How to Legally hide some of my income from the Gov?

[pennrj430]

Hi Everyone, I'm newly self employed and after a slow start this past year, things are starting to pick up. If all goes as planned, next year I should be making a decent income (I hope).
My question is this. I don't actually need much income at this point in my life due to my expenses being on the low side. Is it possible to deposit a majority of my income into some kind of tax differed investment? Since I started working for myself, I started putting money into a Traditional IRA and stopped putting money into my Roth, but that is only $5,000 a year. What is the best way thing to do at this point with my money where I can legally invest it and not have to pay taxes on it now?

Thanks for your help.

[dczech09]

With tax shelters, you are never really "hiding" your money from the government. You are simply setting up an arrangement to change the way taxes are imposed.

As you are self-employed, you have a few options:
Traditional IRA
Roth IRA
SEP-IRA
Solo 401k
Variable Annuity

Do some research on these things. Without knowing more details, it is hard for myself or anyone else here to make a good judgement as to what you should do. But these are your main options and I would definitely look at taking advantage of two or three of them.

[jpg7n16]

Small business retirment plans. And I agree with dczech, that you are not "hiding" it from the gov. You are more just postponing the inevitable.

Start here:
elaws - Small Business Retirement Savings Advisor

And see a chart of your options here:
elaws - Small Business Retirement Savings Advisor


That's the best place to start.

[pennrj430]

Thanks for both of your replies, and the links. I didn't mean to imply I wanted to do anything sketchy, I want to do it by the book.

[Petunia 100]

You also have the option of establishing s Simple IRA.

[pennrj430]

Just have a few questions after reading through these links. I'm a one man business, I don't have any employees, I couldn't imagine ever having any. And I don't have a payroll or anything. I get paid from various companies and get 1099's. This is my only source of income, I don't work for a company.

What would be a good choice for someone like me? I was looking at a Simple IRA, It seems the easiest to set up, the only downside is that it has a max contribution of $11,500. I was hoping to contribute more. If I do a retirement plan like this, are there any other ways to differ taxes?

Thanks again guys.

[Petunia 100]

Just have a few questions after reading through these links. I'm a one man business, I don't have any employees, I couldn't imagine ever having any. And I don't have a payroll or anything. I get paid from various companies and get 1099's. This is my only source of income, I don't work for a company.

What would be a good choice for someone like me? I was looking at a Simple IRA, It seems the easiest to set up, the only downside is that it has a max contribution of $11,500. I was hoping to contribute more. If I do a retirement plan like this, are there any other ways to differ taxes?

Thanks again guys.

In addition to the Simple, you can contribute 5k per year to a traditional IRA, or a Roth if eligible, or split the 5k between both.

[pennrj430]

I didn't know that I can max out both a Simple IRA and a Traditional IRA in the same year. That is great news! Thanks Petunia.

[sblatner]

I think you should look into a SEP IRA. I don't know how much you make but for a SEP, you can contribute 25% of your salary or $50k whichever is less.

[rj.phila]

im in a similar boat, and do a SEP.

[jpg7n16]

Self employed 401k gets you the $17k employee elective deferral.

Also does not count against your $5k IRA contribution limit.


In many cases, the SE401k gets you the max amount put away.


FWIW -- there are separate limits for employer plans (SEP, SIMPLE, SE401k, Pension, etc.) and personal accts (IRAs)