Problem $5-10($Algorithmic$)$

Small Business and Self$-$Employed Retirement Plans $($LO $5\mathrm{.}4)$

During $2023,$ Pencho is a self$-$employed therapist, and his net earned income is $$188,000$ from his practice. Pencho's SEP$-$IRA Plan, a defined contribution plan, states that he will contribute the maximum amount allowable.

Calculate Pencho's contribution.

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A Simplified Employee Pension $($SEP or SEP IRA$)$ is a retirement plan available to any employer $($including a self$-$employed individual$).$ The amount of contributions can change from year$-$to$-$year and can be zero. However, the maximum contributions cannot exceed the lesser of a statutory percentage of the employee's compensation or an annual amount that is set each year by the IRS. Patticipants in SEPs must meet requirements for minimum age and years of service.