A BRIEF DISCUSSION OF RETIREMENT AND TAX TOPICS
CALLING ALL WOMEN ENTREPRENEURS:
It was hard enough establishing your business and rearranging your schedule, but now it’s time to think about your fi nances.Are you saving for retirement? It’s easy to say “I’ll save more next year” or “I’ll open a retirement plan soon,” but now’s the time to get started.
There are several ways a retirement plan can have signifi cant tax advantages and help women entrepreneurs save for retirement: on some plans your contributions are deductible when made and money in some retirement programs grow tax deferred (or, in the case of a Roth, potentially tax free*).
You have several choices in addition to a Traditional IRA and Roth IRA.SEP Plans. A SEP (Simplifi ed Employee Pension) IRA allows you to contribute 25% of pay up to $51,000 in year 2013. SIMPLE Plans.
The SIMPLE (Savings Incentive Match Plans for Employees) IRA plan allows you to contribute up to $12,000 ($14,500 if age 50 or older) in year 2013. Additionally there is a required employer match.Solo 401(k). A one-participant 401(k), also known as the Solo 401(k), is a traditional 401(k) covering a business owner with no employees. This plan allows you to contribute up to $17,500 (plus a $6,000 catch-up if age 50 or older) for 2013. There may be employer contributions available to increase total contributions to $51,000 (plus the catch-up).
The Solo 401(k) comes with additional tax compliance requirements.If you have employees working for you, there are additional constraints and requirements for each retirement plan. The bottom line is start saving now for retirement. Are you paying estimated taxes?As a self-employed individual, you may be required to pay quarterly estimated taxes since you don’t have an employer withholding these taxes. Your tax obligation includes self-employment tax (Social Security and Medicare tax) and income tax.
To determine if you are subject to self-employment tax and income tax, you must calculate your net profi t or loss from your business. Work with a qualifi ed tax professional to ensure you are paying the appropriate quarterly taxes to avoid penalties. Women entrepreneurs have a number of retirement options, each with its own tax requirements.
Work with a qualified professional when you are establishing your business. Want to learn more? Like us on Facebook, visit our Women and Wealth page on our website, or contact me for more information.
