The following content originally appeared in an article by Dawn Reiss in US News & World Report on March 8, 2017.
Last-Minute IRA Contributions Before Filing Your Taxes
As the end of tax season looms, here’s what investors should consider.
Many investors, especially those who run small businesses, don't have a clear picture of their income tax liability before the end of a tax year.
Prior to filing their income taxes, there are some moves investors can make to improve their tax situation and retirement planning.
If business owners are looking to reduce their tax liability, another avenue is the simplified employee pension. With a SEP, employers can contribute 25 percent of net compensation per employee – up to $265,000 – or $53,000 that year, whatever is less.
"While you do have to make contributions for every employee, it's a no-brainer for anyone operating solo or who have just a few employees," says Lauren Klein, founder and president of Klein Financial Advisors in Newport Beach, California.
Self-employed individuals can contribute up to 20 percent of their adjusted net earnings to a SEP, or the yearly limit, whichever is less.