I finally got my act together and sat with my account for tax stuff! And MAN does that always feel so good – regardless of the outcomes :) Just to knock something off your brain and free up more space, ya know? Hate those nagging thoughts that continually linger…
And just like all years, I am always shocked that I don’t owe as much as I always think I will in the end :) Mainly out of ignorance, I suppose, but regardless better to be shocked with positive news than with negative! Especially when dealing with money owed to someone. (and/or the gov’t)
Which brings us to today’s (not really) dilemma in which you tell me what YOU’D do in my shoes. I already know what I’ll be doing here, but want to blog about it today for those of you who don’t know this stuff is an option, and what the pros and cons are with it.
Here’s a snippet of what my accountant sent me:
I am working on your return and I know you requested info on SEP contributions this year. The maximum contribution you can make is $25,628. If you make the contribution you will owe $3,431 to IRS and $647 to your state. If you make no SEP contribution you will owe $9,978 to IRS and $3,195 to to your state.
So in a nutshell if I invest $25 Grand into my SEP IRA retirement account right now (the max allowed based on my biz profit from 2012), I can cut out a TON of taxes owed to the government. Specifically $9,095 worth! And that’s *outside* of my $8,000 quarterly payments – now increased to $8,600 too.
The pros to doing this:
- If I say yes, it forces me to save a ton more for retirement!
- I don’t have to pay the gov’t over $9,000 for *nothing* in return.
The cons to doing this:
- That’s a $hit ton of money!!! All of which took a lot of work to earn…
- That’s a $hit ton of money!!! ;)
Now you can probably guess which avenue we’ll be taking if you’ve been reading this blog for more than a week (hint: I haven’t missed a max SEP deposit in three years), but it doesn’t mean that I don’t stop to consider everything again just to make sure I’m making the right move for us (our family) at this point in time. And I think that’s an important takeaway here: what was important one year ago when deciding that, yes, I’ll be maxing out our SEP again this year, is not always the same case when you fast forward into one more year of life lived.
But if there is one thing I do my damnedest to complete year and and year out, at least when it comes to finances, it’s ALWAYS maxing out the most rewards for the cheapest bucks. Or however that saying goes… Basically I have a hard time saying no to a good deal :) So every year I scheme for ways to complete these missions no matter what’s going on in our financial lives, and so far so good, fortunately. (And before the SEP it was the 401(k)! Something most of us have access to.)
So the plan for being able to invest so much money this year? Strategic saving and a ton of hustling. As well as offloading properties I no longer wanted any more (remember that idea of trading an online one for a real one? well we decided it was better to put into retirement than in areas I have zero experience in ;)) We’ve had to stay on our game with all the changes that popped up last year like babies who eat thousands of dollars and changes to my wife’s earning power, but no one ever said this stuff was easy… And we only start all over again this year!
What would you do in a situation like this? Or maybe you ARE in the situation? Whether with an SEP, 401(k), or even Traditional IRA, there are a slew of different tools out there we can take advantage of to help lower our taxes. But it all comes down to some sexy ass planning and an unwillingness to give up no matter how much we’re tempted to stray… Like those dang sirens back in the pirate ship days, we must avert our eyes!
(Photo by stockmonkeys.com)
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!