If you look at most of the retirement plan contribution limits for 2014, you notice that they look familiar. Oh yeah, they are almost all the same as 2013! Because of the way the IRS and Congress adjust these limits for inflation, there are many years when even if inflation ticked up a little, there is not enough of a jump to raise the maximum contributions. But one of the few exceptions in 2014 is the maximum contribution limit to a solo 401K plan. The maximum has jumped $1,000 to $52,000, up from $51,000 in 2013. For someone self-employed in 2014, to reach the maximum limit you have to have income from the business of $260,000 (you can contribute 20% of your net business income to the 401K if you are self-employed.) Now for a C or S Corporation, which is based on wages, a shareholder employee can contribute the $52,000 on only $138,000 of wages, because as an employee the shareholder can contribute 100% of wages up to $17,500 as an employee deferral, and the corporation can contribute 25% of the wages up to $34,500 as an employer contribution for the employee (meaning wages have to be $138,000 to qualify for the maximum contribution.) Anyway, this is one time when something going up (besides the stock [...]
Year End Musings of a Burbank CPA: A Quick List of New Year’s Resolutions
Here is a quick list of tax items you need to get a good start on in the coming New Year. With a lot of these things the sooner the better: 1. Get your tax return information together now! If you wait too long you are going to be rushed and this will possibly cause you to miss deductions that save taxes or forget to claim income that will get you a letter from the IRS later in the year. Don’t put it off – get it done now so when your tax documents (W2s, 1099s, etc) come you are ready to schedule a meeting with your tax preparer or (gasp) do your taxes yourself. 2. If you have your return prepared by a professional, set up an appointment with them right away. Even though individual returns can’t be processed until January 31, meet with your old trusted preparer as soon as possible to get what you have in place – then items can quickly be added as they come in and the return can be processed as soon as possible (there may be a line of returns waiting for processing – this gets you in the line, plus if there is a [...]
CPA Financial Musings: Self-employed face a retirement crisis
This is the problem with being a new self-employed businessman – you have to balance keeping the business going and saving for your own retirement. It is a big problem: see this post in USAToday by Rodney Brooks for more details: http://www.usatoday.com/story/money/columnist/brooks/2013/12/16/small-business-pension-401k-retirement/4030873/ As the article says, it is a fine line for most self-employed. Just remember not all your retirement income will come from the business, a fair percentage will have to come from outside savings. Trust me, I am fighting with this issue myself. Just remember that planning and budgeting with a financial professional can find a middle ground that can help balance both ends of this teeter-totter. For financial, accounting and tax musings, You can count on us to count for you! Email: bstonercpa@sbcglobal.net Phone: 818-317-6035 Website: www.briantstonercpa.com Has been Featured On https://twitter.com/bstonercpa