,611

38 Chapter 5 Table and Worksheets for the Self-Employed Publication 560 (2023)
6.

How To Get Tax Help

If you have questions about a tax issue, need help preparing your tax return, or want to download free publications, 

forms, or instructions, go to IRS.gov to find resources that 

can help you right away.

Preparing and filing your tax return. After receiving all 

your wage and earnings statements (Forms W-2, W-2G, 

1099-R, 1099-MISC, 1099-NEC, etc.); unemployment 

compensation statements (by mail or in a digital format) or 

other government payment statements (Form 1099-G); 

and interest, dividend, and retirement statements from 

banks and investment firms (Forms 1099), you have several options to choose from to prepare and file your tax return. You can prepare the tax return yourself, see if you 

qualify for free tax preparation, or hire a tax professional to 

prepare your return.

Free options for tax preparation. Your options for preparing and filing your return online or in your local community, if you qualify, include the following.

• Free File. This program lets you prepare and file your 

federal individual income tax return for free using software or Free File Fillable Forms. However, state tax 

12,611

14,616

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

16 Self-employed SEP, SIMPLE, and qualied plans ..... . ......... . 16

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

Publication 560 (2023) Chapter 6 How To Get Tax Help 39
preparation may not be available through Free File. Go 

to IRS.gov/FreeFile to see if you qualify for free online 

federal tax preparation, e-filing, and direct deposit or 

payment options.

• VITA. The Volunteer Income Tax Assistance (VITA) 

program offers free tax help to people with 

low-to-moderate incomes, persons with disabilities, 

and limited-English-speaking taxpayers who need 

help preparing their own tax returns. Go to IRS.gov/

VITA, download the free IRS2Go app, or call 

800-906-9887 for information on free tax return preparation.

• TCE. The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly 

those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors. 

Go to IRS.gov/TCE, download the free IRS2Go app, or 

call 888-227-7669 for information on free tax return 

preparation.

• MilTax. Members of the U.S. Armed Forces and qualified veterans may use MilTax, a free tax service offered by the Department of Defense through Military 

OneSource. For more information, go to 

MilitaryOneSource (MilitaryOneSource.Mil/Tax).

Also, the IRS offers Free Fillable Forms, which can 

be completed online and then e-filed regardless of income.

Using online tools to help prepare your return. Go to 

IRS.gov/Tools for the following.

• The Earned Income Tax Credit Assistant (IRS.gov/

EITCAssistant) determines if you’re eligible for the 

earned income credit (EIC).

• The Online EIN Application (IRS.gov/EIN) helps you 

get an employer identification number (EIN) at no 

cost.

• The Tax Withholding Estimator (IRS.gov/W4App) 

makes it easier for you to estimate the federal income 

tax you want your employer to withhold from your paycheck. This is tax withholding. See how your withholding affects your refund, take-home pay, or tax due.

• The First-Time Homebuyer Credit Account Look-up 

(IRS.gov/HomeBuyer) tool provides information on 

your repayments and account balance.

• The Sales Tax Deduction Calculator (IRS.gov/

SalesTax) figures the amount you can claim if you 

itemize deductions on Schedule A (Form 1040).

Getting answers to your tax questions. On 

IRS.gov, you can get up-to-date information on 

current events and changes in tax law.

• IRS.gov/Help: A variety of tools to help you get answers to some of the most common tax questions.

• IRS.gov/ITA: The Interactive Tax Assistant, a tool that 

will ask you questions and, based on your input, provide answers on a number of tax law topics.

• IRS.gov/Forms: Find forms, instructions, and publications. You will find details on the most recent tax 

changes and interactive links to help you find answers 

to your questions.

• You may also be able to access tax information in your 

e-filing software.

Need someone to prepare your tax return? There are 

various types of tax return preparers, including enrolled 

agents, certified public accountants (CPAs), accountants, 

and many others who don’t have professional credentials. 

If you choose to have someone prepare your tax return, 

choose that preparer wisely. A paid tax preparer is:

• Primarily responsible for the overall substantive accuracy of your return,

• Required to sign the return, and

• Required to include their preparer tax identification 

number (PTIN).

Although the tax preparer always signs the return, 

you're ultimately responsible for providing all the 

information required for the preparer to accurately 

prepare your return and for the accuracy of every item reported on the return. Anyone paid to prepare tax returns 

for others should have a thorough understanding of tax 

matters. For more information on how to choose a tax preparer, go to Tips for Choosing a Tax Preparer on IRS.gov.

Employers can register to use Business Services Online. The Social Security Administration (SSA) offers online service at SSA.gov/employer for fast, free, and secure 

online W-2 filing options to CPAs, accountants, enrolled 

agents, and individuals who process Form W-2, Wage 

and Tax Statement, and Form W-2c, Corrected Wage and 

Tax Statement.

IRS social media. Go to IRS.gov/SocialMedia to see the 

various social media tools the IRS uses to share the latest 

information on tax changes, scam alerts, initiatives, products, and services. At the IRS, privacy and security are our 

highest priority. We use these tools to share public information with you. Don’t post your social security number 

(SSN) or other confidential information on social media 

sites. Always protect your identity when using any social 

networking site.

The following IRS YouTube channels provide short, informative videos on various tax-related topics in English, 

Spanish, and ASL.

• Youtube.com/irsvideos.

• Youtube.com/irsvideosmultilingua.

• Youtube.com/irsvideosASL.

Watching IRS videos. The IRS Video portal 

(IRSVideos.gov) contains video and audio presentations 

for individuals, small businesses, and tax professionals.

Online tax information in other languages. You can 

find information on IRS.gov/MyLanguage if English isn’t 

your native language.

CAUTION

!

40 Chapter 6 How To Get Tax Help Publication 560 (2023)
Free Over-the-Phone Interpreter (OPI) Service. The 

IRS is committed to serving taxpayers with limited-English 

proficiency (LEP) by offering OPI services. The OPI Service is a federally funded program and is available at Taxpayer Assistance Centers (TACs), other IRS offices, and 

every VITA/TCE return site. The OPI Service is accessible 

in more than 350 languages.

Accessibility Helpline available for taxpayers with 

disabilities. Taxpayers who need information about accessibility services can call 833-690-0598. The Accessibility Helpline can answer questions related to current and 

future accessibility products and services available in alternative media formats (for example, braille, large print, 

audio, etc.). The Accessibility Helpline does not have access to your IRS account. For help with tax law, refunds, or 

account-related issues, go to IRS.gov/LetUsHelp.

Note. Form 9000, Alternative Media Preference, or 

Form 9000(SP) allows you to elect to receive certain types 

of written correspondence in the following formats.

• Standard Print.

• Large Print.

• Braille.

• Audio (MP3).

• Plain Text File (TXT).

• Braille Ready File (BRF).

Disasters. Go to IRS.gov/DisasterRelief to review the 

available disaster tax relief.

Getting tax forms and publications. Go to IRS.gov/

Forms to view, download, or print all of the forms, instructions, and publications you may need. Or you can go to 

IRS.gov/OrderForms to place an order.

Getting tax publications and instructions in eBook 

format. Download and view most tax publications and instructions (including the Instructions for Form 1040) on 

mobile devices as eBooks at IRS.gov/eBooks.

IRS eBooks have been tested using Apple's iBooks for 

iPad. Our eBooks haven’t been tested on other dedicated 

eBook readers, and eBook functionality may not operate 

as intended.

Access your online account (individual taxpayers 

only). Go to IRS.gov/Account to securely access information about your federal tax account.

• View the amount you owe and a breakdown by tax 

year.

• See payment plan details or apply for a new payment 

plan.

• Make a payment or view 5 years of payment history 

and any pending or scheduled payments.

• Access your tax records, including key data from your 

most recent tax return, and transcripts.

• View digital copies of select notices from the IRS.

• Approve or reject authorization requests from tax professionals.

• View your address on file or manage your communication preferences.

Get a transcript of your return. With an online account, 

you can access a variety of information to help you during 

the filing season. You can get a transcript, review your 

most recently filed tax return, and get your adjusted gross 

income. Create or access your online account at IRS.gov/

Account.

Tax Pro Account. This tool lets your tax professional 

submit an authorization request to access your individual 

taxpayer IRS online account. For more information, go to 

IRS.gov/TaxProAccount.

