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In the general sense, these people are not considered employees, per se, however, for the purpose of allowing them to use a tax qualified pension program, they are deemed as an "employee." For these reasons, you often find these types of qualified pension plans used by physicians, attorneys, dentists, or other entrepreneur type occupations that own and operate an unincorporated practice/operation.
Contributions are generally limited to 25% of the participant's compensation or $44,000 whichever is less.
Like other qualified plans, the contributions are made with pre-tax money and all earnings accumulate tax free until withdrawal. However, self-employed people who are deemed as an owner/employee cannot contribute to this plan unless they provide benefits for all other full time, eligible employees. Employer contributions, on the other hand, do not have to be made each year.
Lastly, as with any other tax qualified plan, the plan must be in writing prior to the end of the taxable year for which the deduction are claimed.
Action
To Take If you are self-employed and are interested in evaluating a Profit Sharing or Keogh type plan, including various funding options, please click HERE.
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Fielder Financial Management, LTD.
All Rights Reserved.
Securities are offered through Girard Securities, Inc.
member FINRA, SIPC.
Mark R. Fielder, Registered Principal. CA. Insurance Lic. # 0690576.
