SIMPLE tax savings using salary deferrals - Set them up before October 1st.

SIMPLE IRAs and SIMPLE 401(k)s are an easy way to establish a tax deferring retirement plan for your small business within a few hours.   The idea of a salary deferral is to defer paying tax until you are in a lower tax bracket (e.g. retirement at 59.5 yrs old) or until you find something that you actually want to invest in (you can always rollover into another type or IRA).  The basics are that you set the account with a financial institution and then employer transfers your salary to that account (funds it).

These SIMPLE plans are an especially good fit for people who are already comfortable investing with brokers like TDAmeritrade or Vangaurd.  

Here are some reasons why you might want to set up one of the two SIMPLE options. 

1.  You are probably already investing or banking with an institution that offers SIMPLE plans and you would be deferring up to 13,000 in salary for 2013 so your business will show more salary/compensation paid for 2013 and significantly less tax. 

2.  A SIMPLE IRA account literally takes less than 10 minutes to set up online with large institutions.  

3.  For SIMPLE IRAs your corp does not have to report anything or do any other filing with government.  SIMPLE 401(k)s are a little bit more tricky to set up and comply with but they have the benefit of allowing plan loans. 

4.  As long as you set up the plan before October 1, 2013 You can wait to fund the account until your last pay period.

5.  You can take the money out before you are 59.5 without the 10% penalty for your family's college expenses or to buy your first home. 

7.  You can get a tax credit for the cost of setting it up if we decide to use it. 

8.  If we do not decide to fund it before the end of the year we don't have to use it, but by setting it up at least you have the option. 


Lyle PhippsComment