Tom Meaglia, ChFC®

Chartered Financial Consultant


Investment Advisor Representative

CA Insurance Lic. #0567507

Meaglia Financial Consulting

2105 Foothill Blvd., #B140, La Verne, CA 91750

Toll Free: 800-386-3700

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March/April 2019

One BIG Last-Minute Tax Break

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While some of us may worry about getting our tax payments out on time or refunds back, most of us don’t use this time to figure out ways to minimize taxes and plan for future financial goals. If you are self-employed or own a business, a Simplified Employee Pension IRA (SEP-IRA) can be one way to accomplish these twin goals. You have until your business’ tax filing deadline plus extensions to open and make tax-deferred contributions to SEP-IRAs for tax year 2018.

A SEP-IRA Primer
Whether you have a few employees or work for yourself, a SEP-IRA may be right for you. While virtually any business is eligible to contribute, this particular retirement account is well-suited for smaller businesses. That’s because qualified employees must be allowed to participate in the plan, to which employers make contributions.

Any employee who is at least age 21 and was an employee of your business in three of the last five years is eligible to participate in the SEP plan. You don’t have to contribute to the plan every year but when you do, everyone who qualifies must receive contributions, which immediately vest to employees.

By the Numbers
In tax year 2018, employer contributions are based on the first $275,000 of compensation. Every eligible employee must receive the same percentage of their compensation up to the smaller of $55,000 or 25% of compensation.

Self-employed individuals must make a separate calculation to figure how much they can contribute. If you are self-employed, your compensation is net earnings less one-half of your self-employment tax, less contributions made to the SEP-IRA.

The Total Package
Compared to most other types of qualified retirement plans, a SEP-IRA is easy to set up and administer, with no tax filing required. It also allows larger contributions than most qualified retirement plans do, which is a big draw for business owners looking to defer more income and minimize taxes.

If, for instance, you own a business and are in the 25% combined tax bracket, contributing $20,000 to a SEP-IRA before your tax filing deadline will reduce your taxes by $5,000. Potential earnings grow tax-deferred until withdrawal, which may trigger a 10% tax penalty if taken before age 59 1/2, with some exceptions.


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Investment advisory services offered through Fusion Capital Management, an SEC Registered Investment Advisor. 9111 Cypress Waters Blvd., Ste 140, Dallas, TX 75019.
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