SEP IRA

Posts Tagged ‘retirement’

realestate2cash_SDIRA2of5.mov

Question: I want to cash out my entire IRA?

I have a SIMPLE IRA floating around from a previous job with about $1,000 in it, and i need to cash it out to pay off a credit card. I need to know if i can do this, how soon, and what are the consequences to it? i know it’s not a 401k but i know the IRA is similar, help?

Answer: with the simple, there’s a 25% penalty if you cash out within 2 years of when you started working for the company. longer than that, it’s a 10% penalty.

this is in addition to paying regular income tax on the value of the account.

Recessionproof Real Estate Investing with a Self Directed IRA LLC or Solo 401k

Question: Tax regarding contract income and business loss?

I work in a contract positions and will make 90K , i was planning to put in 20% ie 18K in SEP IRA .
I also have a startup business this year , which generated 40K in capital losses.

Answer: I think you have some confusion about the startup business.

“Capital loss” is only possible on the disposition of a “capital asset”. Using the word “generated” makes it sound like what you have is an operating loss. That’s actually good news for you. Capitial losses can only offset cap. gains plusanother $3k of ordinary income. This operating loss is ordinary, meaning that you are not limited (unless other limitations apply such as passive loss or at-risk limitations).

Now, before you do a happy dance you have probably not figured the loss correctly. You must distinguish between start up costs ( money spent getting ready to open the doors) and operating expenses incurred once you are in biz. Start up costs must be amortizwed ( you can elect to expense up to $5000 of start up costs) but you must amortize the excess above $5000 over a 15 year period.

SEP-IRAs are set up on a per business basis. If youv had employees in one biz, it is not right that they be shorted because you lost $$ in another biz. This is true even though you have no employees.

Also, even though you will net your bottom lines for SE tax , you must figure SE tax on the SEP IRA biz only and reduce net income by half of SE tax before applying the 20%.

Good luck.

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