Tax Guru-Ker$tetter Letter

Sunday, June 30, 2002

Self Employed Retirement Plans

Here's a good brief summary of some of the options available to self employed individuals. SEP-IRAs have long been the preference for my clients over Keoghs for a number of reasons. Unlike Keoghs, which require that they are established before the end of the tax year (i.e. 12/31/01 for 2001 1040s), a SEP-IRA can be established & funded as late as the extended due date of the tax returns (i.e. 10/15/02 for 2001 1040s).

SEP-IRAs also have the same high dollar limits as Keoghs, but aren't required to submit any 5500 forms, as are required each year for Keoghs.

One big word of warning. Most of these plans are based on the same income that is subject to the 15.3% self employment tax. It is often a much wiser move to take steps, such as using a C corp, to reduce or eliminate the SE tax, and invest that tax savings in something that will grow for your retirement years, such as your business or some real estate.

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/30/2002 10:02:00 PM Send this post: