ActiveFinancialGroup
Uploaded on Jan 20, 2021
Category
Economy & Finance
As small business owners become more successful, they look for ways to reduce their tax burden. One of the most popular ways to reduce taxes is with a SEP IRA. This is the most “used” and popular option, one of which is highly recommended by CPA’s. While the SEP IRA is the simplest and easiest to set-up, it does not necessarily provide the best tax advantages.
Category
Economy & Finance
SMALL BUSINESS SOLUTIONS
Financial and Retirement Investment Planning
https://www.activefinancialgroup.com
SMALL BUSINESS SOLUTIONS
As small business owners become more successful,, they look for ways
to reduce their ta x b u rd e n .. O n e o f t he m o s t p o p u l a r w a y s t o re d u c e
taxes is with a SEP IRA.. This is the most “used” and popular option,, one
of which is highly r e co m m e n d e d b y C P A ’s .. W h il e t h e S E P I R A i s t h e
simplest and easi es t t o s e t- u p ,, it d o e s no t n ec e s s ar i ly p r o v id e th e best tax advantages..
Certain plans,, su ch a s a So l o -4 0 1 c a n p ro v i d e a b e tt e r t a x b en efit without adding any additional cost or complexity.. In some cases,, a So lo -
k can offer much m o re fl e xi b le an d “l iq u i d it y ” to th e o w n e r fo r h i s / he r s
business growth,, which is just not possible in a SEP..
In some cases,, a c h a n ge to th e co r p o r a te s t r u ct u r e c a n o p e n a d d it i o na l
options as well.. You need the right Financial planner and small
business retirem en t s p e c ia li s t w h o h a s t h e r ig h t e xp e r ie n c e a n d
expertise with a proven track record to help guide you through that
process.. Let AFG,, a lo n g w i th th e a p pr o v a l fr o m y o u r C P A d et e r m i n e a
tax strategy that w or ks for you and your company.. Have the small business experts at AF G p u t a p l an i n p l ac e to h e lp y ou a c h ie v e y o u r
current and future go a l s..
SMALL B U S I N E S S S O L U T I O N S
Want more infor m a ti o n ,, pl e a se c a ll,, o r u s e o u r c o n t ac t p a g e fo r y o ur
free consultation today!Small business o w n e r r e t ir e m e n t st r a te g i e s
1.. Traditional o r R o t h I R A Best for: Those just starting out or saving less than $6,,000 a year.. If you
are leaving a job to st a r t a b u s in e s s ,, yo u c an a ls o ro l l y ou r o ld 4 0 1 (k)
into an IRA..
IRA contribution li m i t: U p t o $ 6 ,, 0 0 0 i n 2 0 2 0 ,, p l u s a $1 ,, 0 0 0 c a t ch - up
contribution for those 50 or older..
Tax advantage: T a x d e d u c ti o n o n c on t r ib u t io n s t o a tr a d it io n a l I R A ; no
immediate dedu c ti o n f o r R o th I R A ,, b u t w i th d r a w a ls in r etirement are tax-free..
Employee eleme n t : N on e .. T h e se a r e in d iv i d u a l p l an s .. If yo u h a ve
employees,, they can set up and contribute to their own IRAs
SMALL B U S I N E S S S O L U T I O N S
2.. Solo 401(k)
Best for: A busin e ss o w n e r o r s e lf -e m p lo y e d p e r so n w i th n o e m p l o yees (except a spouse,, if applicable)..
Contribution lim i t: U p to $ 5 7 ,,0 0 0 in 2 0 2 0 ( p lu s a $ 6 ,, 0 0 0 c a t ch - up
contribution for those 50 or older) or 100% of earned income,,
whichever is les s .. T o h e lp u n d e r st a n d t h e c o n t ri b u ti o n l im it s h e r e ,, it
helps to pretend you’’re two people: An employer (of yourself) and an
employee (also o f y o u rs e l f) ..
In your capacity as the employee,, you can contribute as you would to a
standard employ e r - o ff er e d 4 0 1 ( k ) ,, w it h s a la r y d e fe r r a ls o f u p t o 1 0 0 %
of your compensation or $19,,500 (plus that $6,,000 catch-up
contribution,, if e li g ib l e) ,, w h i ch e v e r i s le s s ..
