Financial matters are always on the focus of business owners˳ For self employed individuals, tax-planning is an important process that can enhance earnings and help business owners accelerate wealth building˳ At the same time, business owners also need to think of retirement planning and saving for their future˳ Fortunately, you can achieve both of these goals by setting up a Solo 401(k) retirement plan˳
Solo 401(k)s are self-directed retirement plans that offer flexible investment choices and one of the highest contribution limits among qualified retirement plans – $53,000 for 2016, or $59,000 if you’re 50 or older˳ This lets participants lower their taxable income by thousands of dollars each year˳
Here are the deadlines:
Many people mistakenly assume that the Solo 401(k) account need to be set up and receive contributions before the end of each year˳ Because of this, eligible entrepreneurs tend to delay setting up a retirement plan and can miss out on tax benefits and retirement savings˳ There are different deadlines for setting up a Solo 401(k) and for making contributions – and self-employed professionals need to know these deadlines to plan ahead
You must set up your Solo 401(k) by the end of each year
Small-business owners have until the last day of the year to set up a Solo 401(k) plan that qualifies for that year’s contributions˳
To be eligible for a Solo 401(k) plan, you must engage in a self-employed business activity with the intention of generating profit˳ That business can’t have any employees aside from yourself and your spouse˳
But you can make contributions into the next year
Fortunately, Solo 401k contributions do not need to be made by Dec˳ 31 to be counted for the tax year˳
According to the tax code, Solo 401(k) plans can receive contributions up to your business’ tax-filing deadline˳ For sole proprietorships, partnerships or LLCs, the contribution deadline is April 15 of the following tax year˳ For corporations, it’s March 15˳ You can even apply for an extension if needed˳
What do you stand to gain?
By contributing to a Solo 401(k) plan, you can lower your taxable income by a substantial amount˳ The funds can grow on a tax-deferred basis, meaning you won’t pay taxes on the wealth you accumulate until you make withdrawals during retirement˳
You can use a Solo 401(k) calculator to determine the exact amount you can contribute this year˳
Source by https://ezinearticles˳com/?Small-Business-Owners:-Understand-Different-Solo-401(K)-Deadlines&id=9250006
