Donate some to UNICEF or a local shelter.
Donate to Doctors without Borders.
Buy a new computer
Upgrade your existing computer (More Memory, etc.)
Buy a digital camera
New software for your website
The list goes on and on..
If you have your own thing with no employees, run down to your local investment firm, open a SEP pronto and dump up to 20% of your income in tax free.
SEPs are the small business version of a 401k and the same rules apply. Problem is that if you have an employee, whatever you put in for yourself, you have to put the equal amount in for your employee.
But they are great for the self employed person on their own.
Open new websites and pay for domains and hosting for a year or more in advance.
Cram money into PPC and postage meter accounts.
These are great ideas!
I'm going to look into the SEP's right now....sounds like a good place to start. Donating & a new laptop is on the list
Never thought of prepaying for some advertising/domains/ etc. I'll see if I can work that in too.
Thanks so much!
>> dump up to 20% of your income in tax free
do you have to deposit it right now (before 12/31), or can you wait till you do the taxes?
|SEPs are the small business version of a 401k and the same rules apply. |
Depending on your income and age, a 401K may allow for greater deductions than a SEP. You can open a self employed 401K for you and your spouse (if your spouse is an employee of your business or has self employment income from a different business), through places like Fidelity or Charles Schwab. I'm not sure about Schwab but Fidelity does not have any fees to open or administer the account.
You get to deduct up to $14,000 each for the 401k ($18,000 if you are over 50), and another 25% of the your compensation (up to $42,000).
If your spouse has a 401k through a regular job, he or she can still have a self employment 401K at long as the total 401K deductions are not over $14,000 ($18,000 for 50+) limit, plus they can also do the 25% of compensation deduction.
You have until the day your taxes are due to make the contributions, but you have to open the account before the end of this calendar year to be able to use it for 2005.
|do you have to deposit it right now (before 12/31), or can you wait till you do the taxes? |
I am not sure. If you call any finacial investing firm, I am sure they can tell you. I put a chunk in every month, but when I opened mine the advisor told me that if I had not reached 20% by the end of the year, I could just do one lump sum if I wanted, but he did not say if it was an IRA type of end of year or calander end of year.
I opened mine last week and I'm very excited. If one is lucky enough to put $40K a year for 4-5 years, that can easily be a fortune in 25 years--even if you do nothing else.
- magazine subscriptions
- upgraded logos, other artwork
- the desk chair of your dreams
- the desk of your dreams
- file cabinets
- new carpet for your office
- etc. etc. ...
how about my company invoices your company for however much you want :)
>> 20% of your income
I think its 25% and before any of you got excited it have a $42,000 cap :(
adopt a bunch of kids
Some tips: if you have a corp with excess cash, consider paying yourself a dividend. (U.S.) Max tax on divs is now just 15%. There are many factors to consider.
Money market funds are back. Taxable ones are now approaching 4% yield after being down to about 1% a year or two ago. Some funds allow check writing.
If you have a big estate, try to die in 2010 when the estate tax expires for one year. It would be tax-wise to expire with it!
Oh dear...already have more than a few...but not for tax reasons ;)
Question: The SEP Solo 401k is when you don't have any employees. It was recommended by my accountant to pay my children a reasonable sum of money (like I said I have more than a few, but because of their ages there wouldn't be taxes). If I do this, wouldn't they be my employee's (per say) and disquality me from using the SEP Solo 401k? Would this be a better idea than an IRA?
I've already been told not to deposit any checks until after January 1 (it would defeat the purpose of the spending spree). All this investment information is new to me and my head is swimming...Sounds exciting really, but just don't want to get "taken" because of how green I am.
It has been a challenge finding knowledgable advisors who (first believe) then understand that real money can be made online.
|If I do this, wouldn't they be my employee's (per say) and disquality me from using the SEP Solo 401k? |
I don't know the answer to that but for retirement plan questions you can call the IRS directly at 877-829-5500 and ask to talk to an EP agent. I called yesterday with some questions and the person was really helpful, answered my questions above and beyond what I needed to know and sent me by email the copies of regulations that had the answers I was looking for.
The basic info for small business retirement plans is also downloadable in Publication 560 at
though I don't think the 2005 version is available yet.
