Tax-season is here and we have some good news! You or your clients may be eligible for a $500 tax credit. It's true! It's available to employers with new qualified retirement plans.
Who is eligible?
Employers with 100 employees or less, and who have installed a new qualified retirement plan.
How much can I or my client claim?
50% of the first $1,000 (max $500 credit) of administrative costs for each of the first 3 years of the plans existence.
Are there any other qualifications?
There must be at least one non-highly compensated employee (an employee who owns less than 5% of the company or an employee who earned less than $110,000 during the prior year)
The employer must not have maintained a retirement plan in the 3 years prior to establishment of the new plan
The plan must be a qualified employer plan such as 401(k), defined benefit, SIMPLE, and SEP plans. See complete definition on Form 8881
How do I or my client claim this credit?
Complete IRS Form 8881, Credit for Small Employer Pension Plan Startup Costs. You can download the form at the IRS website here:
See, so now tax time might not be so bad.
What do you think?
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