Retirement Plan Options Available for Small Businesses and Self-Employed Individuals

If you are starting your own business, opening up a private practice or thinking about implementing a new retirement plan for your existing business, you have several retirement plan options available to you.

Below is a list of the primary retirement plan options for small businesses summarizing the key features (for 2023) of each plan.


    • Contribution limits:
      • 25% of employee W-2 wages up to a maximum contribution of $66,000, or
      • 20% of owners net SE income (for Schedule C and Partnership income) after the self-employment tax deduction up to a maximum contribution capped at $66,000
    • Date to establish and fund the plan:
      • The filing date of the tax return including extension
    • Form 5500 annual tax return filing requirement:
      • None
    • Best suited for:
      • SE individuals/entities with no employees
      • SE individuals/entities with employees who have worked for less than 3 years
      • Moonlighting individuals paid as an independent contractor (1099-NEC) who decide to contribute additional amounts to a retirement plan when meeting with their tax preparer after December 31, 2023 

Solo 401k

    • Contribution limits:
      • $22,500 as an employee/salary deferral contribution
      • $7,500 as an employee/salary deferral catch-up contribution (if age 50 or greater)
      • 20% of owner’s net SE income after self-employment tax deduction as an employer contribution, or
      • 25% of employee W-2 wages as an employer contribution
      • Total maximum combined contribution capped at $66,000 (or $73,500 including $7,500 catch-up contribution)
    • Date to establish and fund the plan:
      • Plan must be established by December 31 of the current year
      • Employee/salary deferral portion must be contributed by December 31 of the current year
      • Employer contribution must be contributed by the tax return filing date including extension
    • Form 5500 annual tax return filing requirement:
      • Once Plan assets equal or exceed $250,000 at the end of the tax year the Plan is required to file Form 5500-EZ
    • Best suited for:
      • Self-employed individuals with no employees except a spouse (and other employees that work less than 1,000 hours per year)
      • Owner is not already part of a salary deferral plan (401(k), 403(b), SIMPLE) with another employer
      • Owners that annually fund a “Back-Door Roth Conversion”


    • Contribution limits:
      • Employee elective deferral limited to $15,500 plus catch-up provision of $3,500
      • Employer can either match employee elective deferrals (for only participating employees) dollar for dollar up to 3% of W-2 wages (which can be reduced to 1% in any 2 out of a 5-year period) or contribute 2% of W-2 wages (up to $330K of wages) for all eligible employees (including non-participating employees)
    • Date to establish and fund the plan:
      • Plan must be established by October 1 of the current year
      • Employer contributions must be contributed by the tax return filing date including extension
    • Form 5500 annual tax return filing requirement:
      • None
    • Best suited for:
      • Newly formed or small employer entities that want to offer a salary deferral retirement plan to their employees at minimal costs (with regard to both employer contributions and administration costs), and
      • The owner either cannot afford or prefers not to make a large retirement contribution on his/her own behalf


    • Contribution limits:
      • Employee elective deferral limited to $22,500 plus catch-up provision of $7,500
      • Combined employee and employer contribution limited to $66,000 or $73,500 including a catch-up provision
      • Typically set up as a Safe Harbor Plan for smaller entities – to guarantee the owner’s contribution is not limited:
        • Non-Elective Safe Harbor Plan: 3% employer non-matching contribution for all eligible employees’ W-2 wages
        • Enhanced Safe Harbor Match: dollar for dollar matching contribution up to 4% (not to exceed 6%) of W-2 wages for participating employees
      • Date to establish and fund the plan:
        • Plan must be established by December 31 of the current year
        • Employer contributions must be contributed by the tax return filing date including extension
      • Form 5500 annual tax return filing requirement:
        • the Plan is required to file Form 5500-EZ
      • Best suited for:
        • Established entities that can afford the company contribution funding amount plus administrative costs
        • The owner plans to significantly fund or maximize his/her retirement contribution

Navigating the maze of retirement plan options to find the best opportunity for your company is not a simple task.  The list above provides a basic summary of information for small business retirement plans.  And working with your tax advisor to fully discuss the pros and cons of each plan as it relates to your practice or business will assist you in determining the best retirement planning strategy for your company.

New Year-End Tax Reporting Rules for Digital Assets on the Horizon

The IRS recently issued proposed regulations requiring brokers to provide reports of digital asset transactions, including cryptocurrency sales, to their customers at year-end.

Per the proposed regulations, beginning with the 2025 tax/calendar year, brokers that provide digital asset transactional services to their customers will be required to track and report gross proceeds from these investments to their customers.  Proceeds from digital asset transactions will be reported on a Form 1099-DA.  For sales that take place after 2025 this new report will be required to include basis and capital gain information to facilitate the reporting of these transactions by taxpayers on their annual personal income tax return.

Because of the lack of a standardized tax reporting requirement for digital assets, the proposed regulations should simplify and clarify necessary tax information from these specialized investments and will facilitate the proper reporting of these investment transactions on personal income tax returns annually.

As these are only proposed regulations and not final, we will continue to track the progress of this new reporting initiative.

