I own my INC company and I withdraw salary from my company. I have 3 more employees working for my company. Other employees dont want to participate IRA. How much maximum can I contribute to IRA for me and my wife?
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Traditional IRA contribution limits depend on your Adjusted Gross Income.
Normally, the limit will be $4,000.
There are factors that can reduce the limit below $4,000; if your AGI is over a certain amount, the limit on how much you can contribute will be reduced; also, if you contribute to other tax-deferred retirement plans, the limit may be reduced.
See IRS publication 590, but I believe the rules are being changed for 2006. You could consult with your tax advisor for the specifics of your situation.
It may matter how much of what you withdraw is salary and how much (if any) of what you withdrawl is a distribution/dividend, also.
But probably the taxable salary portion should be over the $4,000, anyway.
if your wife is also an employee, then, read irs faq
this may work for me, as opposed to roth ira. 25% pre-tax upto $44k - not after-tax $ like roth $4k max. i'm looking at the fidelity se401(k). what i need to find out is how easily transferrable if i decide to work for some1 else.
mak101 said:I own my INC company and I withdraw salary from my company. I have 3 more employees working for my company. Other employees dont want to participate IRA. How much maximum can I contribute to IRA for me and my wife?
mak101 said:I own my INC company and I withdraw salary from my company. I have 3 more employees working for my company. Other employees dont want to participate IRA. How much maximum can I contribute to IRA for me and my wife?
You can setup a SEP-IRA, but make sure that your Employees are not eligible. Several publications deal with this. Also possible to setup a Profit-Sharing Plan if SEP-IRA is not feasible. Both plans allow upto 25% of salary contribution per year.
dhobi said:You can setup a SEP-IRA, but make sure that your Employees are not eligible. Several publications deal with this.Generally speaking, U.S.-based full-time workers are going to be eligible, and a SEP is going to require a uniform contribution percentage, so that is probably not going to end up being useful.Also possible to setup a Profit-Sharing Plan if SEP-IRA is not feasible. Both plans allow upto 25% of salary contribution per year.Again, a qualified plan is going to require substantial contributions for the employees. It's also going to require substantial overhead.
A 401(k) could be a good choice -- it wouldn't necessarily require anything for the employees, though the employer's contributions are going to be limited if there's zero employee participation. But that may be the best choice, if you can afford it.
Other types of plans are useful in different situations. For example, if you're older than your employees, a target benefit plan will let you make large contributions for yourself and just small ones for them. A defined benefit plan will do even better. But these are complicated, and quite expensive to administer.
If you want an IRA-based plan, which is going to be the simplest and easiest, a SIMPLE IRA is the way to go -- though your employees may decide they do want to participate after they hear about matching contributions.
hoffjm00 said:Not interested in a 403 plan?He shouldn't be -- they're for nonprofits (and certain government employers).
SEP-IRA rules allow that an Employee has to work for you 3 out of 5 past years to be automatically eligible. You can make a rule that a F/T Employee has to wait 2 years before Employer contribution kicks in. (Make sure you don't disqualify yourself).
In Profit-Sharing Plans, all Employees who work less than 1000 hrs per year for you can be made ineligible.
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