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Robert A. Imparato, Jr CFP®
CERTIFIED FINANCIAL PLANNER™ professional
Craig A. Hyldahl CFP®
CERTIFIED FINANCIAL PLANNER™ professional
R.I.C.H. Planning Group, LLC
105 Fieldcrest Avenue, Suite #507
Edison, NJ 08837
Robert: 732-326-5240
Craig: 732-326-5240
Fax: 732-326-5331
Robert: robert@richplanninggroup.com
Craig: craig@richplanninggroup.com
Website: www.richplanninggroup.com
March/April 2019
One BIG Last-Minute Tax Break
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.
GE-2258619b (10/18)(Exp. 10/20)
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Securities offered through Equitable Advisors, LLC (NY,NY (212) 314-4600), member FINRA,SIPC (Equitable Financial Advisors in MI & TN). Investment advisory products and services offered through Equitable Advisors, LLC, an SEC-registered investment advisor. Annuity and insurance products offered through Equitable Network, LLC, which conducts business in California as Equitable Network Insurance Agency of California, LLC; in Utah as Equitable Network Insurance Agency of Utah, LLC; and in PR as Equitable Network of Puerto Rico, Inc. Equitable Advisors and Equitable Network are affiliated companies and do not provide tax or legal advice.
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GE-4833845.1 (7/22)(Exp. 7/24)
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