RTS #045 An example of why clients desperately need your tax advice

Last week, the Wall Street Journal published an article by Tanza Loudenback on the benefits of SEP IRA accounts.

Having recently published the 2024 Desktop Guide For Retirement Plans, I was especially interested in seeing what the WSJ had to say.

When I got to the end of the article, I immediately read it a second time, not because it was so great (it wasn’t bad, just not great), but because something was missing and I thought for sure I had just missed it.

Turns out that I was not the one that missed it, but rather the author and the WSJ editorial team had completely missed one of the critical features of SEP IRAs, which is that all contributions are exempt from payroll taxes.

Let me say that louder for the people in the back: All SEP IRA contributions, because they are made by the employer, are exempt from payroll taxes.

As always, taxes do not drive the bus, but if you (or your client) is evaluating various types of small business retirement plans, being exempt from payroll taxes is a major consideration.

I could (and have) done entire newsletters on this topic, but what I want to make sure you notice today is that despite ‘everybody’ knowing about SEP accounts, one of the most respected business media outlets got it wrong, by a lot.

In other words, without the support of a Tax Wise Retirement Guide like the readers of this newsletter, any potential client (and especially the DIY crowd who mistakenly think savings fees is the only variable), will yet again make terrible tax mistakes.

This is also a reminder of the importance of staying sharp on taxes, as things like SEPs being exempt from payroll taxes are apparently something easily forgotten.

Side note on SEPs: Because of the exemption to payroll taxes, specifically FICA, it can sometimes make sense to fund SEP accounts even if employees turn around and pull the money out, as the 10% penalty is less than the 15% FICA tax.

Stay sharp on taxes. Deliver Massive Value to Clients. Have a wildly successful practice.

Happy Tax Planning!

About The Newsletter

The tax code is 80,000+ pages and Google has 875,000,000 results when you search “Tax Planning”, so each week we are going to help you wade through all of that noise and get to the Relevant Tax Stuff.