Office Evolution Central Phoenix | April 30th, 2019
Pablo Oliva with Integrated Financial Solutions sat down with us and explained the 4 easiest ways to plan for the headache that is small business taxes.
Planning for 2019
Now that the 2018 tax season in mostly wrapped up (unless you filed an extension), it’s time for most business owners to plan for the year to come. As business owners, the bulk of our retirement funding falls on us. Here are 4 easy-to-create plans to help those that are self-employed and small businesses save for retirement and potentially capture some tax deductions.
This option is widely used by one-person businesses. A Simplified Employee Pension allows as much as 25% of your net self-employment income to be contributed pre-tax, with a maximum of $56,000. The plan does require for the owner to contribute a proportionate amount for eligible employees, increasing contribution costs as staff increases.
The Savings Incentive Match for Employees, or SIMPLE IRA for short, is a retirement plan for small businesses with 100 or fewer employees. The plan is designed for pre-tax employee and employer contributions. As the employee, you can contribute up to $13,000 and additional $3,000 for those age 50+. The plan does require a match that ranges from 1%-3%, depending on the funding option selected at adoption. SIMPLE IRAs are simple to set-up, requiring minimum paperwork.
Individual 401(k), i401(k) or Solo 401(k)
The 401(k) is an option for owners who have the will and resources to contribute a significant portion of earning into a retirement plan. As an employee of the business, you can contribute up to $19,000 of employee wages and an additional $6,000 for those ages 50+. The employer can then contribute up to 25% of compensation, not to exceed $56,000 and $62,000 for those 50+. The 401(k) plans also allow for Roth employee contributions that could typically make sense for those that are far away from retirement.
Traditional and Roth IRA
Perhaps the most common vehicle. These accounts allow us to roll money in or transfer assets from others plans. They also allow contributions which are limited by participation in other plans, age, and,
income. The limits for both plans are $6,000 with an additional $1,000 for those 50+. There is also a tax-deduction phaseout for traditional IRAs that are based on your Modified Adjusted Gross Income (MAGI). Roth IRAs also have a contribution phaseout based on your MAGI and do not have the tax-deduction benefits offered by traditional IRAs.
Keep and mind that every plan has additional rules and provisions that should be considered before implementing. Employer and employee pre-tax contributions are generally tax-deductible. The maximum contribution amounts are for the 2019 tax year and could change from year-to-year. Please contact me to discuss if these options are right for you and your business.
Investment advisory services offered through Integrated Financial Solutions, PLLC (IFS), a Registered Investment Advisor. Integrated Financial Solutions, PLLC will only provide investment advisory services in jurisdictions where it is registered as an investment adviser or exempt from registration.
Insurance products and services are offered and sold through individually licensed and appointed insurance agents. IFS does not provide legal or tax advice.