Small Business Owners Looking to Establish Solo 401(k) Plan for 2013 in light of Fiscal Cliff and Higher Income Taxes, According to an IRA Financial Group Tax Attorney

Share Article

Expected higher income taxes in 2013 causing small business owners to focus on the solo 401(k) plan as a way of minimizing the expected tax rate increase

Self-Directed IRA Investors Concerned about the Fiscal Cliff

If the tax increases on income tax happens in January 2013, having a solo 401(k) plan will offer self-employed individuals and small business owners with a way of minimizing the tax increases

With Democrats and Republicans both trying to come up with ways to solve the looming fiscal cliff issue, self-employed individuals and small business owners have been turning their focus to how to protect themselves from the $607 billion of tax increases and federal spending cuts set to kick in automatically in January, the so- called fiscal cliff. The Congressional Budget Office has said the U.S. economy would slow by as much as 0.5 percent next year if Congress fails to keep the increases from taking effect. One area that has concerned self-employed and small business owners is the income and investment tax increases that could take effect at the beginning of 2013. For example, if the tax increases that are set to kick in automatically in January, the rate on dividends for high-income taxpayers will rise to 43.4 percent from 15 percent and the top rate on capital gains to 23.8 percent from 15 percent. For an individual with $10,000 invested in the S&P 500, payouts would fall to $120 a year from $180.20 should the old rate be reinstated. An investor who sells the stock at a $5,000 profit would face capital gains obligations of about $1,190 compared with $750 now.

“If the tax increases on income tax happens in January 2013, having a solo 401k plan will offer self-employed individuals and small business owners with a way of minimizing the increases, stated Adam Bergman, a tax attorney with the IRA Financial Group. “A solo 401(k) plan would allow investors to put the extra tax money in their retirement account instead of the Government's”, according to Mr. Bergman.

Many small business owners are expecting the President to demand tax increases for the wealthy, which includes many self-employed individuals and small business owners, as part of a deal to reduce spending to tackle the nation's deficit. “As a result, small business owners having been rushing to establish individual 401k plan for their business so they can minimize any tax increases they would face, “ stated Mr. Bergman.

The Solo 401(k) plan is unique and so popular because it is designed explicitly for small, owner-only business. It’s a tax efficient and cost effective plan that offers all the benefits of a Self-Directed IRA plan, and includes additional benefits.

While an IRA only allows a $5,000 contribution limit (with a $1,000 additional “catch up” contribution for those over age 50), the Solo 401(k) annual contribution limit is $50,000 for 2012 with an additional $5,500 catch-up contribution for those over age 50. In addition, if ones spouse generates compensation from the business, he or she can also make high contributions to the Plan.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP and Dewey & LeBoeuf LLP.

IRA Financial Group is the market’s leading “Checkbook Control” Self Directed IRA and Solo 401k Plan Facilitator. We have helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate tax-free and without custodian consent!

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Jaclyn Baily
Visit website