Question

Justine, age 25, earns $40,000 as an employee of CHS Systems (CHS). Before filing its 2020 tax return, CHS decides to establish a SEP plan for its employees and contribute the maximum amount permissible for the benefit of each employee. In this case, CHS may contribute up to $6,000 to Justine's SEP account.

a.) True
b.) False

Answer 1

The statement is false. CHS can contribute up to 25% of Justine's compensation, or $6,000, whichever is less, to her SEP account.

Step-by-step explanation:

False

CHS can contribute up to 25% of Justine's compensation, or $6,000, whichever is less, to her SEP account. Since Justine earns $40,000, the maximum contribution CHS can make to her account is $10,000 (25% of $40,000). Therefore, the statement is false.