Tax Deferred Options – Pay now to the IRS or Invest In YOU! Sent Out Newsletter(08.11.2020)


We are quickly approaching the end of the year – Are you ready?
Tax Deferred Options – Pay now to the IRS or Invest In YOU!

We are quickly approaching the end of the year.  Life events causes us to reevaluate our position.  We need to ensure we are making the best financial decision for now and our future.  Today, we (Entrepreneurs) are working towards building our business and enjoying the best of life.  I ask, how much are you putting away for tomorrow? How much money are you willing to invest into a SEPs, Roth IRA and Profit-Sharing plan etc.  

Many have a significant net income, which results to a high tax liability.  I ask, do you want to pay Internal Revenue and the State OR invest into a tax deferred option?

You’ve heard the advice before: Diversify, make time work for you, and embrace stocks. For most folks, those are the core pillars of any investment strategy. For business owners, that’s true only up to a point. You are different and need to invest accordingly.  So, it’s important to put something aside on a regular basis.” In other words: Build your company as if it will last forever, but invest your personal wealth as if everything will collapse tomorrow.”

SEPs can get set up to contribute up to 25% of salary up to an annual maximum, and that amount is going up in 2019. Maximum contributions are $56,000 in 2019, up from $55,000 in 2018 and marking the third straight year of annual increases.  SEP IRAs can be a great choice that offers many of the same benefits without all the administrative hassle that a 401(k) plan entails.

For Self Employed individuals the calculation of the 25% limit is a bit more difficult. That’s because the IRS forces employers to use 25% of net self-employment income, which one must calculate after accounting for the reduction in income from the SEP contribution as well as for other obligations such as self-employment taxes. The challenge of you wanting to make a contribution on your own behalf as the business owner, then you have to make the same percentage contribution on behalf of any employee you have.

The contribution limits for your SIMPLE IRA plan are separate from the limits for your SEP plan. Assuming you are not also an owner of your employer’s business, you can contribute the maximum to both plans.

Employee contributions
You can make salary deferrals (salary reduction contributions) of up to $13,500 to a SIMPLE IRA plan in 2020 ($13,000 in 2019). If you’re age 50 or over, you can contribute an additional $3,000 (in 2015 – 2020) in catch-up contributions.

If you participate in more than one retirement plan that allows you to make salary deferrals (such as a 401(k) or a 403(b) plan), your total annual employee contributions to all the plans can’t exceed your personal limit of $19,500 in 2020 ($19,000 in 2019), plus an additional $6,500 in 2020 ($6,000 in 2015 – 2019) if you’re age 50 or older. However, because the SIMPLE IRA plan limits your contributions to $12,500, plus an additional $3,000 catch-up contribution, this is the maximum amount you can contribute to your SIMPLE IRA plan.

Employer contributions
Your employer must either:
  • match your salary deferrals, on a dollar-for-dollar basis, up to 3% of your compensation, or
  • make a non-elective contribution of 2% of your compensation (taking into account no more than $285,000 of compensation in 2020 ($280,000 in 2019)

Roth IRA is an IRA that, except as explained below, is subject to the rules that apply to a traditional IRA.
  • You cannot deduct contributions to a Roth IRA.
  • If you satisfy the requirements, qualified distributions are tax-free.
  • You can make contributions to your Roth IRA after you reach age 70 ½.
  • You can leave amounts in your Roth IRA as long as you live.
  • The account or annuity must be designated as a Roth IRA when it is set up.
The same combined contribution limit applies to all of your Roth and traditional IRAs. 

Above, I am sharing two options but there are several options.  Keep in mind, these retirement plans come with a time sensitive deadline. I want to thank Frank Summers with Edwards Jones for providing two valuable hand-outs to help you have an overview of the various options, see below

As your Accountant, I help with your overall financial wellness strategy.  Financial Advisors can go over the various plans available and recommend the plan best for you and yours. Below, I want to introduce you to several Financial Advisors.  If you have an Advisor please take advantage by using the handout provided by Frank Summers.  

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Book an Appointment with a Financial Advisor
Remember, It’s Your Choice
Please note, I am not recommending one person over the other. I want you to take the time to invest learning the various options to defer income!!

Working with Frank he has demonstrated the ability to listens and understand our clients’ needs.

Ali is a new partner who has demonstrated that integrity is the core of her practice supporting business owners.

Meet with one or two advisors and see, who you feel comfortable with!

Handout Provided by Frank Summers

Which Plan is Right? —– Which plan is right?
Plan Comparison I LOVE Plan Comparison

MidYear – Final Year Projections – Please advise, if you want a year tax projections. Please provide copies of data that impact your taxable income, including spouse’s paystub, other business p&L, etc. We will use the current Profit and Loss Statements to prepare the projections. Fee: $175 to prepare the projection, which I will send to you via email. As usually, we can schedule a meeting to discuss (Face-to-Face OR Virtual) the projection. If so, Send an email requesting a Year End Tax Forecast.
Frank Summers – Edwards Jones
Aims to help individuals develop investment strategies geared toward their unique, long-term goals
Website: Click Here Telephone: 704.366.5811
Ali Bouasavat – First Financial Security
Helps to plan for financial dreams and identify future risks, which could be a challenge
Website: Click Here Telephone: 704.574.6880
Devonte Ivory – Edwards Jones
His focus is to help get you the capital you need to do what you want.
Website: Click Here Telephone: 704.299.3521
Need Another Option
I did not want to overwhelm you with options. If you want other referral options, please email me.
If you want to share your financial advisor – Please send the Advisor’s contact information.
We are Accepting New Clients
Bookkeeping Starting @ $30 per month
Payroll Tax Preparation – Individuals and Business
Payroll – Flat Rate $115 per month up to 10 people Unlimited Payroll Runs can be processed.
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