Whether over the river and through the woods or merrily preparing your holiday decorations, the last thing you want to think about is tax planning. However, waiting until January to address any strategies to reduce your 2013 tax burden is a bit too late.
There are two retirement plans that a business owner, that has no employees, can implement that can provide a significant deferral of income and taxes: 1) a Simple-IRA and 2) an Individual or Solo 401(k) Plan.
Originally, with the passage of the new health care law, beginning in 2011, employers were to report health care benefits for employees. This amount would be reported on each employee’s form W-2, but it would not affect an employee’s individual taxable income.
If you answered no, you may want to consider the benefits to you and your employees a retirement plan can offer. A few of these benefits are a tax deduction for your contributions, the assets grow tax-free with compounding interest, and it is another benefit you can offer to attract and retain better employees.
There are credits that are available for both businesses and individuals who operate or participate in a retirement plan. Small businesses can receive a credit of up to $500 a year for the first three years for starting a new pension plan, and individuals can receive up to a $2,000 credit each year for contributing to a pension plan.