(469) 742-0283 – In this short video, Certified Public Accountant John Harman discusses situations when self-employed business owners may choose an alternative to funding a SEP IRA when looking to gain tax-free income with intelligent retirement and tax planning. He and his team serve those who live and work in Collin County including McKinney, Frisco, Plano, Allen, Fairview, Prosper, Celina, Melissa, Anna and nearby towns.

The firm is located at:
John Harman, CPA PLLC
1402 S. Custer Rd, S-102
McKinney, TX, 75070
info@mckinneytax.com
Phone: (469) 742-0283

For more on taxes, here is the IRS website:

The firm won McKinney Online’s “Best Of” award in 2019 for Accountant. Here is the link:

Here is more about his firm:

John Harman CPA PLLC

A full service CPA firm that continually offers small business
personal service to clients. Our excellent four member key staff has
over 50 years experience in tax and/or CPA firms.

Services provided:
Tax Preparation – 1040, 1065, 1120, 1120-S, 1041, 706, 709
Estate Planning
retirement planning
Business Consulting
Insurance and Annuities consulting as part of Retirement and Estate Planning
Bookkeeping
Payroll

Our firm provides outstanding service to our clients because of our dedication to the three underlying principles of professionalism, responsiveness and quality.
Professionalism

Our firm is one of the leading firms in the area. By combining our expertise, experience and the energy of our staff, each client receives close personal and professional attention.

Our high standards, service and specialized staff spell the difference between our outstanding performance, and other firms. We make sure that every client is served by the expertise of our whole firm.
Responsiveness

Our firm is responsive. Companies who choose our firm rely on competent advice and fast, accurate personnel. We provide total financial services to individuals, large and small businesses and other agencies.

To see a listing of our services, please take a moment and look at our services page. Because we get new business from the people who know us best, client referrals have fueled our growth in the recent years.

Through hard work, we have earned the respect of the business and financial communities. This respect illustrates our diverse talents, dedication and ability to respond quickly.
Quality

An accounting firm is known for the quality of its service. Our firm’s reputation reflects the high standards we demand of ourselves.

Our primary goal as a trusted advisor is to be available to provide insightful advice to enable our clients to make informed financial decisions. We do not accept anything less from ourselves and this is what we deliver to you.

We feel it is extremely important to continually professionally educate ourselves to improve our technical expertise, financial knowledge and service to our clients.

Our high service quality and “raving fan” clients are the result of our commitment to excellence.

We will answer all of your questions, as they impact both your tax and financial situations. We welcome you to contact us anytime….(read more)

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As tax season approaches, it’s important to not only consider tax-saving strategies for the current year but also for the future. For those who are self-employed or own a small business, one option to consider is setting up a Simplified Employee Pension Individual retirement account (SEP IRA). However, it’s important to weigh the alternatives and determine which option is best for your specific situation. McKinney Frisco CPA discusses SEP IRA versus other options for tax savings and retirement planning.

First, let’s dive into what a SEP IRA is. A SEP IRA is a retirement plan for self-employed individuals or small business owners. Contributions are made by the employer, based on a percentage of each employee’s income, up to a certain limit. The contributions are tax-deductible, reducing the employer’s taxable income, and the investments grow tax-free until withdrawal during retirement.

An important factor to consider when deciding on a retirement plan is the contribution limit. The contribution limit for a SEP IRA in 2021 is 25% of an employee’s compensation, up to a maximum of $58,000. This allows for a significant tax deduction, compared to traditional IRAs and Roth IRAs, which have much lower contribution limits.

However, SEP IRA contributions cannot exceed the lesser of 25% of an employee’s compensation or $58,000. This means that if an employee’s compensation is $100,000, the maximum contribution would be $25,000, even if the 25% limit exceeds $58,000.

Another option to consider is a Solo 401(k), which is designed for self-employed individuals. Like a SEP IRA, contributions are tax-deductible, and investments grow tax-free until withdrawal. However, the contribution limit for a Solo 401(k) is significantly higher, up to $64,500 in 2021, including a $19,500 employee contribution and a 25% employer contribution.

Another advantage of a Solo 401(k) is the ability to take out a loan from the account, which may not be an option with a SEP IRA. Additionally, a Solo 401(k) may offer the option of a Roth component, allowing for tax-free withdrawals in retirement.

If you’re a small business owner with employees, another retirement plan option to consider is a SIMPLE IRA. With a SIMPLE IRA, both the employer and employees can make contributions, and contributions are tax-deductible. The contribution limit for a SIMPLE IRA is lower than a SEP IRA or Solo 401(k), at $13,500 in 2021, but it may be a more affordable option for small businesses with limited budgets.

Finally, it’s important to consider the administrative costs associated with each retirement plan option. A SEP IRA may have lower administrative costs compared to a Solo 401(k) or SIMPLE IRA, making it a more cost-effective option for small businesses.

In conclusion, a SEP IRA can be a great option for self-employed individuals or small business owners looking to save on taxes and prepare for retirement. However, it’s important to weigh the alternatives and determine which option is best for your specific situation. Consulting with a knowledgeable CPA can help you navigate the complex world of retirement planning and make informed decisions.