Opening A Simplified Employee Pension Plan (sep) To Lower The Taxes
It sometime gets annoying to prepare the annual tax forms
. But, now you can open a simplified employee pension plan (SEP) to lower your taxes. By putting money into a SEP retirement account, you can lower the taxes by about $1,500!!
As you might have heard about SEPs, but you couldn't open one because of full-time job provides a 401(k) plan. However, it turns out for those who own a side business, it doesn't matter that your primary employer has a 401(k) plan.
All year you have been beating yourself over not maxing out your 401(k). As you don't want to lower your 401k contributions, so you try to built up a sizable emergency fund. With this you feel more secure in your job situation, so you can pull money out of your emergency fund to fund a Simplified Employee Pension Plan.
What is a Simplified Employee Pension Plan?
A SEP is a retirement account for the self-employed or small business owners. It works very much like a traditional IRA where the contributions are tax deductible. The money in the SEP IRA is then taxed on withdrawal.
Advantages of a SEP IRA:
1. Allows small business owners much higher contribution limits than traditional IRAs - 25% of net income, with a cap for 2010 of $49,000
2. Allows small business owners to create simplified pensions for their employees.
3. You can contribute to a SEP any time of the year, including up to April 15 of the next tax year.
4. You can open a SEP IRA at almost any bank, mutual fund company or brokerage firm.
5. You can open a SEP IRA even if your primary employer has a 401k.
Start a Side Business
You can plan to start a side business alon with your jobs. There are so many benefits. Now you find out that a SEP IRA is just own more benefit.
Over the last three years, people have been building an online business in their part-time after work. This side business has been awesome for all. Now it is allowing you to open a SEP IRA and save even more money on your taxes.
So, having a side business id beneficial as, SEP IRA might be a great retirement account to lower your tax liability.
A SEP IRA is super easy to open - it takes about an hour. You can consider various SEP IRA like, Vanguard SEP, Fidelity SEP or a SEP through your bank.
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by: James Harty
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