What Is a SIMPLE IRA or Payroll Deducted IRA?
Feb 01, 2021
When we are working with businesses that have employees and want to offer a retirement option but may not want to get too complicated with a 401k, we usually land on two main options:
- SIMPLE IRA
- Payroll Deducted IRA
What Is a SIMPLE IRA and What Do I Need To Know About SIMPLE IRAs?
A SIMPLE IRA plan (Savings Incentive Match Plan for Employees) allows employees and employers to contribute to pre-tax IRAs set up for employees.
- Contributions and Matching
- Contributions up to $13,500 for 2021.
- Employer can choose from a 2% contribution to all eligible employees OR a 3% matching contribution (only those who choose to contribute).
- Tax Advantages
- Business contributions are deductible business expenses.
- Investment gains are tax deferred until distribution.
- Roth option NOT available.
- Filing and Compliance
- Employer does not need to file a 5500.
- Discrimination testing is not required.
- Notes
- If you are a business owner with employees but want to keep retirement “simple”, this is a great easy option.
What Is A Payroll Deducted IRA and What Do I Need To Know About A Payroll Deducted IRA?
A placeholder until your company is ready to onboard a full on retirement plan.
- Definition
- An employee establishes an IRA (either a Traditional or a Roth IRA) with a financial institution.
- The employee then authorizes a payroll deduction for the IRA.
- The employer’s responsibility is simply to transmit the employee’s authorized deduction to the financial institution.
- Contributions and Matching
- Contributions up to $6,000 for 2021.
- Employer does NOT match contributions.
- Employer deductions contributions from employee’s paycheck and sends to the financial institution.
- All employees may participate.
- Tax Advantages
- Employee contributions and investment gains may enjoy tax deferral until distribution.
- Both traditional and Roth IRAs available
- Filing and Compliance
- Employer does not need to file a 5500.
- Discrimination testing is not required.
- Once the employer submits the contributions, they have no further responsibility.
If you are looking for professional advice and help in this area, we work directly with Life, Inc Retirement Services. Visit this page to get connected!.
On the link above you can setup a call to connect with an expert and get started right away. There is also a retirement plan evaluator which will guide you towards the best plan for your business.
The Time Is NOW To Start Paying Less In Taxes.Ā Join TaxElm and start eliminating taxes and growing your wealth!
What you'll get:
- Tax Savings Blueprint and Training: This is your roadmap to hit the ground and start implementing. Know exactly which strategies are relevant to you and which ones you should focus on first! Then dive into the training library with content, videos, downloads, guides, templates, etc. and start implementing right away!
- Unlimited Access to Tax Experts: Got a specific question about a tax rule? Youā€™ll have unlimited messaging access directly with-in the software to our team of tax experts to get the accounting and tax answers you need.
- Annual Comprehensive Consultation: Once a year you get a live meeting with a tax expert to discuss anything tax savings you would like. This is your time to get your questions answered live 1-on-1.
- Annual Tax Return Review: Each year, upload your prior year tax returns, and our expert team will meticulously analyze them to generate a custom report highlighting key findings and actionable savings strategies tailored to your specific tax situation.
- Monthly Webinars and Training: Every month, we host a live, virtual training session on a key tax topic. Join us live and bring your questions or view the training on your own schedule (recordings are added to the tax training library).
- Partner Directory and Discounts: You get exclusive, members-only rates and access to our expert referral network for accounting, bookkeeping, tax preparation, payroll, financial planning, legal, retirement planning, tax resolution, and more!
- TaxElm Guarantee: We will present tax saving strategies that will, at a minimum, cover the cost of your subscription fee or your money back!
It is like having a taxĀ strategist walking with you along this entrepreneurial journey!
Stay connected with news and updates!
Join our mailing list to receive the latest news and updates from our team.
Don't worry, your information will not be shared.
We hate SPAM. We will never sell your information, for any reason.