Using direct deposit. The safest and easiest way to receive a tax refund is to e-file and choose direct deposit, 

which securely and electronically transfers your refund directly into your financial account. Direct deposit also 

avoids the possibility that your check could be lost, stolen, 

destroyed, or returned undeliverable to the IRS. Eight in 

10 taxpayers use direct deposit to receive their refunds. If 

you don’t have a bank account, go toIRS.gov/

DirectDeposit for more information on where to find a bank 

or credit union that can open an account online.

Reporting and resolving your tax-related identity 

theft issues. 

• Tax-related identity theft happens when someone 

steals your personal information to commit tax fraud. 

Your taxes can be affected if your SSN is used to file a 

fraudulent return or to claim a refund or credit.

• The IRS doesn’t initiate contact with taxpayers by 

email, text messages (including shortened links), telephone calls, or social media channels to request or 

verify personal or financial information. This includes 

requests for personal identification numbers (PINs), 

passwords, or similar information for credit cards, 

banks, or other financial accounts.

• Go to IRS.gov/IdentityTheft, the IRS Identity Theft 

Central webpage, for information on identity theft and 

data security protection for taxpayers, tax professionals, and businesses. If your SSN has been lost or 

stolen or you suspect you’re a victim of tax-related 

identity theft, you can learn what steps you should 

take.

• Get an Identity Protection PIN (IP PIN). IP PINs are 

six-digit numbers assigned to eligible taxpayers to 

help prevent the misuse of their SSNs on fraudulent 

federal income tax returns. When you have an IP PIN, 

it prevents someone else from filing a tax return with 

your SSN. To learn more, go to IRS.gov/IPPIN.

Ways to check on the status of your refund. 

• Go to IRS.gov/Refunds.

• Download the official IRS2Go app to your mobile device to check your refund status.

Publication 560 (2023) Chapter 6 How To Get Tax Help 41
• Call the automated refund hotline at 800-829-1954.

The IRS can’t issue refunds before mid-February 

for returns that claimed the EIC or the additional 

child tax credit (ACTC). This applies to the entire 

refund, not just the portion associated with these credits.

Making a tax payment. Payments of U.S. tax must be 

remitted to the IRS in U.S. dollars. Digital assets are not 

accepted. Go to IRS.gov/Payments for information on how 

to make a payment using any of the following options.

• IRS Direct Pay: Pay your individual tax bill or estimated 

tax payment directly from your checking or savings account at no cost to you.

• Debit Card, Credit Card, or Digital Wallet: Choose an 

approved payment processor to pay online or by 

phone.

• Electronic Funds Withdrawal: Schedule a payment 

when filing your federal taxes using tax return preparation software or through a tax professional.

• Electronic Federal Tax Payment System: Best option 

for businesses. Enrollment is required.

• Check or Money Order: Mail your payment to the address listed on the notice or instructions.

• Cash: You may be able to pay your taxes with cash at 

a participating retail store.

• Same-Day Wire: You may be able to do same-day 

wire from your financial institution. Contact your financial institution for availability, cost, and time frames.

Note. The IRS uses the latest encryption technology to 

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 

faster than mailing in a check or money order.

What if I can’t pay now? Go to IRS.gov/Payments for 

more information about your options.

• Apply for an online payment agreement (IRS.gov/

OPA) to meet your tax obligation in monthly installments if you can’t pay your taxes in full today. Once 

you complete the online process, you will receive immediate notification of whether your agreement has 

been approved.

• Use the Offer in Compromise Pre-Qualifier to see if 

you can settle your tax debt for less than the full 

amount you owe. For more information on the Offer in 

Compromise program, go to IRS.gov/OIC.

Filing an amended return. Go to IRS.gov/Form1040X 

for information and updates.

Checking the status of your amended return. Go to 

IRS.gov/WMAR to track the status of Form 1040-X amended returns.

It can take up to 3 weeks from the date you filed 

your amended return for it to show up in our system, and processing it can take up to 16 weeks.

CAUTION

!

CAUTION

!

Understanding an IRS notice or letter you’ve received. Go to IRS.gov/Notices to find additional information about responding to an IRS notice or letter.

Responding to an IRS notice or letter. You can now 

upload responses to all notices and letters using the 

Document Upload Tool. For notices that require additional 

action, taxpayers will be redirected appropriately on 

IRS.gov to take further action. To learn more about the 

tool, go to IRS.gov/Upload.

