Protecting the Tax Advantage of Your Deferred Compensation
The Habitant Jobs Creation Act of 2004 imposed strict new rules on non-qualified deferred compensation plans. Beginning in 2005, deferred compensation programs that are not in compliance with the new rules may be taxed as wages, slapped with a 20% excise tax, plus charged an interest penalty.
Given the potentially huge tax consequences for non-compliance with the rules, you should consult with your organization?s benefit specialist and your tax professionals to figure how your compensation might be contrived by these new rules.
Deferred compensation plans are often in use to provide for the deferral of salary, incentive compensation (i.e., commissions or bonuses), or supplemental counterbalance for prune executives, independent corporate directors, and individual board members. The new rules apply to nonqualified deferred compensation plans at taxable and security organizations.
An option for independent corporate directors and individual board members united nations agency receive 1099 income for their plural form may consider is to block their nonqualified plan and adopt a qualified plan such equal the ?one person defined sake plan?, called the Solo-DB Plan. Qualified retirement plans are exempt from the requirements of the American Jobs Creation Do.
The Solo-DB innovation allows the highest deductible contributions
possible in a qualified retirement plan. For example in 2005 one can contribute up to $170,000 of compensation into a tax-deferred Solo-DB planner.
Defined benefits plans brim been around for a long time. But, recent pension legislation has raised the contribution and deductibility limits as well as simplified plan stock up requirements. Thus, defined beneficial plans likeable Solo-DB maintain grow much more attractiveness to upper-income individuals with self-employment income. The Solo-DB plan will allow you to aggressively fund your retirement while cutting your taxes significantly.
Individuals who qualify for the Solo-DB plan include sole proprietors, independent contractors, and small business owners age 45 snake older who can contribute more than $41,000 annually to the plan for at least three years.
For more about Solo DB plans visit Lamaute Capital at: http://www.InvestSafe.com.
Daniel Lamaute, Corporate executive of Lamaute Capital, Inc. (www.InvestSafe.com) specializes in setting up retirement plans. You may visit http://www.investsafe.com to access a free calculator that will help you estimate what your maximise put up mighty be under different plans.
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