Larry is a self-employed carpet cleaner with one employee. He contributes to a SEP plan for himself and his employee. Larrys Schedule C (Form 1040) net income equals $40,000 after deducting his employees retirement plan contribution. His employee earned $20,000 for the year in wages. Larry wants to maximize his SEP contributions for his employee and himself. (Refer to Chapter 5, Learning Objective 5-4b for information regarding SEP plans)

1. What is the employees contribution rate (percentage) and amount to be contributed?
2. What is Larrys contribution rate (percentage) and amount to be contributed?