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YEAR-END PLANNING: START A RETIREMENT PLAN?
December 19, 2006
Sometimes a business can accomplish a lot of tax savings by setting up a retirement plan before year-end. While Simplified Employee Plans (SEPs) don't have to be set up until your tax return due-date, full-fledged qualified plans must be in place before year end. But - if the documents are in place, the plan can be funded anytime before the due date of your return, including extensions.
A full-fledged profit-sharing plan can be especially helpful if you are profitably self-employed and don't control any other businesses. Such taxpayers may be able to set up a plan by year-end and make as much as a $44,000 deductible contribution to their own retirement savings via a "solo-401(k)" profit-sharing arrangement. It's a sweet deal - you reduce your current taxes merely by taking money from one pocket and putting it into another, figuratively.
If you think you might qualify, though, you'd better get to work - you'll have to move fast to get the paperwork in place by December 31.
You can also find some other year-end business planning tips at About.com.
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The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation.
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not neccesarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to
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