Financial issues are all the time on the main target of enterprise homeowners. For self employed people, tax-planning is a vital course of that may improve earnings and assist enterprise homeowners speed up wealth constructing. At the identical time, enterprise homeowners additionally want to think about retirement planning and saving for his or her future. Fortunately, you possibly can obtain each of those objectives by organising a Solo 401(ok) retirement plan.
Solo 401(ok)s are self-directed retirement plans that provide versatile funding decisions and one of many highest contribution limits amongst certified retirement plans – $53,000 for 2016, or $59,000 when you’re 50 or older. This lets individuals decrease their taxable earnings by 1000’s of {dollars} annually.
Here are the deadlines:
Many individuals mistakenly assume that the Solo 401(ok) account must be arrange and obtain contributions earlier than the top of every 12 months. Because of this, eligible entrepreneurs are inclined to delay organising a retirement plan and may miss out on tax advantages and retirement financial savings. There are totally different deadlines for organising a Solo 401(ok) and for making contributions – and self-employed professionals have to know these deadlines to plan forward
You should arrange your Solo 401(ok) by the top of every 12 months
Small-business homeowners have till the final day of the 12 months to arrange a Solo 401(ok) plan that qualifies for that 12 months’s contributions.
To be eligible for a Solo 401(ok) plan, you will need to interact in a self-employed enterprise exercise with the intention of producing revenue. That enterprise cannot have any staff apart from your self and your partner.
But you may make contributions into the subsequent 12 months
Fortunately, Solo 401k contributions don’t must be made by Dec. 31 to be counted for the tax 12 months.
According to the tax code, Solo 401(ok) plans can obtain contributions as much as your online business’ tax-filing deadline. For sole proprietorships, partnerships or LLCs, the contribution deadline is April 15 of the next tax 12 months. For companies, it is March 15. You may even apply for an extension if wanted.
What do you stand to achieve?
By contributing to a Solo 401(ok) plan, you possibly can decrease your taxable earnings by a considerable quantity. The funds can develop on a tax-deferred foundation, that means you will not pay taxes on the wealth you accumulate till you make withdrawals throughout retirement.
You can use a Solo 401(k) calculator to find out the precise quantity you possibly can contribute this 12 months.
