| Do you provide a tax-deductible retirement plan | | | | so you would do well to research each one |
| to the employees of your Sole Proprietorship? If | | | | thoroughly before deciding which one is best for |
| so, this article will explain the ins and outs of how | | | | you, your business and your employees. |
| to properly deduct any expenses related to such | | | | Some of these plans allow you to make |
| plans on your Schedule C. | | | | tax-deductible contributions on behalf of your |
| If you look at Schedule C, Line 19, you'll notice it | | | | employees. Some of these plans also allow your |
| says "Pension and profit-sharing plans". For many | | | | employees to make voluntary pre-tax |
| Sole Proprietors, does such language cause your | | | | contributions to the plan from their compensation. |
| head to spin while reaching for the Tylenol? Yes, | | | | And some of these plans have a matching |
| such wording can seem archaic to us. Does | | | | provision in which you make a contribution to the |
| anyone still have a pension plan? The answer to | | | | plan only if the employee makes a contribution. So |
| that question is Yes, but there are several other | | | | there is quite a variety of options here. |
| types of retirement plans that are more common | | | | For more information on the different retirement |
| these days, and any expenses you incur to setup, | | | | plans available to Sole Proprietors, check out IRS |
| maintain and contribute to an employer-sponsored | | | | Publication 560, Retirement Plans for Small |
| employee retirement plan are usually deductible. | | | | Business, available for free at the IRS website, or |
| Here are the more common types of retirement | | | | consult with your tax or investment professional. |
| plans you should consider offering to your | | | | Two other important warnings related to small |
| employees: | | | | business retirement plans: |
| 1. Simplified Employee Pension Plan, also known as | | | | 1. Contributions on behalf of yourself are generally |
| a SEP. | | | | not reported on Schedule C. They are instead |
| 2. Savings Incentive Match Plan for Employees, | | | | deducted on Form 1040, Line 28, "Self-employed |
| better known as a SIMPLE Plan. | | | | SEP, SIMPLE, and qualified plans." |
| 3. Keogh Plan. | | | | 2. Some retirement plans require you to file an |
| 4. 401(k) Plan. | | | | information return known as Form 5500 or Form |
| Each of these plans has different features and | | | | 5500-EZ. Be sure to find out whether your plan |
| benefits for both your employees and yourself, | | | | has such a requirement. |