You already filed your taxes — or you're about to, on extension — and you assume last year's retirement savings window is closed. It isn't. If you timely extended your 2025 return, you have until October 15, 2026 to do something almost no other retirement account allows: open a brand-new SEP IRA for last year, fund it now, and deduct the contribution on the return you're filing. A self-employed filer with strong 2025 income could still shelter up to $70,000 of it.
This is the SEP IRA's superpower, and it makes October 15 one of the most valuable deadlines on the small-business tax calendar. Here's exactly how it works, how much you can still contribute, and which doors have already closed — including the Solo 401(k) deadlines you can no longer hit.
Why the SEP Deadline Is Different From Every Other IRA
Most retirement accounts run on a hard April 15 clock. Traditional and Roth IRA contributions for a tax year must be made by the April filing deadline, and filing an extension buys you zero extra time. Miss it and the opportunity is gone forever.
SEP IRAs play by employer-plan rules instead. Both establishing the plan and funding it are tied to your business's tax return due date, including extensions. The IRS spells this out in Publication 560: you can set up and contribute to a SEP for a given year as late as the due date of your return for that year, extensions included. There is even a subtle bonus the IRS confirms explicitly — if you obtained a valid extension, you have until the end of the extension period to deposit the contribution regardless of when you actually file the return. Filed back in March but never got around to funding? You can still fund through the extension deadline.
But the deadline depends on your entity, and this is where people get tripped up:
- Sole proprietors, single-member LLCs, and C corporations on extension: October 15, 2026 for the 2025 tax year.
- Partnerships and S corporations on extension: September 15, 2026 for the 2025 tax year.
Read that second line carefully. If your business is an S corporation or partnership and you extended, your SEP deadline for 2025 may be days away — or already here — while your sole-proprietor friends get another month. And if you never filed an extension at all, your window closed back on the original due date (March 15 for S corps and partnerships, April 15 for sole proprietors and C corps). No extension, no second chance.
How Much You Can Still Contribute for 2025
For the 2025 tax year, SEP contributions are limited to the lesser of:
- 25% of the employee's compensation, or
- $70,000.
Two more 2025 numbers shape the math. Only the first $350,000 of compensation counts toward the 25% calculation, and any employee who is at least 21, worked for you in at least three of the last five years, and earned at least $750 must be included in the plan at the same percentage you give yourself. There are no catch-up contributions in a SEP at any age — the $70,000 cap is the cap.
Self-employed filers need to be careful with the percentage, because the famous "25%" is really about 20% for you. Your contribution base is net earnings from self-employment minus half your self-employment tax minus your own SEP contribution — the contribution reduces the very base it's calculated from. The worksheet in Publication 560 walks through the circular math, and IRS guidance confirms the shortcut: for a sole proprietor with no employees, the effective maximum works out to roughly 20% of net adjusted self-employment income.
A quick example: $150,000 of net self-employment income becomes roughly $139,403 after subtracting half the self-employment tax. Twenty percent of that is about $27,881 — your maximum deductible 2025 SEP contribution, fundable all the way out to October 15, 2026 if you're on extension. At a combined 30% marginal rate, that's more than $8,000 of real tax savings from money you get to keep.
S corporation owners face a different constraint: your SEP contribution is based on your W-2 wages from the corporation, not on total business profit. If you paid yourself a $60,000 salary on $200,000 of profit, your maximum SEP contribution is 25% of $60,000 — just $15,000. This is one of the genuine trade-offs of the S corporation's payroll-tax savings, and it's worth modeling before you assume the SEP will shelter your whole income.
The Solo 401(k) Doors That Already Closed
If you're weighing a last-minute SEP against a Solo 401(k), understand that several Solo 401(k) options for 2025 are already off the table. This isn't a flaw in the Solo 401(k) — it's a much more powerful vehicle in many situations — but its deadlines are stricter, and some have passed:
Employee elective deferrals had to be elected by December 31, 2025. The IRS requires a self-employed individual to make the deferral election by the last day of the tax year. If no Solo 401(k) offering elective deferrals existed by that date, you cannot retroactively create 2025 employee deferrals now. For 2025, that was up to $23,500 of contributions ($31,000 at age 50-plus, plus the special $11,250 "super catch-up" for ages 60–63) that is now unreachable.
The SECURE 2.0 retroactive-deferral exception has also expired. Congress created a narrow lifeline letting sole proprietors establish a new Solo 401(k) and fund first-year elective deferrals as late as the tax return due date — but without extensions. For 2025, that was April 15, 2026. Gone.
S corporation owners can't backfill deferrals through payroll. Deferrals for shareholder-employees must be elected and withheld from actual paychecks during the year. You cannot recharacterize salary already paid as a 2025 deferral in September.