In your capaci ty a s t h e e m p lo y e r ,, y o u c a n m a k e a n a d d i ti o nal
contribution of up to 25% of compensation..
SMALL BUSINESS SOLUTIONS
3.. SEP IRA
Best for: Self-employed people or small-business owners with no or few
employees..
Contribution limit: T h e le s s e r o f $5 7 ,, 0 0 0 i n 2 0 2 0 ( $ 5 6 ,,0 0 0 i n 2 0 1 9 ) o r u p to
25% of compensation or net self-employment earnings,, with a $285,,000
limit on compensat io n t h a t c an b e u s e d t o fa c t o r th e c o n t ri b u ti o n .. A g ai n ,, net
self-employment income is net profit less half of your self-employment taxes
paid and your SEP c o n t ri b u ti o n .. N o c a tc h - u p c o n tr ib u t io n ..
Tax advantage: You can deduct the lesser of your contributio
net self-employmen t e a r n in g s o r c o m p e n s a ti o n — l im it e d to
n s o r 2 5 % of that $285,,0 00
cap per employee in 2 020 — on your tax return.. Distributions in retirement are taxed as income.. Th e re is n o R o th ve r s io n o f a SE P IR A ..
There is a special ru l e fo r so l e p r o p ri e to r s a n d s in g l e -m em b e r L L C s: Y o u can
contribute 25% of net self-employment income,, which is your net profit less
half your self-emplo y m en t t a x a n d t h e p l an c on t r ib u t io n s y o u m a d e f or
yourself..
The limit on compe n sa t io n th a t c a n b e u s e d t o f a ct o r y o u r c o nt r ib u t io n is
$285,,000 in 2020..
SMALL B U S I N E S S S O L U T I O N S
4. Simple IRA
Best for: Larger businesses,, with up to 100 employees..
Contribution limit: U p to $1 3 ,, 5 0 0 i n 2 0 2 0 o r $ 1 3 ,,0 0 0 f o r 2 0 1 9 (p l u s c atch-
up contribution of $3,,000 if 50 or older).. If you also contribute to an
employer plan,, the to t a l o f a l l c o n t r ib u ti o n s c a n ’’t e x ce e d $ 1 9 ,, 5 0 0 ..
Tax advantage: Con tr i b u ti o n s a re d ed u c t ib l e ,, b u t d i s tr ib u t io ns in retirement are taxed.. Contributions made to employee accounts are d ed u c t ib l e as a
business expense..
Employee element: U n l ik e th e SE P I R A ,, th e co n t r ib u t io n b u r d e n i s n ’’t s olely
on you: Employees ca n c o n tr ib u t e t h r o u gh s a la r y d e f e rr a l.. B u t em p lo yers
are generally required to make either matching contributions to employee
accounts of up to 3 % o f e m p lo y e e c o m p e n s a ti o n ,, o r f ix e d c o n t ri b u ti o ns of
2% to every eligible employee.. Choosing the latter means the employee does
not have to contribu t e t o e a r n y o u r c o n tr ib u t io n .. T h e c o m p en s a t io n l im it for
factoring contributi o n s is $2 8 5 ,, 0 0 0 i n 2 0 2 0 ..
SMALL B U S I N E S S S O L U T I O N S
5.. Defined benefit p l a n
Best for: A self-emp l o ye d p e rs o n w it h n o e m p lo y e e s w h o h a s a h i g h in c ome and wants to save a lot for retirement on an ongoing basis..
Contribution limit: Calculated based on the benefit you’’ll receive at
retirement,, your ag e a n d e x p e ct e d i n v es t m e n t r e tu r n s ..
Tax advantage: Con tr i b u ti o n s a re g en e r a ll y t ax d e d u ct ib l e ,, a n d d is t ri b u tions
in retirement are taxed as income.. An actuary must figure your deduction
limit,, which adds an a d m in i s tr a ti v e la y e r ..
Active Financial Group
Website: https://www.activefinancialgroup.com/
Office One
Address:: 1300 Riidenour Bllvd,, NW Suiite 221 Kennesaw,, GA 30152
Emaiill:: [email protected]
Phone No:: (678) 574-0080
Office Two
Address:: 2207 Spalldiing Driive,, Atllanta,, GA 30350
Emaiill:: [email protected]
Phone No:: (770) 797-5788
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