E every wage earner in America has a tax problem. In the last three decades, taxes have climbed to an alarming rate. The more you earn the more you pay! Taxes are an important item to consider, because…it is not what you earn that counts…it is what you keep! The problem is that most people do not understand the basic rules of the Tax Game.
What is a Qualified Plan?
A Qualified Plan(QP) is a plan that meets requirements of the Internal Revenue Code and as a result, is eligible to receive certain preferential tax benefits. These plans include: Money Purchase, Profit Sharing, 401K, Stock Bonus/ESOP. They allow someone who has earnings and is younger than 701/2 years old, to accumulate some of those earnings on a tax deferred basis. Everyone who pays taxes should try and maximize their contribution to whichever plan(s) they are eligible.
The QP allows a person to defer tax on earnings until they begin withdrawing funds at retirement.
Individual Retirement Account(IRA)
Everyone 701/2 with earned income should consider having an IRA even if they are a participant in a qualified plan. For 2013, depending on your income, an individual can contribute up to the amount shown below and have it be fully deductible (contact your tax advisor for specific information).
|IRA Contribution Limit||5,500|
|IRA Catch-Up Contributions||1,000|