If you are interested in a business pre-tax retirement plan, then contact our office for a consultation soon! There are deadlines approaching soon on setting up certain small business retirement plans for 2022. Our tax accountants are available to discuss your different tax benefits and options of each retirement account available for your business – that fit your unique situation. These options may include, but are not limited to, Solo 401K plans for single owned or single employee small businesses, SEP IRA plans or SIMPLE IRA plans – to name a few. Here is a great guide to help you start understanding the options of retirement plans for small entities and self-employed: …(read more)

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Fund Your Year-End Small Business Pre-Tax Retirement Accounts Soon for 2022

As the end of the year swiftly approaches, it’s time for small business owners to start thinking about their financial planning for the upcoming year. One crucial aspect that often gets overlooked is retirement savings. By funding your pre-tax retirement accounts before the year-end, you not only ensure a secure future but also capitalize on valuable tax advantages.

Small business owners have a variety of retirement account options to choose from, each offering its own unique benefits. Two popular choices among small business owners are the Simplified Employee Pension Individual Retirement Accounts (SEP-IRA) and the Solo 401(k) plans. Both of these accounts allow you to contribute pre-tax dollars, which can significantly reduce your taxable income for the year.

SEP-IRA accounts are an excellent choice for self-employed individuals or small business owners with very few employees. Contributions to SEP-IRAs are based on a percentage of your income, up to a maximum amount established by the IRS. For 2022, the maximum contribution limit is $61,000 or 25% of your compensation, whichever is less. By funding your SEP-IRA, you are not only making a wise investment in your future but also reducing your current tax liability.

Another option for small business owners is the Solo 401(k) plan, also known as an Individual 401(k). This retirement account allows you to contribute as both the employer and the employee, providing an opportunity for higher contributions. For 2022, the total contribution limit for a Solo 401(k) is $61,000, or $64,500 if you’re over 50 years old. As the employer, you can contribute up to 25% of your compensation, and as the employee, an additional $19,500 can be contributed, or $26,000 if you’re above 50. The Solo 401(k) is an excellent choice for those looking to maximize their retirement savings while managing their tax liability.

By funding these pre-tax retirement accounts before the year-end, you not only secure your financial future but also enjoy valuable tax advantages. Contributions to SEP-IRA and Solo 401(k) accounts are tax-deductible, meaning they reduce your taxable income for the year. This reduction can potentially move you into a lower tax bracket, saving you a considerable amount of money come tax season.

Beyond the immediate tax benefits, investing in your retirement accounts early allows you to take advantage of compounding interest. The earlier you start saving, the more time your investments have to grow, potentially resulting in a more substantial retirement fund. By making regular contributions to your retirement accounts, you give yourself a better chance of achieving your desired retirement goals.

While the year-end seems far away, the time to fund your pre-tax retirement accounts for 2022 is now. Start by evaluating your financial situation and determining which retirement account best suits your needs. Consult with a financial advisor if needed, and make a plan to contribute before the year-end deadline. By taking these steps, you’ll set yourself up for a secure financial future while minimizing your tax liability.

In conclusion, small business owners have a golden opportunity to fund their retirement accounts and capitalize on valuable tax advantages before the year-end. By contributing to pre-tax retirement accounts such as SEP-IRAs and Solo 401(k) plans, you not only secure your financial future but also reduce your current tax liability. Don’t procrastinate; start planning now and take advantage of the benefits that come with funding your year-end retirement accounts for 2022.