Posted by Art_PA on 12/12/09 10:24am
Msg #314108

Tax Planning

Self employed notaries should look into establishing a SEP IRA, or a solo 401k before the end of this year. Assuming you have not spent your money, you can shelter a considerable amount, particularly with the 401k, and especially if you are over the age which allows you to make a "catch-up" contribution. The annual contribution limits change, and I believe you can contribute over $15,000 for 2009.

These plans allow you to cut your taxes greatly and are worth looking into if you have the cash to fund them.

Reply by Jim/AL on 12/12/09 11:26am
Msg #314119

Can u loan me about 14 grand Art? n/m

Reply by John Tennant on 12/12/09 11:35am
Msg #314120

You might also look into Roth IRA using after tax dollars. In a Roth, if the contributions are not withdrawn in the first 5 years all of the interest or investment returns relating to the Roth are IRS tax free for life. In addition, you can start a Roth anytime before April 15, 2010 and have it count as starting this year.
Finally, anyone that has a 401k or other type of IRA can roll it into a current, or new, Roth during 2010 without unlimited earnings, and pay only half of the rollover taxes on the 2010 income(paid to IRS in 2011) and one half on the 2011 income (paid to IRS in 2012). This window is only currently available during 2010.

Reply by Art_PA on 12/12/09 12:33pm
Msg #314124

I am not a financial planner and have nothing to sell. I have lent my available funds to Warren Buffett and am not in a position to help Jim, or any of you with your retirement plan contributions.

Having said that, you owe it to yourselves to determine whether is is best to contribute to traditional plans which allow you to shelter income and thereby pay less tax now, or to contribute to a Roth with after tax $$.

You should be aware that you will see a great deal about Roth conversions of traditional plans, which will be pushed by financial advisers, insurance agents, banks, brokers, etc., who will only benefit if you buy some product from them when you convert.

There is no guarantee that say, 20 years from now, Congress will not change the rules for Roth IRAs making them taxable in order to pay for some other wonderful benefit program, so I am no a fan of paying taxes now to maybe save taxes later. From what I have read, the Roth conversion numbers only work if you have outside funds to pay the taxes incurred, and can thereby keep the traditional IRA assets intact in the Roth.

I suggest that you owe it to yourselves to pay less tax and to put something in a plan now. How much depends on how much you have left in your bank account which you can afford to contribute. You can run the numbers and see how much you can save by creating a 401k or SEP IRA. It is certain that you do not get a superbox in heaven by paying more taxes than you have to pay. Do a little research while you are waiting for the phone to ring.

Reply by Charles_Ca on 12/12/09 6:57pm
Msg #314166

Re: Tax Planning, good ideas Art but no good deed goes

unpunished, at least not here.

Reply by Susan Fischer on 12/14/09 1:01am
Msg #314224

Dad rolled a hefty IRA into a Roth years ago, when

his tax liability was fairly low, and there will be no further taxes owed.

I don't believe Congress can tax the same dollar twice, even in 20 years.

Of course, Dad was in a position to pre-pay taxes, and the amount rolled was considerable. His main reason was to save his heirs taxes due, which I thought was a very, very nice thing to do for his children.

Reply by NewPhoenix on 12/12/09 5:04pm
Msg #314159

I have a self directed ROTH IRA but you can only contribute your after tax dollars from employed W2 type income (as opposed to self-employed income) when you are working for someone else.
Since I have been self employed for quite a while now I have not been able to put any more money into my ROTH.

I'd like to find a ROTH type of plan I could set up from my self-employed after-tax income. But I guess the closest thing is the SEP IRA. But with those you can only invest they way THEY (whoever you set it up with) tell you to - in their company of course.

I'm sure somebody knows better...

Reply by John Tennant on 12/12/09 5:25pm
Msg #314162

Please check your PM.

Reply by John Tennant on 12/12/09 6:56pm
Msg #314165

FWIW

The 2008 IRS Publication 590, page 60, chapter 2, states that all earned income that is taxable, including self-employment income, can be used for a Roth IRA. Not included, SSi, Retirement benefits, etc. Earned only.

Reply by NewPhoenix on 12/13/09 1:02pm
Msg #314194

FWIW

Hey thanks for the reference that is good news. Now I don't have to open up a different account.

Reply by MW/VA on 12/13/09 9:17am
Msg #314176

Great advice, Art. Thanks for the tip. I think I need to plan this for this coming year.