February 24, 2020
You could get paid to set up a retirement plan. The New SECURE Act provides tax credits for Small Businesses to sponsor a retirement plan
Because tax credits reduce tax for every dollar of credit allowed. It’s like getting paid by the IRS to establish a retirement plan for your small business under the guidelines in the new SECURE Act that became effective January 1, 2020.
Here are the key features of the new tax credits for setting up a retirement plan:
§ Start-up retirement plan credit for smaller employers of $250 per non-highly compensated employees eligible to participate in the employer plan. Tax credits are available for three years. The minimum tax credit is $500 and the maximum is $5,000 per year.
§ The credit amount is limited to 50% of actual plan start-up and administrative costs.
§ The tax credit program is available to employers with up to 100 employees beginning after December 31, 2019.
§ The tax credits apply to SEP, SIMPLE, 401(K) and profit-sharing type qualified plans.
§ There is also an additional tax credit of up to $500 per year for retirement plans that include an automatic enrollment feature.
For example, if you are a small employer with 20 non-highly compensated employees eligible to participate in the plan, the plan has an automatic enrollment feature and there are at least $10,000 per year in startup and administrative costs for the plan, the maximum aggregate tax credits for the three year period would equal $16,500.
The SECURE Act tax credit opportunity might be the incentive you need to set up a retirement plan for your business. Great topic for discussion with your financial wellness team.
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