Most of the big investment places also have small business retirement specialists, but the quality of the advice between the different places can really vary. I found the retirement advisors at Fidelity to be by far the most knowledgeable.
Thanks Jane for the information. I will definitely be giving them a call today to get more information. I am sure I'm not the only one in town that needs to set-up something like this before the end of the year!
|I am sure I'm not the only one in town that needs to set-up something like this before the end of the year! |
When I called Fidelity I called the branch in town to mail me the retirement packet instead of their headquarters as I wanted to get the forms right away and taken care of before Christmas. They actually sent me the forms through an overnight delivery service and then had someone call me to help me fill them out. I know they are doing that to make money and not just to be nice, but I was impressed with their efficiency just the same.
Plus Fidelity told me about a special rule I had to follow in setting up our accounts because we have more than one business. When I mentioned that to one of the other investment firms retirement plan advisors he had not even heard of the rule. So I called the IRS for clarification and the IRS agent confirmed that the Fidelity advisors had it right.
BTW, I believe that Fidelity answers phones 24/7.
Generally Vaguard funds have lower expenses, but Fidelity is a pretty good way to go, too.
If you're going to invest in mutual funds, it would be a good idea to invest atleast some part in India focussed mutual funds. The Indian stock index (BSE sensex) has more than doubled in the last eighteen months from 4500 to 9300. Not for the faint hearted however. Stock investments can be risky.
|Generally Vaguard funds have lower expenses, but Fidelity is a pretty good way to go, too. |
Vanguard does not offer a 401k plan for small businesses. They have a little online questionaire to help you decide which retirement plan is right for you, but you have to watch out because their only choices are among the plans they offer. So if a 401k plan is your best bet, you would never know if from their questionaire. They would steer you to a SEP instead.
In their footnotes at the bottom of the page they say "Our suggestions are limited to the retirement plans offered by Vanguard® Small Business Services", but they certainly don't knock themselves out trying to make that clear to people.
According to the chart at the Fidelity small business retirement site, the difference in in what you can save between a SEP IRA and a self employed 401K for someone 50 or older with $100,000 net business profits can be an extra $18,000 ($18,616 compared to $36,616). So it pays to compare the different plans and watch those footnotes.
Draw off 55p per mile in travel expenses you forgot to file for with your company. (Coughs loudly)
Here's a useful tip for small businesses. Have the company pay for mandated executive meals at work. Where I used to do my work, I'd almost have to order food in, every day. Stuff like pizza. I'd save the receipts and have my company issue me a check at year end. Generally I was doing some work while eating: Answering phone, being around for emergencies, etc.
Watch the tax regs on this, but what I did was legit.
Ive done that too, slipped my mind.
Thanks for everyones help, it has really been appreciated!
Spending spree update:
- Decided to open 2 IRA's and deposit to the allowable limit.
- Purchasing a new lap top w/ all the button's & whistles. (Should have looked into this before...do you know how much easier this is going to make my life :)
- Equipment purchases for next years business goals...software etc.
- No more cash deposits for the year.
Someone correct me if I am wrong, but I am having a hard time spending money to save (example: $1,000 to save $250 ) on something I don't really NEED. Investing it seems to make the most sense since you get to retain the whole amount.
....Plus I keep thinking I'll need this money to pay the tax!
does an S-corp have to distribute ALL the money by 12/31? If I leave it in the bank, will I still pay taxes for 2005?
> If you had 15 days to reduce some of the money
> you will be owing come April, what would you do, buy, invest in etc?
buy everything ahead you can:
- pay hosting for the year.
- buy advertising ahead of time.
- bulk up any float accounts you can.
- new equipment. Laptops, desktops, phones this year - and then resell your old stuff after the first of the year on ebay.
- get that dreamy printer you've been thinking about (oh, wait, that's a note to self).
- subscriptions to sites, services, magazines (hint hint...lol)
- you can write off any vehicle over 6k lbs. (buy a hummer).
- 1 word: Plasma!
- 2 words: HD TV.
- stuff to sell. You have the income this year, and can write off the goods next year.
- Form a s-corp quick. Plenty of tax loops there.
> Have the company pay for mandated executive meals at work.
only deductible if you have them ON SITE at the place of employement. Otherwise it is a percentage.
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