Last minute deduction

[ILLMAS]

Hello to all, I paid and pre-paid as any items as I could, but I still have a small profit, I am thinking of either opening an SEP or IRA plan, can someone advice on what's best? I have a 401K plan, which I haven't contributed in almost a year.

Thanks

[Lion EA]

Why don't you contribute to your 401(k) plan on a final 2008 payroll? If you have very little profit, an IRA allows $5,000 without being limited to profit. If you have more profit or are limited in IRA contributions due to being an active participant in an employer's plan, then a SEP has higher limits than an IRA but IS limited by your net SE income. You can contribute to your IRA up to 15 April and to a SEP through your return due date including extensions. You don't even mention Roth contributions. You need to sit down with your tax advisor to go over your individual situation in detail.

[jainen]

>>I paid and pre-paid as any items as I could<<

In my opinion, it is best to pay tax on the net income your records reasonably support. Reducing your tax to zero by pre-paying expenses is a hard position to defend.

[Lion EA]

You're not in business to make zero. Or, if you are, it's not a business, it's a hobby.

[David1980]

I would hope if I had a year I could get myself to almost 0 profit I would consider it a bad year and expect to make more the next. If that were the case, it would probably be more helpful to have deductions in the higher profit year where I might be in a higher tax bracket.

[JohnH]

I agree with all the responses. If your profit is approaching zero, your time can be better spent trying to generate more income rather than tweaking deductions.

[mcb39]

I agree with all the responses. If your profit is approaching zero, your time can be better spent trying to generate more income rather than tweaking deductions.

I also agree with all of the responses. It's bad enough when you DO have a loss, without trying to create one.

[samingeorgia]

On the other hand, I have a C corp. so as to get health benefits paid for by the company. Strictly non-discriminatory, of course. Health insurance is a big expense at age 61. Since it's a Personal Service Corp., I spend the time between Christmas and New Year figuring out how much my year-end salary bonus will be to zero out the profit. For 2008: $ 59 profit!!

No bailout needed here, nosirree!

[joanmcq]

With a PSC, thats what you should be doing....why do you think the tax rates are so onerous with PSCs?

[samingeorgia]

With a PSC, thats what you should be doing....why do you think the tax rates are so onerous with PSCs?

Why? Because the crooks in Congress don't want doctors, dentists, engineers, other lawyers, and accountants to accumulate $ 50K per year in their corporations at 15% per year! Because we peasants aren't allowed to get the freebies and graft that Congress gets, that's why! Our only shelter is 401K, SIMPLE, etc. and Congress' pals stole that from us, too.

But I'm not bitter or nothin'.....

[ILLMAS]

I am back from the Holiday break and I still have a profit for 2008!!! There would not been anyway I could of zero out, I really don't have that many operating expenses. I am self-employed and opened a SEP-IRA plan on 12/31/08, I just need to catch up with my accounting to determine the contribution.