March 4, 2010 (MMD Newswire) — With the Bush tax cuts set to expire Dec. 31, 2010, income taxes will increase to nearly 40% for individuals and professional corporations.
Taxpayers are just starting to feel the pinch because of state budget deficits. Hawaii and Oregon have already increased their state income taxes, tacking on an additional 11% for high-income taxpayers.
As high-income small business owners meet with their tax advisors, they are looking for tax-saving strategies, and exploring pensions, 401(k)’s, and profit sharing plans.
Today, with the savings rate so low, Congress has relaxed the rules to allow deductions for contributions to both defined benefit and profit sharing plans.
When “a penny saved is a penny earned” and taxes take up to 50% of your penny, not much is being saved. “A pension (defined benefit) plan is the only qualified retirement plan that will allow a business owner to contribute and deduct more than $49,000 for 2010,” says James Podleski, President of National Pension Partners.
Reviewing the new tax laws and understanding the different types of retirement plans available can bring great value. Here are a couple helpful tips when speaking with your CPA or tax advisor about pension plans.
”SOCIAL SECURITY AND MEDICARE TAXES”
Individuals can save up to 15.3% in additional Social Security and Medicare taxes by electing to use a pension or profit sharing plan as opposed to a 401(k). A 401(k) requires Social Security and Medicare taxes to be withdrawn from deferred amounts, whereas pension and profit sharing contributions are made free of Social Security and Medicare taxes.
There are four types of defined benefit pension plans: traditional, cash balance, 412(e)(3) or fully insured, and the DB/K. Choosing which plan is best suited for you will require a comprehensive review of all appropriate designs. Working with a bonded, third party administrator, capable of illustrating all designs and offering an explanation of the pros and cons for each, will be valuable when meeting with your CPA or tax advisor.
To learn more about the new tax saving advantages a pension plan can offer while saving for retirement, go to: http://www.nppdirect.com and view “Pension Tour”. This pension education tour is approved by the National Association of State Board Accountancy NASBA.
Nicholas A. Paleveda, MBA, JD, LL.M., a tax attorney licensed in Florida with over 25 years of experience working with high-income individuals and businesses will be making the presentations in 27 states across the country in the spring of 2010.
‘Mark & Dave Scott are principals with the Scott & Baldwin accounting firm and located in Roseville, Ca. http://www.scott-baldwin.com/’
Contact Information: James Podleski, President, National Pension Partners. firstname.lastname@example.org, Cell: 310-704-0826 Fax: 360-756-9033