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Read More About It!  Lorraine in New York wanted to know more about the solo 401(k)'s See what clever insights the Pros provide! <Tax Pro Responds> Stan Pearlman of Flushing says: This is primarily only for self-employed individuals or for principals of companies in which the only parties on payroll are the principals themselves. One can elect to contribute up to the first $ 11,000 of their gross wages, or if self-employed, of their net profit into a 401(k) plan in their name. As a business entity, their business can elect to sponsor up to 25 % of the gross wages or net self-employed income. The maximum contribution for both parts can not exceed $ 40,000 or 100 % of the gross income (W-2wages) or net self-employed income. For those over age 50 an additional $ 1,000 can be put in. This 25 % is classified as an employee benefit plan and as such lowers a corporate/partnership entity income and the corresponding taxes. For self-employed persons, the 25 % portion lowers both the regular and self-employment taxes, plus the unincorporated tax for those municipalities that impose an unincorporated tax. Currently only a limited number of mutual fund companies are offering this coverage and the fees involved (set-up and annual)vary greatly from one company to another. one would have to speak to a financial advisor to find out what companies are offering this, the fees and type of investments available within each. Stan Perlman For more information on these solo 401(k)'s, drop by TaxMama's Article, Finally, a Break for the Small Fry Or, Get $50,000 Tax Free Remember, while your contributions for the year may have a limit, you can rollover money from other 401(k)s or IRAs and borrow up to 50% or $50,000 right away. Best wishes, Eva Rosenberg Your TaxMama  |
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