Tax Tip of the Week
August 27, 2007

Has your retirement plan kept pace?

If you're not sure, now's the time for a tune-up. Making sure your plan continues to qualify for tax benefits will provide current deductions and tax-deferred growth.

Here are four areas to evaluate.

1. Eligible employees.

Generally, all employees who meet your plan's coverage rules must be allowed to participate. That may include part-timers and terminated workers.

To do: Review your payroll records to confirm you haven't missed any qualifying employees.

2. Contribution limits.

Plan contributions are limited by law, and may be adjusted periodically for inflation. The limit varies based on the type of plan you offer. For instance, this year's maximum SIMPLE plan contribution is $10,500 (plus an additional catch-up contribution of $2,500 for employees over age 50).

To do: Verify and monitor total contributions per employee per year.

3. Timely deposits.

For SEP and SIMPLE plans, you have until the due date of your federal tax return (including extensions) to deposit contributions you make on behalf of employees. Missing the deadline can mean losing your tax deduction. Payroll-deduction SIMPLE plan contributions must be deposited within thirty days after the last day of the month during which they were withheld.

To do: Review your deposit history. Set up recurring reminders to avoid penalties.

4. Informational notices.

You're generally required to provide employees with facts about plan features, eligibility and changes. Document formats and deadlines differ, but most plans stipulate at least annual reporting to participants.

To do: Bring your employees up to date, and schedule regular notifications.

Give us a call to discuss recent tax law changes and procedures for correcting inadvertent errors in your plan administration. We can help you keep your retirement plan in good shape.

Questions for our Financial Expert?
E-Mail us at: finance@ClevelandSeniors.Com