retirement - Linkenheimer LLP CPAs & Advisors

Choosing A Retirement Plan For Your Small Business

Most growing small businesses reach a point where the owner looks around at the leadership team and says, “It’s time. We need to offer employees a retirement plan.”

Often, this happens when the company is financially stable enough to administer a retirement plan and make substantive contributions. Other times it occurs when the business grows weary of losing good job candidates because of a less-than-impressive benefits package.

Whatever the reason, if you don’t have a retirement plan and see one in your immediate future, you’ll want to carefully select the one that will work best for your company and its employees. Here are some basics about three of the most tried-and-true plans.

401(k) plans offer flexibility

Available to any employer with one or more employees, a 401(k) plan allows employees to contribute to individual accounts. Contributions to a traditional 401(k) are made pretax, reducing taxable income, but distributions are taxable.

Both employees and employers can contribute. For 2023, employees can contribute up to $22,500 (up from $20,500 in 2022). Participants who are age 50 or older by the end of the year can make an additional “catch-up” contribution of $7,500 (up from $6,500 in 2022). Within limits, employers […]

By Linkenheimer LLP|2022-12-08T16:37:29+00:00December 8th, 2022|retirement, small business|0 Comments

How Inflation Will Affect Your 2022 And 2023 Tax Bills

The effects of inflation are all around. You’re probably paying more for gas, food, health care and other expenses than you were last year. Are you wondering how high inflation will affect your federal income tax bill for 2023? The IRS recently announced next year’s inflation-adjusted tax amounts for several provisions.

Some highlights

Standard deduction. What does an increased standard deduction mean for you? A larger standard deduction will shelter more income from federal income tax next year. For 2023, the standard deduction will increase to $13,850 for single taxpayers, $27,700 for married couples filing jointly and $20,800 for heads of household. This is up from the 2022 amounts of $12,950 for single taxpayers, $25,900 for married couples filing jointly and $19,400 for heads of household.

The highest tax rate. For 2023, the highest tax rate of 37% will affect single taxpayers and heads of households with income exceeding $578,125 ($693,750 […]

By Linkenheimer LLP|2022-11-02T19:27:32+00:00November 2nd, 2022|Uncategorized|0 Comments

Inflation Means You And Your Employees Can Save More For Retirement In 2023

How much can you and your employees contribute to your 401(k)s next year — or other retirement plans? In Notice 2022-55, the IRS recently announced cost-of-living adjustments that apply to the dollar limitations for pensions, as well as other qualified retirement plans for 2023. The amounts increased more than they have in recent years due to inflation.

401(k) plans

The 2023 contribution limit for employees who participate in 401(k) plans will increase to $22,500 (up from $20,500 in 2022). This contribution amount also applies to 403(b) plans, most 457 plans and the federal government’s Thrift Savings Plan.

The catch-up contribution limit for employees age 50 and over who participate in 401(k) plans and the other plans mentioned above will increase to $7,500 (up from $6,500 in 2022). Therefore, participants in 401(k) plans (and the others listed above) who are 50 and older can contribute up to $30,000 in 2023.

SEP plans and defined contribution plans

The limitation for defined contribution plans, including a Simplified Employee Pension (SEP) plan, will increase from $61,000 to $66,000. To participate in a SEP, an eligible employee must receive at least a certain amount of compensation for the year. That amount will […]

By Linkenheimer LLP|2022-11-02T18:38:07+00:00November 2nd, 2022|retirement|0 Comments

Tax And Other Financial Consequences Of Tax-Free Bonds

If you’re interested in investing in tax-free municipal bonds, you may wonder if they’re really free of taxes. While the investment generally provides tax-free interest on the federal (and possibly state) level, there may be tax consequences. Here’s how the rules work.

Purchasing a bond

If you buy a tax-exempt bond for its face amount, either on the initial offering or in the market, there are no immediate tax consequences. If you buy such a bond between interest payment dates, you’ll have to pay the seller any interest accrued since the last interest payment date. This amount is treated as a capital investment and is deducted from the next interest payment as a return of capital.

Interest excluded from income

In general, interest received on a tax-free municipal bond isn’t included in gross income although it may be includible for alternative minimum tax (AMT) purposes. While tax-free interest is attractive, keep in mind that a municipal […]

By Linkenheimer LLP|2022-10-14T18:30:43+00:00October 14th, 2022|retirement|0 Comments

Should Your Business Address Retirement Plan Leakage?

Under just about any circumstances, the word “leakage” has negative connotations. And so it follows that this indeed holds true for retirement planning as well.

In this context, leakage refers to early, pre-retirement withdrawals from an account. Now, as a business owner who sponsors a qualified retirement plan, you might say, “Well, that’s my participants’ business, not mine.”

However, there are valid reasons to care about the issue and perhaps address it with employees who participate in your plan.

Why it matters

For starters, leakage can lead to higher plan expenses. Fees are often determined on a per-account or per-participant basis. When a plan loses funds to leakage, total assets and individual account sizes shrink, which tends to hurt administrative efficiency and raise costs.

More broadly, if your employees are taking pre-retirement withdrawals, it could indicate they’re facing unusual financial challenges. These usually have a negative impact on productivity […]

By Linkenheimer LLP|2022-02-23T23:45:14+00:00February 23rd, 2022|contributions, retirement|0 Comments