As an accountant in St. Cloud, FL I know that you do not really know whether self employment is a curse or a major blessing. It can be a blessing because you are your own boss. But on the downside you no longer get health benefits and other perks that you would have gotten in a job.
The best accountant in St. Cloud, FL will tell you that being self employed can be stressful. Around 70 % of the self employed people in the country are not saving any money for their retirement years.
Simplified Employee Pension
Someone who is working alone has the option to work on a Simplified Employee Pension from the IRA. This allows people who are working alone to put aside pretax earnings.
Now on the other hand if you are contributing to your employees SEP, these contributions will not get included in your gross income. In accountant in St. Cloud, FL terms, this just translates into the fact that you do not need to pay taxes on it. The Internal Revenue Service says that the lesser of your money compensated towards savings is the most you can subtract on your business’s tax return. This applies for your employees SEP- IRAs.
As an accountant in St. Cloud, FL I will advise that the best apart about this is that you do not need to set up an account to just reap the tax advantages that you may get. If your income is more than what you expected, you can easily contribute a heavy amount to your savings which will automatically reduce your tax bill.
The Solo 401(k)
An accountant in St. Cloud, FL will also counsel that as a self employed individual you also have the choice of opening up a Solo 401(k). This is a lot like the traditional 401(k). In a solo plan you get to contribute listed as an employer or an employee. If you contribute as an employee then you cannot put away money more than $17, 500 for one tax year. However as an employer your contributions cannot go over $52000. If you are 50 years old or older than that, you get to add an additional $5500. Whatever you choose you get to contribute a percentage of your pretax dollars into the account, which in turn reduces your taxable income.
You also have the option of opening up a Simple IRA. In the Simple IRA you can put money away up to the limit of $11,500 of your pre- tax income. Your contributions are tax deductibles. In addition you do not even have to pay up taxes on this amount until you decide to withdraw this money in your golden years. Consult with your accountant in St. Cloud, FL before you do this.
If you are self employed as well and confused about which path to take on your retirement plan. The smartest decision here is to reach out to a good accountant in St. Cloud, FL and seek advice on your financial situation.
If you need more information about our St. Cloud, FL accounting and tax services, please contact us at 407-502-2400. Freedomtax Accounting’s staff has been providing honest accounting services and tax services for 15 years. Our Orlando accounting and tax firm has its main offices in Kissimmee, FL. Our services are provided nationwide, but mainly in the Central Florida market to areas like Orlando, South Orlando, Kissimmee, St. Cloud, Poinciana, Clermont, Davenport, Hunters Creek, Lake Nona, Celebration, Winter Park, Windermere, Dr. Phillips, Maitland, Altamonte Springs, Winter Garden, Ocoee, Apopka, Belle Isle, Edgewood, and Oakland FL. Our tax accountants and IRS enrolled agents (irs ea) specialize in corporate accounting and bookkeeping, tax services, tax preparation, back taxes help, tax debt relief, tax resolution, tax planning, itin number, incorporations, and non profit 501c3 tax exempt.