If you’re self-employed or a business owner, you can adopt a SEP (simplified employee pension) plan, also known as a SEP-IRA, and take “look-back” deductions for 2001. To find the maximum contribution, you must take two numbers into account: the maximum compensation that can be included and the maximum percentage of that compensation that can be deducted.
For 2001, the maximum compensation is $170,000 and the maximum deduction is 15%. Thus, the most you can contribute to a SEP plan is $25,500: $170,000 times 15%. The calculation for the self-employed is a little more complicated so you’d need over $200,000 in self-employment income to make the maximum $25,500 contribution.
You can make a deductible contribution for 2001 up until the time you file your tax return, including extensions.