SEP IRA

Posts Tagged ‘simple ira vs 401k’

Question: Simple tax questions that I don’t know the answers to?

Last week, I did my taxes with Tax Cut Software as I have done for several years in the past, because I have one W-2, mortgage interest, property taxes and that’s about it. Well, when I looked at the projected refund I would be receiving, I fell down. It is about half of what I normally receive ($800 down from $1600). To isolate the problem, I went back to the W-2 section and entered last year’s W-2 info and sure enough….it went back up to $1600. I can only guess that I jumped to a higher tax bracket earning about $64k in ‘06 vs. just over $70k in 2007.

Questions:
1) Does the above sound correct?

2) For future reference, will contributing substantially more to my 401K knock my earnings down to the lower tax bracket gaining me the higher refund?

3) Can I still do anything this year to get the higher refund….I heard snippets of someone saying something about opening an IRA with $4k or $5k or whatever the max is to knock down earnings to get me the higher tax refund?

Answer: question 1 yes
question 2 yes
question 3 yes and u have till april 15 to do it, plug the different number in and u will see the result of reducing ur taxable income.

Get Massive Profits In Your 401K or IRA

Question: Can a person make maximum contributions to a SIMPLE IRA and a 401k in the same year?

The person works for two employers, one has a 401k, the other has a SIMPLE IRA.

Answer: There is a maximum you can contribute to your 401(k) and a maximum you can contribute to an IRA. The two have separate limits and one does not affect the other.

Also, if you are contributing to a 401(k) it is generally a good idea to contribute to a Roth IRA as opposed to a traditional IRA unless you need the immediate tax write off.

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