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Solo 401(k) Plan Deadlines for 2011 Tax Savings Are Fast Approaching

12/08/2011:

There is an important deadline for owner-only businesses that want to save on taxes this year, let alone have money set aside for retirement. Solo plans, also called Individual 401(k) plans, enable owners to tax-defer up to $49K in taxes for 2011 or $54,500 if you are at least 50 years of age. This can be a significant tax savings for this year, to the tune of nearly $10,000 for some.

Must Purchase a Plan Now to Have Until Your Tax Deadline to Save on 2011 Taxes

Individual 401(k) plans, which are for the self-employed or any multiple owner business that does not have any employees, must be setup by December 31, 2011 to receive tax benefits. The good news is that you’ll have until your tax filing deadline (April 17, 2012 for most) to make profit sharing contributions into your 401(k) and still receive the tax benefits for 2011.

ShareBuilder 401k has pretty much the latest deadline to buy and setup your plan that qualifies for 2011. You can purchase and complete the online setup by December 31st at 11:59 Eastern and still qualify. There is a nominal expeditor charge for plans purchased from December 23rd through December 31st.

You’ll Have Access to Roth 401(k) and Loan Options Too

Individual 401(k) plans also allow you to make Roth contributions during the calendar year (but Roth contributions are not valid for the previous year if made post December 31st). With a loan through your 401(k) plan, you can always access half of your money up to $50,000 penalty-free in case of an emergency and you pay it back to yourself. For a summary of a Solo 401(k) plan benefits, just give this a read.

Paying yourself first is a great way to receive a gift that can keep on giving for years to come.

Happy Holidays!

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