Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
401k ?'s and tax implications for self-employed....
Old 12-17-2005, 04:18 PM   #1
Thinks s/he gets paid by the post
thefed's Avatar
 
Join Date: Oct 2005
Posts: 2,203
401k ?'s and tax implications for self-employed....

If i start up a 401k for my business, a self directed 401k, i can still ONLY contribute up to the max, right?

What if my company (that i own) matches me 100%? What about 150%? Could my company then write off that contribution against it's earnings? Sounds too good to be true...but I'm sure I could do it somehow. Do I need to be incorporated? LLC? Sole proprietorship (I am now)

Thanks guys!
__________________

__________________
thefed is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: 401k ?'s and tax implications for self-employed....
Old 12-17-2005, 04:31 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: 401k ?'s and tax implications for self-employed....

You can shelter $40+K in a solo 401k. I would give Fidelity a call. They made it very easy for me to set up my wife's solo 401k.
__________________

__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: 401k ?'s and tax implications for self-employed....
Old 12-17-2005, 07:33 PM   #3
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Re: 401k ?'s and tax implications for self-employed....

Quote:
Originally Posted by brewer12345
You can shelter $40+K in a solo 401k.* I would give Fidelity a call.* They made it very easy for me to set up my wife's solo 401k.
Of course they made it easy, they just want your money.

Fidelity won't give personal tax advice regarding what the best plan is, how much is deductible and how to deduct it, effects on other income, alternative methods of income reduction, special allocation strategies, etc.

A local lawyer and CPA can help a business owner make intelligent decisions in these areas before he jumps into something he may regret later.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Re: 401k ?'s and tax implications for self-employed....
Old 12-17-2005, 08:14 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Re: 401k ?'s and tax implications for self-employed....

Quote:
Originally Posted by thefed
If i start up a 401k for my business, a self directed 401k, i can still ONLY contribute up to the max, right?

Yes, you can only contribute up to the maximum. For an individual 401(K) that is $42,000 for the 2005 tax year. However, there are rules governing how much you specifically can contribute based on how much your business earns - which limit your contributions below the 'maximum'. I would avoid trying to liberally interpret the tax rules to get a bigger deduction. Certainly check with a tax professional to find out how much you can contribute and which of the several retirement plans is best for your specific situation.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Re: 401k ?'s and tax implications for self-employed....
Old 12-17-2005, 08:36 PM   #5
Dryer sheet aficionado
 
Join Date: Dec 2005
Posts: 45
Re: 401k ?'s and tax implications for self-employed....

Quote:
Originally Posted by thefed
If i start up a 401k for my business, a self directed 401k, i can still ONLY contribute up to the max, right?
Although most self-employed set up defined contribution plans, I believe that it is possible to set up a defined benefit plan. The retirement benefits could be as generous as you wished. Then the company would have to fund its new liability, which could soak up some or all of the profits. I haven't done this, but remember reading about it some years ago when I was self-employed briefly. I have one self-employed friend who has done something along these lines, but I don't know the details. Most accountants don't seem to know about it. Only works if there are no employees.
__________________
NYCGuy is offline   Reply With Quote
Re: 401k ?'s and tax implications for self-employed....
Old 12-17-2005, 08:44 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Re: 401k ?'s and tax implications for self-employed....

Quote:
Originally Posted by NYCGuy
Although most self-employed set up defined contribution plans, I believe that it is possible to set up a defined benefit plan.* The retirement benefits could be as generous as you wished.* Then the company would have to fund its new liability, which could soak up some or all of the profits.* I haven't done this, but remember reading about it some years ago when I was self-employed briefly.* I have one self-employed friend who has done something along these lines, but I don't know the details.* Most accountants don't seem to know about it.* Only works if there are no employees.
Oh no!!! Another under funded defined benefit plan in the works. I wonder if you can foist the pension plan off on the PBGC once your employer decides to close up shop. Could be a sweet deal.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Re: 401k ?'s and tax implications for self-employed....
Old 12-17-2005, 09:42 PM   #7
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Re: 401k ?'s and tax implications for self-employed....

Quote:
Originally Posted by NYCGuy
Although most self-employed set up defined contribution plans, I believe that it is possible to set up a defined benefit plan.* The retirement benefits could be as generous as you wished.* Then the company would have to fund its new liability, which could soak up some or all of the profits.* I haven't done this, but remember reading about it some years ago when I was self-employed briefly.* I have one self-employed friend who has done something along these lines, but I don't know the details.* Most accountants don't seem to know about it.* Only works if there are no employees.
Most accountants do seem to know about it. That's why they don't recommend it to most self-employed individuals.
__________________

__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Reply

Tags
401k


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
500 search phrases for 2006 dory36 Other topics 2 01-16-2007 08:00 AM
Tax Rates now and 2011 Gearhead Jim FIRE and Money 25 12-10-2006 09:07 AM
Taxes tryan Other topics 0 12-08-2006 08:45 AM
Paying off Debt vs. 401(k) Contributions BigMoneyJim FIRE and Money 4 02-10-2003 11:06 AM

 

 
All times are GMT -6. The time now is 07:41 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.