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Got the scoop on my tax outlook for the year...advice is needed:
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?
There is not much overhead in an online business, all creative, legitimate ideas welcome.
I never thought I would see the day where I actually was required to spend money.
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.
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.
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!
adopt a bunch of kids
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.
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.
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.
Watch the tax regs on this, but what I did was legit.
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!
- 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.