Year-end planning includes revisiting your retirement plan or visiting in case of a new business. Offering retirement plans now provides compelling benefits for not only the usual large corporations but even for small businesses. Let’s take a look at some of these key reasons for you and your business to offer retirement benefits to your employees!
Impact on Tax Liability
As an employer, the contributions you make towards the benefit of your employees are deductible up to certain annual limits. This extends even to contributions made to employees working under self-employed individuals. Here, the difference would be that the deduction amount for the self-employed individual would be deducted from the gross income of their returns. Additionally, for the first 3 years of the self -employed individual’s retirement contributions, the person can avail 50% of their administrative costs as a Tax Credit. If you an employer in a Pass-through entity, even better! Lowering Tax liability due to retirement contributions can fuel an increase in your qualified business income deduction. So, make the right choice of retirement benefit to maximize your retirement write-offs!
Retirement plans can help you save up!
Putting back all your profits into your company should not be your only priority. Save some up for yourself. Retirement plans are a great way to meticulously structure your savings and help you build up a nice something for yourself. Make a targeted choice on a plan to contribute on your employee’s behalf and still write off a sizeable amount of tax liability in the process. People with few or no employees especially can be surprised at how much they can amass putting as little as 20% of annual net earnings away.
Always a great perk
Employees these days look at other aspects aside from just their salaries. They look at what other perks are being offered as a part of their packages and sometimes, these perks are even decisive in them leaving or staying in their jobs. Retirement plans are still one of them. As an employer, it is best to set up 401(k) plans for your employees and maximize your contributions to these plans as well based on what type of employer or employee you are. If you a small business owner then also read small business tax challenges, using home office deduction right, new rules for writing off business equipment and vehicle, should you incorporate or not under new tax rules, and much more here.
With so many benefits to retirement plans, it is time to stopping sticking to the conventional means and start adopting these plans early to not only help benefit you but also keep your business and employees happy! There are many more benefits based on your circumstances and this is best evaluated by tax professionals like CPA’s or your tax advisor. What are you waiting for? Get contributing!