SEP IRA

Archive for February, 2007

Question: What does a good tax preparer charge?

Well, now I am struggling again to do taxes. This is happening lately and I am being late too often. I have Turbo Tax and know WHAT to do, just do not get around to filing. Usually, I think a single person, with nothing more complicated than average retiree, should have a easy return, although not too simple since there are tax deductions, IRA, annuities and pensions. So what would be likely cost at store front place?
Also, may I legally resell TurboTax if never opened package?

Answer: You will find that charges for tax preparation will vary from preparer to preparer. I would avoid the store front tax preparation places. A lot of the people that work there have taken a 10 week course on how to do taxes – I know because I have taught the classes myself. Call around to a few CPA’s in your area and they should give you a feel for what they would charge. CPA’s are licensed and required to take continuing education every year to keep up with tax law changes. The tax law has become so complicated that it really takes a professional to do it right.

I don’t see a problem with selling your Turbo Tax since you’ve never opened it.

Joni M. Becker, CPA

Dion Gouws CPA Diego La Jolla Tax preparation Office.3gp

Question: is SIMPLE IRA deductible like traditional and roth?

Answer: First, a technicality…Roth contributions are made on an after-tax basis. They are not deductible from income taxes. On the other hand, distributions out of a Roth are not subject to income tax either.

A SIMPLE IRA is set up by your employer to simplify the retirement planning for employees…it is less burdensome than a 401-K.

The employer makes contributions to the SIMPLE IRAs set up for each of the eligible employees. In addition, employees can (but are not required to) tdefer a part of their salaries into the plan for retirement. A SIMPLE IRA Plan is funded both by employer and employee contributions. Each employee is always 100% vested in (or, has ownership of) all money in his or her SIMPLE IRA.

The Contribution limits are significantly higher for SIMPLE IRAs than traditional IRAs. Here are the limits:

Employee – $10,500 in 2007 and 2008. If the employee is age 50 or over, a “catch-up” Contribution is also allowed. This additional catch-up Contribution amount is: 2007 and 2008 – $2,500.

Employer – Generally, a dollar-for-dollar match up to 3% of pay or a 2% non-elective Contribution for each eligible employee.

The Contribution limit for a traditional IRA is $4,000 for 2007 and $5,000 for 2008 if you are 49 or less. If fifty or older, you can step up the Contribution by another $1,000 to $5,000 and $6,000 respectively.

Must You Participate in a SIMPLE IRA Plan?

Must all eligible employees participate in the SIMPLE IRA plan?

No, an eligible employee is not required to make contributions to the plan.

Participation is voluntary. Participating employees must establish a SIMPLE IRA to receive elective deferrals and employer matching contributions.

If an employee does not establish a SIMPLE IRA Account before contributions must be made on the employee’s behalf, the employer may establish a SIMPLE IRA for the employee.

An employer may elect to make a 2% of compensation Contribution on behalf of each eligible employee (both participating as well as nonparticipating), instead of making matching contributions. If an employee does not establish a SIMPLE IRA Account before contributions must be made on the employee’s behalf, the employer will establish a SIMPLE IRA for the employee.

Example: ABC Corporation established a SIMPLE IRA plan and elected to make a 2% nonelective Contribution for each eligible employee who receives at least $5,000 in compensation from the employer during the year. Employee A is eligible but chose not to participate during the year. The employer must still make a nonelective Contribution on the employee’s behalf and must establish a SIMPLE IRA Account for the employee to accept the Contribution.

What are the fees to establish a SIMPLE IRA Plan?

Each Simple Ira Account is assessed an annual account maintenance fee of approximately $15-$50 when the account is opened and every year thereafter. The annual maintenance fee is suaully submitted with the SIMPLE IRA application.

In addition, there is a termination fee of approximately $75 when the account is closed, unless the distribution is due to retirement (age 59 �), total disability or death.

*The annual IRA account maintenance fee is usually waived for large accounts.

Ultimately, it is the employee’s responsibility to pay his or her maintenance and termination fees for his or her own account.

There is usually no additional fee to the employer for using SIMPLE IRA Employer Agreement.

Must the employer file IRS Form 5500 or any other form on an annual basis for a Simple Ira Plan?

No.

There are no annual filing requirements for a Simple Ira Plan.

Where can I get more information about SIMPLE IRA Plans?