Note. You can use Schedule LEP (Form 1040), Request for Change in Language Preference, to state a preference to receive notices, letters, or other written communications from the IRS in an alternative language. You may 

not immediately receive written communications in the requested language. The IRS’s commitment to LEP taxpayers is part of a multi-year timeline that began providing 

translations in 2023. You will continue to receive communications, including notices and letters, in English until they 

are translated to your preferred language.

Contacting your local TAC office. Keep in mind, many 

questions can be answered on IRS.gov without visiting an 

IRS TAC. Go to IRS.gov/LetUsHelp for the topics people 

ask about most. If you still need help, IRS TACs provide 

tax help when a tax issue can’t be handled online or by 

phone. All TACs now provide service by appointment, so 

you’ll know in advance that you can get the service you 

need without long wait times. Before you visit, go to 

IRS.gov/TACLocator to find the nearest TAC and to check 

hours, available services, and appointment options. Or, on 

the IRS2Go app, under the Stay Connected tab, choose 

the Contact Us option and click on “Local Offices.”

The Taxpayer Advocate 

Service (TAS) Is Here To Help 

You

What is TAS? TAS is an independent organization 

within the IRS that helps taxpayers and protects taxpayer 

rights. Their job is to ensure that every taxpayer is treated 

fairly and that you know and understand your rights under 

the Taxpayer Bill of Rights.

How can you learn about your taxpayer rights? The 

Taxpayer Bill of Rights describes 10 basic rights that all 

taxpayers have when dealing with the IRS. Go to 

TaxpayerAdvocate.IRS.gov to help you understand what 

these rights mean to you and how they apply. These are 

your rights. Know them. Use them.

What can TAS do for you? TAS can help you resolve 

problems that you can’t resolve with the IRS. And their 

service is free. If you qualify for their assistance, you will 

be assigned to one advocate who will work with you 

42 Chapter 6 How To Get Tax Help Publication 560 (2023)
throughout the process and will do everything possible to 

resolve your issue. TAS can help you if:

• Your problem is causing financial difficulty for you, 

your family, or your business;

• You face (or your business is facing) an immediate 

threat of adverse action; or

• You’ve tried repeatedly to contact the IRS but no one 

has responded, or the IRS hasn’t responded by the 

date promised.

How can you reach TAS? TAS has offices in every 

state, the District of Columbia, and Puerto Rico. To find 

your advocate’s number:

• Go to TaxpayerAdvocate.IRS.gov/Contact-Us;

• Download Pub. 1546, The Taxpayer Advocate Service 

Is Your Voice at the IRS, available at IRS.gov/pub/irspdf/p1546.pdf;

• Call the IRS toll free at 800-TAX-FORM 

(800-829-3676) to order a copy of Pub. 1546;

• Check your local directory; or

• Call TAS toll free at 877-777-4778.

How else does TAS help taxpayers? TAS works to resolve large-scale problems that affect many taxpayers. If 

you know of one of these broad issues, report it to TAS at 

IRS.gov/SAMS. Be sure to not include any personal taxpayer information.

Low Income Taxpayer Clinics (LITCs)

LITCs are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level 

and need to resolve tax problems with the IRS, such as 

audits, appeals, and tax collection disputes. In addition, 

LITCs can provide information about taxpayer rights and 

responsibilities in different languages for individuals who 

speak English as a second language. Services are offered 

for free or a small fee for eligible taxpayers. To find an 

LITC near you, go to TaxpayerAdvocate.IRS.gov/LITC or 

see IRS Pub. 4134, Low Income Taxpayer Clinic List, at 

IRS.gov/pub/irs-pdf/p4134.pdf.

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.

