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Self-employeds: Take your last shot at cutting 2004 tax

by on
in Employment Law,Human Resources

If you're among the millions of self-employed Americans who opted for an automatic filing extension, enjoy the summer while you can. Just remember that the due date for filing your 2004 tax return isn't far off. It's Aug. 15, 2005.

Strategy: Now's the time to make a tax-deductible contribution to your Simplified Employee Pension (SEP) or Keogh plan. The deadline is your regular tax return due date plus any extensions. In other words, if you haven't filed your 2004 return, you still have time to cut your 2004 tax bill!

The maximum deductible contribution for a 2004 SEP is the lesser of 25 percent of compensation or $41,000. For Keogh plans, the effective percentage figure is 20 percent of earned income. Note: You can deduct Keogh contributions for the 2004 tax year only if the plan was in place before Jan. 1, 2005.

Alternatively, if you qualify, you might contribute to a SIMPLE plan. With a SIMPLE, you can contribute up to $9,000 for 2004 (plus an extra $1,500 if you're age 50 or over).

Tip: As with SEPs and Keoghs, the contribution deadline for SIMPLEs is your tax return due date plus extensions. But the plan must be established by Oct. 1 of the year for which you claim deductions.

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