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Beth A. Botti, CFP®, ChFC, CLU, CDFA™
Financial Consultant
California Insurance License #0G24537
612 Wheelers Farms Road, Milford, CT 06460
Phone: 203-877-6556 Ext. 169
Fax: 203-301-0736
Email: beth.botti@equitable.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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Duly registered and licensed financial professionals offer securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA,SIPC (Equitable Financial Advisors in MI & TN), offer investment advisory products and services through Equitable Advisors, LLC, an SEC-registered investment advisor, and offer annuity and insurance products through Equitable Network, LLC (Equitable Network Insurance Agency of Utah, LLC in UT; Equitable Network of Puerto Rico, Inc.). Equal Opportunity Employer - M/F/D/V. Equitable Advisors and its associates and affiliates do not provide tax, accounting, or legal advice or services. Representatives may transact business, which includes offering products and services and/or responding to inquiries, only in state(s) in which they are properly registered and/or licensed. Your connection to this website does not necessarily indicate that the sender is able to transact business in your state. The information in this website is not investment or securities advice and does not constitute an offer. For more information about Equitable Advisors, LLC you may visit https://equitable.com/crs to review the firm's Relationship Summary for Retail Investors and General Conflicts of Interest Disclosure.
GE-6572038.1 (4/24)(Exp. 4/26)
CFP®, and CERTIFIED FINANCIAL PLANNER™ are certification marks owned by the Certified Financial Planner Board of Standards, Inc. These marks are awarded to individuals who successfully complete the CFP Board's initial and ongoing certification requirements.
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