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Federal bailouts: one for them, one for you?

Posted: November 17, 2008 8:39 p.m.
Updated: November 18, 2008 4:30 a.m.

Everyone else is getting a Federal bailout, why not you?

If you are a small business owner, you may be able to enjoy an interest-free loan from the government.

Employer contributions don't need to be made until the filing date of the tax return, including extensions.

This means that for a calendar-year taxpayer with extensions, the actual contribution does not have to be made (depending on the type of retirement plan) until Sept. 15, 2009 or even Oct. 15, 2009. That looks to me like an eight and a-half month interest-free loan from the government!

Spousal tax deduction
If you have adopted an Individual 401(k) plan, or similar "one-person" profit sharing/401(k) plan, you can increase your deductible contribution by employing your spouse in the business. As an employee, your spouse, like you, can also contribute to the 401(k), in addition to receiving a profit sharing contribution.

There are payroll tax considerations for you and your spouse, so consult with your accountant to determine the optimal wage and contribution amounts.

Typically, the additional payroll taxes are more than covered by the additional deductible contributions.

Also, be aware that your 401(k) contributions need to be withheld from your paycheck before Dec. 31 if you are incorporated.

Tax deductions, credits
For you who are employers and have never had a pension plan, there is good news if you wish to consider one.

If you start any type of pension, profit sharing or 401(k) plan before Dec. 31, it covers common law employees, and if you never had a plan, you will be eligible for a $500 tax credit for the first three years of the plan.

Should any of these points be of interest to you, contact your financial advisor or someone you know who can help with pension planning. In today's economic climate, it is important that our small businesses take advantage of tax credits and deductions. This way, we can provide benefits that will keep employees, stay solvent in a tough economy and be prepared for the prosperity that will surely follow this recession.

Jim Lentini is president of Lentini Insurance & Investments, Inc., located in Santa Clarita. His column reflects his own view and not necessarily that of The Signal.


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