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What retirement accounts can I have?

What Retirement Accounts are Available for Someone Who is Self-employed or a Small Business Owner?

Well…it depends (you knew that was coming right?).

Before giving an answer, I always ask:

  • How many employees do you have?
  • Are you an S-Corporation?
  • How much do you want to contribute to your retirement accounts?
  • Do you want as simple a solution as possible?

Three types of accounts work best for small business owners or freelancers:

  • Simplified employee plan (SEP) IRA
  • Solo 401(k)
  • Simple IRA

 

 

 

 

 

 

 

 

 

 

*less half of your self-employment tax

 

What does this chart mean?

A SEP IRA is very similar to a regular IRA. The contributions come from the business only; there are no employee contributions. If you are self-employed, your contribution is 20% of your business net income, and if you are an S-Corporation, your contribution is 25% of your compensation. A SEP IRA tends to be a great plan for a small business owner with no employees.

A Solo 401(k) is similar to a 401(k) offered from an employer. You can make contributions from your paycheck and the business can make contributions as well. A Solo 401(k) does have filing requirements once the plan gets big enough. The “solo” part of a Solo 401(k) is because the plan only works if you don’t have employees.

If you do have employees, a Simple IRA is a very straightforward plan that offers two options: a flat 2% of compensation or a 3% match of compensation.

 

So, what retirement account is right for me?

Most of our small business clients who have no employees tend to use SEP IRAs. Our small business owner clients who do have employees usually use Simple IRAs.

We always recommend you talk to an advisor to determine which option is best for you and your circumstances.

TL;DR: Retirement planning might be a pain, but you should still be saving for it.
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Time for Some Work Life Balance

The answer is to the above question is…

No…that is so not deductible. As an added bonus, the IRS will revoke your passport if you owe more than $50,000.

Now that this filing season has come to a close for businesses and individuals, it’s time for me to take a well-deserved vacation.

That’s right — I am going on a two-week vacation. On the bright side, my team will continue to be available to answer any questions you have while I take some time away from the computer to sightsee overseas.

For situations that are not time-sensitive and that require my direct response, please feel free to contact me or schedule an appointment. I will be able to get back to you after my vacation.

See you soon!

-Toni

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When Am I Required to Provide Health Insurance to Employees?

As you likely know, the Affordable Care Act (ACA) added requirements for employers to provide health insurance to employees if employing a certain number of full-time employees. According to various provisions of the ACA, a full-time employee is defined as anyone working around 30 hours per week. You do need to look at part-time employees as well since they can add up to full-time employees.

If you have over 50 employees, you are considered a Large Employer and are required to provide health insurance benefits. In this case, we recommend speaking to an agent to discuss the specific requirements that must be adhered to under the ACA.

Employers with less than 50 full-time employees are considered Small Employers. Small Employers are not required but are encouraged to offer health insurance benefits to their employees. Small Employers have access to the Small Business Health Options Program (SHOP) and can check their eligibility online.

If your business has under 25 full-time employees, you may qualify for the Small Business Health Care Credit to lower premium costs.

If you provide health insurance benefits to your employees, this information needs to be reported on your employees’ W-2 forms along with any other benefits.

TL;DR: Health insurance is a complicated area if you employ close to 50 full-time employees. If you are under 50 full-time employees than you aren’t required to provide coverage, but there are programs available to help you do so.