401(k) Plan:

Elective Deferrals 24

Safe harbor 26

A

Annual additions 5

Annual benefits 5

Assistance (See Tax help)

Automatic Enrollment 25

B

Business, definition 5

C

Common-law employee 5

Compensation 5

Contribution:

Defined 6

Limits:

Qualified plans 22

SEP-IRAs 9

SIMPLE IRA plan 14

D

Deduction:

Defined 6

Deduction Worksheet for 

Self-Employed 34

Defined benefit plan:

Deduction limits 23

Limits on contributions 22

Defined contribution plan:

Automatic Enrollment 25

Deduction limits 23

Eligible automatic contribution 

arrangement 25

Forfeitures 25

Limits on contributions 22

Money purchase pension plan 18

Profit-sharing plan 18

Qualified automatic contribution 

arrangement 25

Definitions you need to know 5

Disqualified person 31

Distributions (withdrawals) 16

E

EACA 25

Earned income 6

Eligible automatic contribution 

arrangement 25

Employees:

Eligible 8

Excludable 8

Highly compensated 6

Leased 6

Employer:

Defined 6

Excess Deferrals 26

Excise tax 30

Nondeductible (excess) 

contributions 23

Reduced benefit accrual 30

SEP excess contributions 10

Excludable employees 13

F

Form:

1040 23, 30

1099-R 26

5304–SIMPLE 14

5305–S 14

5305–SA 14

5305–SEP 8

5305–SIMPLE 14

5310 32

5329 30

5330 24, 26, 30, 32

5500 32

5500-EZ 32

Form W-2 16

Schedule K (Form 1065) 23

H

Highly compensated employee 6

K

Keogh plans (See Qualified plans)

L

Leased employee 6

N

Net earnings from 

self-employment 6

Notification requirements 14

P

Participant, definition 7

Publication 560 (2023) 43
Participation 19

Partner, definition 7

Publications (See Tax help)

Q

QACA 25

Qualified automatic contribution 

arrangement 25

Qualified Plan, definition 7

Qualified plans 17

Assignment of benefits 20

Benefits starting date 19

Contributions 22, 23

Deduction limits 23

Deduction Worksheet for 

Self-Employed 34

Deductions 22

Deferrals 24, 25

Defined benefit plan 18

Defined contribution plan 18

Distributions 28

Minimum 28

Required beginning date 28

Rollover 29

Tax on excess benefits 30

Tax on premature 30

Tax treatment 28

Elective Deferrals 24

Limits 24

Employee nondeductible 

contributions 22

Excess Deferrals 26

Investing plan assets 21

Kinds of plans 18

Leased employees 19

Minimum requirements:

Coverage 18

Funding 21

Vesting 19

Prohibited transactions 31

Qualification rules 18

Rate Table for Self-Employed 34

Rate Worksheet for 

Self-Employed 34

Reporting requirements 32

Setting up 20

Qualified Plans:

Survivor benefits 19

Qualified Roth Contribution 

Program 27

R

Rate Table for Self-Employed 34

Rate Worksheet for 

Self-Employed 34

Required distributions 28

Rollovers 29

S

Safe harbor 401(k) plan 26

Salary reduction arrangement 11

Salary Reduction Simplified 

Employee Pension(SARSEP) 10

SARSEP:

ADP test 10

Section 402(f) notice 29

Self-employed individual 7

SEP plans:

Deduction Worksheet for 

Self-Employed 34

Rate Table for Self-Employed 34

Rate Worksheet for 

Self-Employed 34

Reporting and Disclosure 12

SEP-IRAs:

Contributions 9

Deductible contributions 9, 10

Carryover of excess 

contributions 10

Deduction limits 9

Limits for self-employed 10

When to deduct 10

Where to deduct 10

Distributions (withdrawals) 12

Eligible employee 8

Excludable employees 8

SIMPLE IRA plan:

Compensation 13

Contributions 14

Deductions 15

Distributions(withdrawals) 16

Employee election period 14

Employer matching 

contributions 15

Excludable employees 13

Notification requirements 14

When to deduct contributions 16

SIMPLE plans 13, 16

SIMPLE 401(k) 16

SIMPLE IRA plan 13

Simplified employee pension 

(SEP) 10

Salary reduction arrangement:

Compensation of self-employed 

individuals 11

Employee compensation 11

Who can have a SARSEP 10

SEP-IRA contributions 8

Setting up a SEP 8

Sixty-day employee election 

period 14

Sole proprietor, definition 7

T

Tax help 39

U

User fee 21

W

Worksheets:

Deduction Worksheet for 

Self-Employed 34

Rate Worksheet for 

Self-Employed 34

44 Publication 560 (2023)