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URL:  http://boards.fool.com/greetings-shortimer-and-welcome-ltlti-am-10049028.aspx

Subject:  Re: Deferring 1099 Earnings Date:  11/7/1997  10:18 AM
Author:  TMFPixy Number:  560 of 76421

Greetings, Shortimer, and welcome.

<<I am putting regular earnings into my company's 401k plan. I recently started doing some consulting work on the side, for which I will be paid via a 1099. How much of my 1099 earnings can be deferred? Is a SEP-IRA the best, easiest method?>>

A SEP-IRA is indeed the quickest and easiest method of sheltering some of your 1099 income. Using it, you can defer roughly 13.04% of your self-employed income. Get IRS Pub 590, Individual Retirement Arrangements, to get the details. To do so, just call 1-800-TAX-FORM or visit the IRS website at http://www.irs.ustreas.gov/prod/forms_pubs/index.html to download the document.

You can also increase your 401k contributions to achieve or enhance the effect of tax deferral provided you remain within the percentage and absolute dollar ceilings for contributions to that plan (i.e., 20% of your gross wage before contributions or $9.5K, whichever comes first). In fact, you can open the SEP-IRA and fund it to the maximum based on 1099 income and at the same time increase your 401k to shelter some more. Just be careful that your contributions don't exceed 25% or $30K of total wages if you do.

Regards…….Pixy

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