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Reward top earners with your retirement plan

by on
in Small Business Tax,Small Business Tax Deduction Strategies

As one of your company’s highest-paid employees, you probably think you deserve a bigger profit-sharing contribution than most other employees. But the tax law’s tough nondiscrimination rules can work against you. Those rules are designed to ensure that lower-paid employees aren’t squeezed out of the mix.

Strategy: Integrate your company’s profit-sharing contributions with Social Security tax payments. That effectively reduces the amount the company must contribute on behalf of the rank and file.

As a result, highly compensated employees — including you — will be entitled to a larger slice of the pie.

Is it legal? Absolutely. An integrated retirement plan qualifies as a “permitted disparity” under a special exception in the tax law. The plan is not considered discriminatory even though only a select few might benefit from it.

Here’s the whole story: Employers are required to pay their share of FICA tax (both Social Security ...(register to read more)

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