Setting Up a SIMPLE Plan

Need Some Deductions for 2012?

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10 Oddball Tax Deductions

Updated for 2012

A SIMPLE plan can be set up in either of two ways:

Form 5304-SIMPLE or Form 5305-SIMPLE can be used to set up a SIMPLE IRA plan.

Each form is a model savings incentive match plan for employee plan document.
Use Form 5304-SIMPLE if you allow each plan participant to select the financial institution for receive his/her contributions.
Use Form 5305-SIMPLE if you require all contributions be deposited initially at a designated financial institution.
The SIMPLE plan is adopted when you complete all appropriate boxes and blanks on the form and you (and the designated financial institution, if any) have signed it.
- Keep the original form you decide to use for your records.
- Either form will serves as proof that you set up a SIMPLE-IRA plan for employees.
- DO NOT file Form 5305-SIMPLE or Form 5305-SIMPLE with the IRS.
By using either Form 5304-SIMPLE or Form 5305-SIMPLE, you will meet the notification requirements for the SIMPLE IRA plan.
- Page three (3) of Form 5304-SIMPLE and page three (3) of Form 5305-SIMPLE contain a Model Notification to Eligible Employees that provides the necessary information to the employees.

A SIMPLE Plan...

Can only be maintained on a calendar year basis
Must be set up for each eligible employee
Cannot be designated as a Roth IRA. However, contributions to a SIMPLE IRA will not affect the amount an individual can contribute to a Roth IRA.

SIMPLE Plans: After the SIMPLE Plan is Set Up; What is an Eligible Employee? What is an Excludible Employee?