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Beyend 401 small buisness owners - Jean D.

Jean.D Beyend 401 small buisness owners - Wiley & sons , 2004. - 274 p.
ISBN 0-471-27268
Download (direct link): beyond401korsmallbusinessowners2004.pdf
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Many financial institutions offer prototype money purchase plans that, can lessen the administrative burden on individual employers.
To Find Out More...
The following pamphlets and other retirement-re la ted information
From the U.S. Department of Labor:
• Simplified Employee Pensions (SEPs) -What Small Businesses Need to Know
* Savings Incentive Match Plan for Employee of Small Employers (SIMPLE) - A Small Business Retirement Savings Advantage
From the Internal Revenue Service
• Publication 560, Retirement. Plans for Small Business (SEP, SIMPLE, and Qualified Plans)
• Publication 590. Individual Retirement Arrangements
U.S. Chamber of Commerce
Business Information and Development (202) 463-5381
D OL/U .S. Chamber/SB A Web site
Defined Benefit Plans
Defined benefit plans provide a fixed, pre-established benefit for employees.
Some employers find that defined benefit plans offer business advantages. For instance, employees often value the fixed benefit provided by this type of plan. In addition, employees in DB plans can often receive a greater benefit at retirement than under any other type of retirement plan. On the employer side, businesses can generally contribute (and there fore deduct) more each year than in defined contribution plans. However, defined benefit plans are often more complex and, thus, more costly to establish and maintain than other types of plans.
are available for small businesses:
U.S. Department of Labor
Pension and Welfare Benefits Administration
www.dol .gov/pwba
PWBA publication request line:
DOL Small Business Advisor www.dol. gov/elaws
Internal Revenue Service
Tax Exempt/Government Entities (877) 829-5500 ep
You can order IRS forms and publications 24 hours a day, 7 days a week, by calling:
1-8OO-TAX-FORM (1-800-829-3676)
Small Business Administration
Answer Desk (800) 827-5722
self-employed members of recognized religious sects opposed to social security benefits who are exempt from setf-employment tax.
Credit for startup costs. For costs paid or incurred in tax years beginning after December 31, 2001, for retirement plans that first become effective after that date, you may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP, SIMPLE, or qualified plan. The credit equals 50% of the cost to set up and administer the plan and educate employees about the plan, up to a maximum of $500 per year for each of the first 3 years of the plan. For plans that become effective after 2002, you can choose to start claiming the credit in the tax year before the tax year in which the plan becomes effective.
You must have had 100 or fewer employees who received at least $5,000 in compensation from you for the preceding year. At least one participant must be a non-highly compensated employee. The employees generally cannot be substantially the same employees for whom contributions were made or benefits accrued under a plan of any of the following employers in the 3-tax-year period immediately before the first year to which the credit applies.
1) You.
2) A member of a controlled group that includes you.
3) A predecessor of {1) or (2).
The credit is part of the general business credit, which can be carried back or forward to other tax years if it cannot be used in the current year. However, the part of the general business credit attributable to the small employer pension plan startup cost credit cannot be carried back to a tax year beginning before January 1, 2002. You cannot deduct the part of the startup costs equal to the credit claimed for a tax year, but you can choose not to claim the allowable credit for a tax year.
To take the credit, get Form 8881, Credit for Small Employer Pension Plan Startup Costs, and the instructions.
Compensation limit. For years beginning after 2001, the maximum compensation used for figuring contributions and benefits increases to $200,000. This amount is subject to cost-of-living increases after 2002.
Deduction limits. After 2001, certain deduction limits change as explained next.
Elective deferrals. For years beginning after 2001, elective deferrals are not subject to the deduction limit that applies to SARSEPs and profit-sharing plans (discussed next). Also, elective deferrals are not taken into account when figuring the amount you can deduct for employer contributions that are not elective deferrals.
SEP and profit-sharing plans. For years beginning after 2001, your maximum deduction for contributions to a SEP or a profit-sharing plan increases to 25% of the compensation paid or accrued during the year to your eligible employees participating in the plan. Compensation for figuring the deduction for contributions includes elective deferrals.
However, a lower limit may apply to SARSEPs. For more information, see Limit on Elective Deferrals in chapter 2.
Defined benefit plans. For plan years beginning after 2001, your deduction for contributions to a defined benefit plan can be as much as the plan’s unfunded current liability.
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