Two months to go until tax day! Here’s my annual nag about tax planning for US based entrepreneurs.
If you’re a US entrepreneur, you should talk to your accountant/financial planner about a SIMPLE IRA. You are eligible even if you have a 401(k) plan at another job, and you can shelter up to $10,500 in regular income and bonuses (but not dividends) from taxes.
Here’s the IRS Page on the SIMPLE IRA.
It’s too late to set up a SIMPLE for 2007, but it’s the perfect time to do it for 2008.
* If your income is derived from software development, ask your tax advisor if you are eligible for the Domestic Production Activities Deduction (form 8903). You could be eligible for a deduction of as much as 3% of your qualifying income.
* If you haven’t opened a Roth IRA, what the heck are you waiting for? If you have a 401(k), but your situation does not allow you to fully fund both your Roth and your 401(k), most experts suggest funding the 401(k) up to your employer match, and then funding your Roth. The Roth doesn’t give you the immediate deduction, but you do get tax-free compounding which is tremendously valuable for younger workers. And you can still set up a Roth for 2007 until tax day 2008. A great source of Roth information is RothIra.com.