Hello, all.

I'm thoroughly confused now. I recently
incorporated an S-corporation. I was
under the impression that "small businesses"
are allowed to have Keogh or money-purchase
plans. But, now that I am reading the
descriptions of each more carefully, I
notice that they seem to assume that a
small business is one that is either a
sole proprietorship or partnership. Doesn't
an S-corp. qualify as a small business?
Especially as I am the sole owner/director/employee
of my corporation?

If anyone can point me to some authoritative
links, I'd be really appreciative. The CPA
who's doing my personal taxes seems to think
S-corps. are not eligible, but he also admits
he knows next to nothing about Medical Savings
Accounts. Another friend has dealt with a
CPA who _has_ set up his corporation with a
money purchase plan. So, even the "experts"
can't seem to agree about what's correct. I
will be calling the IRS to get the answer
"from the horse's mouth", as it were, but would
also like to know if any of you have any
experience with this particular situation.

Thanks,
Beonice

Greetings, Beonice, and welcome. You asked:

. I recently
incorporated an S-corporation. I was
under the impression that "small businesses"
are allowed to have Keogh or money-purchase
plans. But, now that I am reading the
descriptions of each more carefully, I
notice that they seem to assume that a
small business is one that is either a
sole proprietorship or partnership. Doesn't
an S-corp. qualify as a small business?
Especially as I am the sole owner/director/employee
of my corporation?

You may set up a SEP, SIMPLE, defined benefit or defined contribution (401k, money purchase, profit sharing) plan for your corporation if you otherwise meet the criteria for doing so. Many providers among the mutual fund families and brokerages would be most happy to take your money and establish a plan for you. If you're not sure what to use, you might engage the services of a fee-only Certified Financial Planner in your area who specializes in retirement planning for small business owners. There are many who do.

Regards..Pixy

I work for an S-Corp (just an employee, not an owner) and we have a Keogh. My boss said he considered a SEP and a SIMPLE but chose a Keogh because it gives him more control over how much money to put in. A 401(k) is also possible but the amount of paperwork makes it impractical.

Depending on what your goals are and how much you earn each year, will help to determine whether a SEP or SIMPLE would be better for you.

You can choose any of the retirment plans mentioned previously, but the SEP and SIMPLE are the two easiest to setup and if you use a prototype plan it will not cost you anything to setup.

SIMPLE will allow you to put the most in if you make Under $43,333.

SEP will allow you to contribute upto 15% of your income upto $30,000 annually. And the total amount contributed is a pension expense (don't pay FICA & FUTA)

Thanks for all the input, folks.

I've also talked to someone who specializes
in retirement plans, and he concurs: I _can_
set up any of these plans. Income-wise, the
money-purchase and profit-sharing make the most
sense, as there I am expecting significant
corporate income this year.

I have another question, but will ask it in
a separate post. :)

Thanks again,
Beonice