The most expensive to set-up and administer. Is the most flexible.
Paying our fair share of taxes is an ordeal we all struggle through each spring. Saying "our fair share" doesn't mean more than we have to pay but the amount we are responsible for under the guidelines (albeit difficult to understand) set-up by the IRS.
Therefore, the goal is to pay the least amount of taxes while remaining within the complex rules. One overlooked and fairly simple way to reduce your taxes and that of your company is to provide a retirement plan for yourself, your partners and your employees. A retirement plan will reduce your taxable wages because your money is placed in your account prior to the calculation of federal and state withholding. Therefore, your salary is less for tax purposes. Likewise, any funds your company may contribute to your account as well as other employees are considered an expense. All fees associated with managing the retirement plan are also considered an expense. Therefore, your company's revenue is decreased allowing for a tax break.
There are four excellent plans available for small businesses. Which one is right for you? That depends upon the structure of your company, the number of employees and your long range plans.
The four plans are outlined below. Please email or call us if you have any questions or would like additional information or assistance in choosing the right plan for your company.
SEP-IRA
1 - 10
Employer Only
25% of compensation up to $40,000
None
The least costly to set-up and administer. No IRS filing.
SIMPLE-IRA
100 or less
Employee and employer
Employee maximum = $7,000 plus 2-3% matching from employer
None
Created to replace SARSEP-IRA
No. of Employees
Contributors
Annual Contribution
Participation Requirements
Comments
No. of Employees
Contributors
Annual Contribution
Participation Requirements
Comments
KEOGH
Self-Employed, Partnerships, Small Companies
Employeer Only
25% of compensation up to $30,000
None
Higher contribution limits as well as more reporting requirements.
Phone: 406-788-5227
Fax: 425-920-7538
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Reducing Your Taxes by Investing in Your Future
by Suzette Flemming
Copyright 2011 Flemming Business Services, Inc. All rights reserved.
