| Small business owners, whether incorporated or not, | | | | deductible and contributions plus earnings grow without |
| have a number of retirement plan options available. If | | | | taxation until they are withdrawn. Of course, there are |
| you are considering starting a retirement plan, you | | | | drawbacks as well. To name just two: plan assets are |
| should first learn about the kinds of plans available to | | | | illiquid and there is a substantial penalty (10% plus tax) |
| you. In this article, we'll discuss two popular retirement | | | | for early withdrawal. |
| plans used by small businesses and the benefits of | | | | In addition to helping your business, yourself and your |
| each. | | | | employees, recent tax law changes have handed out |
| One of the most popular is the SEP or Simplified | | | | more incentives to establish a retirement plan. They |
| Employee Pension. You can contribute 25% of your | | | | include: |
| compensation up to $45,000 for yourself. Of course, | | | | - Contribution limits that increase regularly allowing you |
| you must make a similar contribution for any | | | | and employees to set aside every larger amounts for |
| employees you have. In other words: if you make a | | | | retirement. |
| 25% contribution for yourself, you must make a 25% | | | | - Catch-up provisions that allow employees age 50 |
| contribution for your employee(s) based on their | | | | and over (including yourself) to side aside additional |
| salaries. The benefits: | | | | contributions. |
| - You can still set up, make a contribution and get a | | | | - Tax credit for small employers that may enable you |
| tax deduction for 2007 as long as it's done by your | | | | to claim a tax credit of 50% of the cost of setting up |
| tax filing deadline. | | | | and administering a SEP or SIMPLE IRA plan. There is |
| - SEP plans have the least paperwork and reporting | | | | a maximum cap of $500 per year for each of the first |
| requirements of any plan, making it easy to set up and | | | | 3 years of the plan. As exciting as this sounds, it's very |
| administer. | | | | unlikely that you'd ever get to use it since these plans |
| - You decide whether to make a contribution | | | | typically don't involve a fee for set up and |
| year-to-year giving you some flexibility in an economic | | | | administration. |
| slowdown. | | | | - Tax credit for certain low and moderate- income |
| Another popular plan - especially if you have | | | | participants (including the self-employed). The amount |
| employees - is the SIMPLE IRA or Savings Incentive | | | | of the credit is based on the contribution made and the |
| Match Plan for Employees. The benefits: | | | | credit rate. The maximum contribution eligible for the |
| - A SIMPLE plans allows for payroll deductions by | | | | credit is $2,000. The credit rate can be as low as 10% |
| employees - $10,500 in 2007 with a catch-up provision | | | | or as high as 50% depending on adjusted gross |
| for those over age 50. | | | | income. Talk with your tax advisor for more |
| - Employee contributions are matched, usually dollar for | | | | information. |
| dollar of the first 3%. In other words...you are only | | | | Take Away Wisdom |
| providing a contribution for those who choose to | | | | As a small business owner, there are lots of really |
| participate. | | | | good reasons to have a retirement plan. The type of |
| - No annual filing requirements and most of the | | | | plan you choose is based on your business and |
| paperwork is handled by the bank or financial institution | | | | personal situation. You may want to talk with your tax |
| making the investments for you and your employee(s). | | | | advisor or give me a call and we can flesh-out which |
| For more detailed information on retirement plans, | | | | plan is appropriate for you. However, if you are looking |
| including rules for setting them up, the IRS offers a | | | | for a tax deduction for 2007 |
| free CD-ROM called "Individual Retirement | | | | As a small business owner, there are lots of really |
| Arrangement Resource Guide for Small Business | | | | good reasons to have a retirement plan. The type of |
| Owners and Individuals". You can order a copy at (the | | | | plan you choose is based on your business and |
| fastest way to find it on the website is to type IRA | | | | personal situation. You may want to talk with your tax |
| Resource Guide for Small Business Owners in the | | | | advisor or give me a call and we can flesh-out which |
| search box). Also check out IRS Publication 560 - | | | | plan is appropriate for you. However, if you are looking |
| "Retirement Plans for Small Business". | | | | for a tax deduction for 2007 - your only option may be |
| There are significant tax benefits to any retirement | | | | a SEP Plan. |
| plan. They include the fact that contributions are tax | | | | |