Demand for Retirement Plans Increases Due to an Available Tax Credit, According to Leading Provider

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Sense Financial Services announced a growing interest in its self-directed retirement accounts as consumers utilize a tax credit to cover costs of establishing the plans. The tax credit can be claimed for entire establishment cost of qualified retirement plans, such as the Individual k or Solo 401k.


The tax credit can cover the entire cost of plan establishment

Sense Financial Services announced an increased interest in the self-directed Individual k or Solo 401k due to the Eligible Small Employer Tax Credit. The leading California provider has seen its clients use the tax credit to cover the establishment costs of their self-directed retirement plans. Most of the company's clients are small business owners and self-employed individuals who qualify for both the retirement plan and the available tax credit.

The Eligible Small Employer Tax Credit can be claimed by small business owners and self-employed for the cost of establishing a qualified retirement plan. IRS Publication 560 outlines the credit as covering the cost of setting up and administering a qualified plan. The credit also includes the costs for educating employees on the retirement plan. Employers may claim the credit for 50% of the plan costs per year, for three consecutive years. The maximum amount of the credit is $500 for each year, for a total of $1500 over a three year period.

The tax credit can be applied to the year before the retirement plan is adopted, counting as part of the set-up cost of the plan. This feature allows the full cost of plan establishment to be covered by the credit.

The credit may only apply to a qualified plan, such as the Individual k or Solo 401k retirement account. The Individual k is a traditional 401k that has been simplified for the small business owner and self-employed. The structure of the IRS-qualified plan affords options and advantages to those who qualify. Its features include high contribution limits, loan feature, and unlimited investment capability. The Eligible Small Employer Tax credit can be applied to the set up costs of the Individual k and can even cover the full cost over the three year period.

In order to be eligible for the credit, a business must have up to 100 employees who have received at least $5,000 in compensation in the tax year before the credit can be claimed. An employer is not eligible for the credit if he or she has previously established or maintained a qualified employer plan within three years before the credit is claimed.

The Eligible Small Employer Tax credit is part of a general business credit that was established by the The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) in 2001. The act made many changes in the Internal Revenue Code, including rules for qualified and retirement plans. A provision in the EGTRRA enacted the credit in an effort to aid small business employers by offsetting the cost of retirement plan establishment and education.

The tax credit can be utilized by the self-employed and small business owners to establish the Individual k plan. The qualified plan offers several advantages to its participants. Claiming the Eligible Small Employer Tax credit can cover the costs for establishing the plan. In order to claim the credit, eligible employers may file Form 8881, Credit for Small Employer Pension Plan Startup Costs.

About Sense Financial Services:

Sense Financial is California's leading provider of retirement accounts with “Checkbook Control”: the Solo 401k and the Checkbook IRA. Over the years, they have assisted hundreds of clients obtain checkbook control over their retirement accounts while providing them with the ability to invest in virtually any investment class, including real estate, private lending, mortgage notes and much more without the need for custodian approval.

To learn more about the solutions they provide, please contact: (949) 228-9393.

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Dmitriy Fomichenko
Sense Financial Services
(949) 228-9393
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