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Year End Business Tax And Retirement Planning


As the year grows to a close, we tend to reflect on what we have accomplished in our business and what shortfalls that we may have encountered. It’s important to never lose site of the long-term plan whilst we focus on the day-to-day chaos. Focusing on the long term plan includes retirement planning for the business owner as well as the employees. Here are a few ways to potentially help secure your future:

Explore benefits of a Solo 401(k) PSP (Profit Sharing Plan):

  • Is your SEP or SIMPLE costing too much in lost deductions and unnecessary taxes? Your Compensation or plan structure of the plan may be limiting their tax deduction. A 401(k) may help overcome this problem.
  • Roth provision: if tax rates are trending up, it may be a great time to make a Roth 401(k) contribution to provide for a federal tax-free source of distributions in retirement. Many prototype plan documents do not have a Roth 401(k) option.
  • Unforeseen circumstances may require that funds be accessed for a period of time; a 401(k) plan allows a number ways to accomplish this without incurring a penalty.

Potential to increase your client’s retirement and tax-savings through a Defined Benefit Plan:

  • Looking for a higher deduction? A defined benefit plan may be an answer. Do not let the tight schedule prevent you from exploring this option: plan document may be amended by 3/15/2010 to correspond to the funding level you are seeking.
  • Combination of a Defined Benefit Plan with a 401(k) may assist you increasing a deductible contribution to meet funding objective while efficiently managing employee costs.
  • You have until the due date of your business tax return, including extensions, to fund the plan and take a deduction for 2009.

Do not miss out on another year with a SIMPLE:

  • ERISA qualified plans offer a more robust asset protection than an IRA-based plan
  • Increase accessibility of retirement accumulations through loans and in-service distributions not available in an IRA-based plan
  • Diversify tax treatment through Roth 401(k) treatment: contributions go in after-tax, grow federally tax-free, and qualified distributions may not taxed when withdrawn
  • SIMPLE IRA may be the only plan in a calendar year, thus a 401(k) option should be evaluated as soon as possible.

Planning for the future starts in the present- don’t let it get away from you. Happy holidays to you all, and to all…a VERY good night!

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