Filed an Extension? October 15 Is Your Last Chance to Fund a 2025 SEP IRA

If you're self-employed and filed for an extension on your 2025 return, you have something most taxpayers don't: a retirement contribution deadline that hasn't passed yet. A SEP IRA can still be opened and funded for 2025 right up to your extended filing date — for most sole proprietors and single-member LLCs, that's October 15, 2026 — and the contribution is deductible on the 2025 return you're about to file.

Why is the SEP deadline later than everyone else's?

Most retirement contributions for a tax year close on April 15. The SEP is different because the IRS ties both the setup and the funding deadline to the return's due date including extensions. Per IRS Publication 560: "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," and "to deduct contributions for a year, you must make the contributions by the due date (including extensions) of your tax return for the year."

That makes the SEP unusual: it can be created after the year is over. By contrast, a traditional or Roth IRA contribution for 2025 closed on the original April deadline regardless of extensions.

Who can open one?

Any business with self-employment income — a sole proprietor, an independent contractor, a single-member LLC, a partnership, or a corporation — can establish a SEP, including someone with a side business alongside a W-2 job. The IRS SEP FAQ walks through setup, which typically means signing Form 5305-SEP with a custodian and opening a SEP IRA for each eligible participant.

How much can go in for 2025?

Per Publication 560, contributions for 2025 can't exceed the lesser of 25% of compensation or $70,000 (the cap rises to $72,000 for 2026, per the IRS SEP contribution limits page).

If you're self-employed, there's a wrinkle: "compensation" means your net earnings from self-employment after subtracting half your self-employment tax and the SEP contribution itself. Publication 560's rate worksheet handles the circularity — a plan that says 25% works out to an effective rate of 20% of net earnings before the contribution. Your tax preparer or custodian can run the exact figure; the point is that 25% of your Schedule C bottom line is not the number.

Only employer contributions are allowed. There are no employee salary deferrals and no catch-up contributions in a SEP, per the same IRS page.

What are the entity-type deadlines?

The "due date including extensions" rule means the deadline depends on how your business files:

• S corporations and partnerships (Form 1120-S / 1065) on extension: September 15, 2026 — already passed.
• Sole proprietors and single-member LLCs (Schedule C on Form 1040) on extension: October 15, 2026.
• C corporations on extension: October 15, 2026.

If you didn't file an extension, your 2025 window closed on April 15.

What if I have employees?

This is where a SEP stops being a personal decision. If you contribute for yourself, you must contribute the same percentage of compensation for every eligible employee. Per Publication 560, an eligible employee is anyone who is at least 21, has worked for you in at least 3 of the last 5 years, and earned at least $750 from you in 2025. A plan can use looser eligibility rules than those, but not stricter ones. For a one-person business this is a non-issue; for a practice with a few long-tenured staff, it changes the cost of the contribution meaningfully.

Worth noting: the deduction lowers your 2025 adjusted gross income, which can affect other items on the return — from the senior deduction phase-out to your New York tax. Run the return both ways before deciding.

The bottom line

A SEP contribution made before October 15 is one of the few tax-year-2025 decisions still open. Whether it makes sense depends on your cash position, your 2025 marginal rate versus the rate you expect to pay in retirement, whether you have eligible employees, and how it fits with your other retirement accounts — 2026 IRA and 401(k) limits are separate and unaffected. The money also becomes ordinary income when withdrawn later, subject to the same required minimum distribution rules as a traditional IRA. Confirm the figures with your tax preparer, and don't wait until the week of the deadline — custodians need time to open the account and post the contribution before October 15.