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Deadline for SIMPLE IRA is fast approaching

Posted by Andrew Chan  September 15, 2010 10:45 AM

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Qualified small businesses and self-employed individuals who are considering establishing a SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) IRA for this calendar year but must do so by October 1, 2010 in order to make contributions for the 2010 tax year. A SIMPLE IRA is a type of employer-sponsored, tax-deferred, retirement plan that allows small employers to make retirement contributions to their retirement and their employees’ retirement. In addition to employer contributions, employees are also allowed to make their own SIMPLE IRA accounts.

Qualified small businesses are defined as (1) those who do not currently maintain another retirement plan (such as a qualified plan, SEP or 403(b) plan), and (2) those with 100 or fewer employees who each earned $5,000 or more in compensation during the preceding calendar year.

For a small business a SIMPLE IRA offers several advantages over other types of tax-deferred retirement plans including:
• An easy way for employees to contribute towards their retirement;
• A relatively inexpensive tax-deferred, retirement plan to set up and administer;
• An ability to offer an employer match for the contributions made by employees;
• Potential tax credits for the costs incurred to set up the SIMPLE IRA plan; and
• Potential tax deductions for contributions made to employees’ accounts.

Keep in mind that SIMPLE IRA plans may not be appropriate or beneficial for all small employers. For more information about SIMPLE IRA retirement plans, visit the IRS web site at: http://www.irs.gov/retirement/sponsor/article/0,,id=139831,00.html


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