You are paying income taxes that could easily be avoided.

Have you procrastinated about setting up a tax-advantaged retirement plan for your small business? If the answer is yes, you are not alone.

Still, this is not a good situation. You are paying income taxes that could easily be avoided. So consider setting up a plan to position yourself for future tax savings.

For owners of profitable one-person business operations, a relatively new retirement plan alternative is the solo 401(k).

The main solo 401(k) advantage is potentially much larger annual deductible contributions to the owner’s account—that is, your account. Good!

Solo 401(k) Account Contributions

“SEP IRAs, a popular option that is often recommended for tax-deferral and retirement savings, does not allow elective deferral contributions, so $19,500 (or $26,000) is left off the table.“

With a solo 401(k), annual deductible contributions to the business owner’s account can be composed of two different parts.

First Part: Elective Deferral Contributions

For 2020, you can contribute to your solo 401(k) account up to $19,500 of

• your corporate salary if you are employed by your own C or S corporation, or