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Thousand Oaks California online Form 5304-SIMPLE: What You Should Know
A SIMPLE IRA plan is one that provides a tax deduction for contributions by the employee to an arrangement that provides an income tax deduction by the employer. The SIMPLE IRA system is intended to encourage individuals and business to save and invest money on behalf of their own retirement. It permits their retirement savings to be invested (i.e. invested in common stock) for investment in a company that provides a tax deduction for their IRA contributions by the employer. It is important to note that if a taxpayer has more money in a SIMPLE IRA than what they are able to make contributions toward that account, they would save that amount for withdrawal. The amount may be subject to a minimum tax of 10 percent, plus an Additional Contributory IRA Tax. For example, if you had 20,000 in a tax-free Thrift Savings Plan (TSP) account and if the first 10,000 was in a TSP account, there is no requirement for your contribution amount. However, no more than 5,000 in the account can be in taxable contributions. This includes income such as: regular or hourly wages and salary, tips, gratuities, retirement savings, other compensation, deferred compensation, investment income, interest and dividends. Any amount in excess of this limit is subject to an Additional 1/4% Additional IRA Tax. In some cases, contributions are not allowable at all and all contributions are saved to be withdrawn if required. A SIMPLE IRA plan is a one-way, non-deductible retirement plan as defined by the Internal Revenue Code, IRC Section 401(a). 2. Retirement Benefits/Tax Benefits; Tax Deduction · 1) For a SIMPLE IRA, if the employee is a CPA and is under age 50 and retired at the end of the employee's employment, the plan requires the employee, if he or she receives a retirement pension or annuity, to save the balance in the IRA within 3 years of retirement. You may choose to make a SIMPLE IRA contribution to an SIMPLE IRA plan for the current year only. If an employee is age 55 or older and not retired, the plan requires the employee to save the balance in the IRA within 6 years of retirement.
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