EMPLOYEE RETIREMENT PLAN DEADLINE
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Small business owners who are considering starting retirement plans for their employees have a chance to save on their 2017 taxes. If they want to set up the least complex plan, the SEP, or Simplified Employee Pension, they can still do so by the due date for their returns — and that could be as late as Oct. 15 if they get an extension of the upcoming April 17 filing deadline.
SEPs require very little paperwork and reporting to the government. An owner can ask a bank or other financial institution to create a SEP, which includes separate retirement accounts for each employee. The owner must also complete a formal written agreement to provide benefits to employees; the easiest way to do that is to complete IRS Form 5305, Simplified Employee Pension — Individual Retirement Accounts Contribution Agreement.
Form 5305 doesn't have to be filed with the government, but each employee covered under the plan must be given a copy.
Owners do need to report the contributions they made to the accounts on their business tax forms. For 2017, they can contribute $54,000 or 25 percent of an employee's compensation. Employees cannot contribute to a SEP plan as they do with 401(k) and similar plans.
You can get more details about SEPs and other retirement plans in IRS Publication 560, Retirement Plans for Small Business. You can find it on the IRS website, www.irs.gov .
Owners who need more time to get the contribution amounts together should request an extension of the April 17 deadline. They'll need to file IRS Form 4868 Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. That can also be found on the IRS website. Very little information is required to complete Form 4868, but owners must be ready to estimate their tax bills and pay what they owe. If they're not sure how much they're going to contribute to a SEP, they need to make a good-faith estimate.
While the SEP is the only kind of employee retirement account that can be set up after the tax year has ended, owners who have other retirement plans including 401(k)s can also make 2017 contributions this year. They must do so either by April 17, or, if they obtain an extension, Oct. 15. Information about those accounts is also available in Publication 560.
STANDING OUT FROM THE CROWD
Small businesses need to differentiate themselves from their competitors if they're going to succeed in a crowded industry. They can get tips on how to do that during an online seminar sponsored by SCORE, the organization that gives free advice to small businesses. It will be held Tuesday, April 10 at 1 p.m. Eastern time. You can learn more and register at https://bit.ly/2Gq6FgY .
Follow Joyce Rosenberg at www.twitter.com/JoyceMRosenberg . Her work can be found here: https://apnews.com/search/joyce%20rosenberg