What is still available: employer profit-sharing contributions to an existing Solo 401(k) can be made up until the extended return deadline — the same October 15 date as the SEP. And under the original SECURE Act, you can still establish a brand-new Solo 401(k) by the extended deadline, but it can receive only employer contributions for 2025, not employee deferrals. For a sole proprietor that means roughly 20% of net adjusted income — the same effective math as the SEP, with more paperwork. The SEP is usually the simpler vehicle for a pure last-minute play.
The Five Mistakes That Blow Up Last-Minute SEP Contributions
1. Contributing without a valid extension. This is the most common and most expensive error. The extended deadline only exists if you actually filed Form 4868 (individuals) or Form 7004 (businesses) on time. If you simply filed late without an extension, contributions after the original due date are excess contributions — subject to an excise tax every year they remain in the account, plus the headache of withdrawing them with earnings.
2. Forgetting your employees. A SEP is not a solo vehicle once you have eligible staff. If your office manager earned more than $750 and worked for you in three of the last five years, she must receive the same contribution percentage you give yourself. Owners who fund only their own account face a plan qualification failure. Before you contribute 25% to yourself, price out 25% for everyone eligible — the total cost sometimes argues for a different plan design next year.
3. Using gross income instead of net adjusted income. Self-employed filers who multiply 25% by their Schedule C bottom line overcontribute every time. You must subtract half your self-employment tax first (and the contribution itself, per the worksheet). Run the Publication 560 worksheet or have your tax software compute it; don't eyeball it.
4. Basing an S corporation contribution on distributions. Only W-2 wages count. K-1 distributions are not compensation for SEP purposes. If your salary was modest, your SEP room is modest — and "fixing" it by running a retroactive bonus now doesn't create 2025 wages.
5. Deducting it in the wrong place. Self-employed individuals deduct SEP contributions on Schedule 1 of Form 1040 (the adjustment for SEP, SIMPLE, and qualified plans) — not on Schedule C, and not as an employee benefit that reduces self-employment tax. It reduces income tax, not SE tax. S corporations deduct employer SEP contributions on the corporate return, and shareholder-employees do not deduct them again personally. Double-deducting is an audit flag; missing the deduction leaves money on the table.
Your October 15 Action Checklist
If you're on extension and haven't maxed out 2025 retirement savings, work through this list now — not on October 14, when your custodian's processing times become your problem:
- Confirm you have a valid extension and know which deadline applies to your entity (September 15 for partnerships and S corps, October 15 for sole proprietors and C corps).
- Compute your maximum contribution using the Publication 560 worksheet — net earnings minus half of SE tax, roughly 20% for the self-employed, capped at $70,000 for 2025.
- Check for eligible employees and price the same-percentage contribution for each of them before committing to your own rate.
- Open the SEP IRA if you don't have one. Most major custodians let you establish the account online in minutes, and a SEP can be created as late as the funding deadline itself. Designate the contribution explicitly "for tax year 2025" — custodians default to the current year, and an undesignated deposit won't support your 2025 deduction.
- Fund it before the deadline, leaving buffer for transfer times. A wire initiated October 15 that settles October 17 is a 2026 contribution.
- Claim the deduction on the correct line of the return you're filing, and keep the contribution records with your 2025 file — not your 2026 file, where a future-you will never find them.
One Deadline Doesn't Preclude the Next
Here's the part people miss: funding a 2025 SEP in October doesn't interfere with your 2026 retirement savings at all. The day after the deadline, you can start contributing for 2026 under the new limits — $72,000 maximum and a $360,000 compensation cap. Some filers deliberately stack the two: a deductible 2025 SEP contribution now, then eleven-plus months to fund 2026. If your cash flow allows it, October is the one month of the year when two tax years' worth of retirement deductions are simultaneously in play.
The SEP IRA is the only mainstream retirement account that lets you look backward at last year's income with this year's knowledge and still act on it. Extensions are usually framed as procrastination paperwork; for retirement savers, they're an extra six months of planning runway. Use it before October 15 takes it away.
Keep Your Retirement Paperwork Audit-Ready
A last-minute SEP contribution creates a paper trail that spans two tax years — a 2026 deposit funding a 2025 deduction — and that mismatch is exactly the kind of thing that confuses future-you (or an auditor) if it lives only in your memory. Record the contribution amount, the tax year designation, the deposit date, and the return line where you claimed it. Beancount.io provides plain-text accounting that keeps every contribution, designation, and deduction in one version-controlled ledger you can search years later. Get started for free and make next October's second chance a one-line lookup instead of a scavenger hunt.
