Tax Mistakes or Tax Breaks Part 3

Doesn’t it seem that the older you get the faster time goes?

3_1One day I was celebrating my 16th birthday. Then the next day I was battling hot flashes and watching my youngest child graduate from high school.

Many of us start out in life full of hopes and dreams. We also strive in our working years to advance in our careers, but perhaps haven’t given much thought to our advancing years.

Then one day there are company layoffs, perhaps illness and other unforeseen circumstances, and no plan B. Or retirement planning came much later than originally hoped 3_2for.

         How about a strategy?

Another tax write-off for the self-employed is a retirement plan. A person with no employees can set up an individual 401K. Your CPA can give you the details, but this is a benefit to keep in mind.

If you have employees, you can implement a SIMPLE (Savings Incentive Match Plan for Employees) IRA – an IRA-based plan that gives small employers a simplified method to make contributions to their employees’ retirement.
There is a third retirement plan called the Simplified Employee Pension IRA (SEP IRA) but once again, 3_3check with a CPA for all the details. A CPA friend of mine told me recently that “retirement plans are a tax deduction that the government is helping to fund.”

Also consider health insurance premiums, which in most cases represent a credit rather than a tax deduction.  “A credit goes directly against one’s taxes, rather than a reduction of income,” my CPA friend said.
Aside from tax deductions, being your own boss, whether it be though a sole proprietorship, LLC, S or C Corporation entity, empowers you to lay down some long-term strategies for money savings from year to year – particularly if you are a high earner.

I’d rather have a break then a mistake any day!