Business Taxes
Business Taxes
Business and other self-employed professionals have an extensive variety of tax- privileged savings means to choose. There are tax programs to save money for yours and or staff’s future including retroactive tax deductions that assists in your cash flow.
You should not hesitate in contacting your CPA and learning more about the diversity of deductions for your current or past years in business.
A great program offered for Business Tax advantages is (SEP), SIMPLE, Retirement Plan Contribution Deductions.
To receive the best possible business tax deduction advantages and adjustments, you must have an Employer ID Number. If you are not a sole proprietorship, but have a corporation, you will also require your corporation papers. Once you have all the necessary business documents and licenses, you can select and set up the retirement plan with a financial institution. There are different plans with varying deadlines and funding limits. Be sure you are familiar with the differences when determining which plan you set-up.
One such plan is SEP-IRAs and can be established and funded as late as October 15th for the previous year, provided that a taxpayer filed an extension. The maximum contribution is 20% of a person’s net self-employed income, with a maximum dollar limit.
A SEP-IRA (Simplified Employee Pension) allows employers to make retirement plan contributions to its employees. In addition, self-employed individuals may create and fund a SEP-IRA retirement plan for themselves.
Sole proprietorships, partnerships, and unincorporated businesses’ can establish a SEP-IRA. Any individual may create a SEP-IRA with their earnings from self-employment, even if they are also an employee somewhere else and covered by a workplace retirement plan.
Another plan is the Simple IRAs. The term Simple IRA is an acronym for ‘Savings Incentive Match Plan for Employees Individual Retirement Account’. This plan can also be funded as late as October 15th (with an extension). However, the taxpayer must establish the plan no later than October 1st of the year contributions apply.
The key essential of a Simple IRA plan is the employer establishes individual Traditional IRA accounts for each employee. Employees can contribute to these accounts, earning tax benefits for the contributions by deferring the taxes that would be owed on income assets earned.
If employees leave this particular employer, they can take the money out of the account as they are 100% vested immediately upon set-up of their Simple IRA.
You definitely will require the assistance of your bank or CPA to set-up SIMPLE plans that consist of a salary deferral portions. You must review the maximum dollar amounts allowed plus matching contributions.
Still another style plan is the Solo 401(k) plan. This combines a deferral portion with a matching portion. This also has maximums and limits you will need to discuss with your financial institute or CPA.
Solo 401(k) plans need to be set up by December 31st, but contributions can be made as late as October 15th of the following year with an extension.
To qualify for solo 401(k) plan, you must have self-employment income. net profits from a Schedule C or Schedule F, self-employed income from a partnership, or wages as a shareholder-employee in an S-corporation. Additionally, you must set up and fund a qualified retirement plan by the required deadline.
To claim deductions from such plans, you must figure your amounts from worksheets in IRS Publication 560 allowable tax deduction for SEP, SIMPLE, and 401(k) contributions. Then the allowable deduction is recorded on your Form 1040 Line 29. S-Corporations report SEP contributions on the corporation’s Form 1120S.
The personal and or business tax structure and fundamentals requires the assistance of a professional financial advisor or CPA. I would not suggest individual attempt to handle the entire business tax deduction process without the assistance of the tax professional.