3rd Quarter Estimates Due 9/15

Third quarter estimated taxes are due 9/15.  For anyone paying estimated taxes, we now recommend that you make those payments online.  Doing so is much safer than sending the IRS a check, and you receive an instant confirmation that the payment has been processed.  Sadly, the IRS hasn’t done a great job processing their mail lately.

Plus, there is a new scam where people steal checks from a mailbox, “wash” the check with specific chemicals to allow them to change just the payee and the amount while keeping the signature intact, and then deposit that fraudulent check into their own bank account to steal the funds. Learn more about check washing at:

To make the payment online if you haven’t yet set up an account with the IRS, simply:

  1. Go to
  2. Click on Make a Payment (
  3. Click on Pay Now with Direct Debit (
  4. Click on Make a Payment (
  5. Select the following:
    1. Reason for Payment: Estimated Tax
    2. Apply Payment To: 1040ES
    3. Tax Period for Payment: 2023

Answer the rest of the questions and you should be all set to make the payment.  Massachusetts and most other states allow you to pay any state estimates due using their Tax Department website.


IRS Issues Stern Warning To Business Owners Who Overstate Their ERC

From IRS News IR-2023-49, March 20, 2023

In a further warning to people and businesses, the Internal Revenue Service added widely circulating promoter claims involving Employee Retention Credits as a new entry in the annual Dirty Dozen list of tax scams.

For the start of the annual Dirty Dozen list of tax scams, the IRS spotlighted Employee Retention Credits following blatant attempts by promoters to con ineligible people to claim the credit. Renewing several earlier alerts, the IRS highlighted schemes from promoters who have been blasting ads on radio and the internet touting refunds involving Employee Retention Credits, also known as ERCs. These promotions can be based on inaccurate information related to eligibility for and computation of the credit.

The IRS is stepping up enforcement action involving these ERC claims, and people considering filing for these claims – only valid during the pandemic for a limited group of businesses – should be aware they are ultimately responsible for the accuracy of the information on their tax return. The IRS Small Business/Self-Employed division has trained auditors examining these types of claims, and the IRS Criminal Investigation Division is on the lookout for promoters of fraudulent claims for credits.

“Businesses should be wary of advertised schemes and direct solicitations promising tax savings that are too good to be true,” Werfel said. “They should listen to the advice of their trusted tax professional. Taxpayers should remember that they are always responsible for the information reported on their tax returns. Improperly claiming this credit could result in taxpayers having to repay the credit along with potential penalties and interest.”

When properly claimed, the ERC is a refundable tax credit designed for businesses that continued paying employees while shut down due to the COVID-19 pandemic or that had a significant decline in gross receipts during the eligibility periods. The credit is not available to individuals.

Beware of ERC promotions

While many eligible employers claimed and have already received the ERC, some third parties continue to widely advertise their services targeting taxpayers who may not be eligible for the ERC. Unfortunately, these advertisements, along with the increased prevalence of websites touting how easy it is to qualify for the ERC, lend an air of legitimacy to abusive claims for refund.

Tax professionals have reported receiving undue pressure from clients to participate and claim the ERC, even when the tax professional believes the client is not entitled to the credit. The IRS encourages the tax professional community to continue to advise clients not to file ERC claims when the tax professional believes they do not qualify.

The IRS has been warning about this scheme since last fall, but there continue to be attempts to claim the ERC during the 2023 tax filing season.

Third party promoters of the ERC often don’t accurately explain eligibility for and computation of the credit. They may make broad arguments suggesting that all employers are eligible without evaluating an employer’s individual circumstances. For example, only recovery startup businesses are eligible for the ERC in the fourth quarter of 2021, but these third-party promoters fail to explain this limitation. In addition, some third parties do not inform employers that they cannot claim the ERC on wages that were reported as payroll costs in obtaining Paycheck Protection Program loan forgiveness.

Additionally, some of these advertisements exist solely to collect the taxpayer’s personally identifiable information in exchange for false promises. The scammers then use the information to conduct identity theft.

The IRS reminds all taxpayers that the willful filing of false information and fraudulent tax forms can lead to serious civil and criminal penalties.

Properly claiming the ERC

Eligible taxpayers can claim the ERC on an original or amended employment tax return for qualified wages paid between March 13, 2020, and Dec. 31, 2021. However, to be eligible, employers must have:

 Learn more at:


How To Minimize Taxes Following The Sale of Your Practice

We recently received this question from a client:

Q: Just wanted to give you a heads up.  If all goes according to plan, we will be signing the sale agreement this week for my office.  Is there any way to reduce the tax implications of the transaction?

A: Here are 5 steps to take to minimize your taxes when selling your practice:

  1. Confirm that all of the payments you receive will be considered Capital Gains, and none will be Ordinary Income.  The long-term Capital Gains term rate is half of the Ordinary Income rates.
  2. Make sure you will max out the 401k salary deferrals for $30k (since you are over the age of 50) prior to the sale date in case you may not be eligible to participate in the 401k plan of the successor company until next year.
  3. Speak with your investment advisors and have them sell any stocks and mutual funds you are holding that went down in value. Losses realized prior to December 31st from your investments held in taxable accounts will offset the capital gain on the sale. Make sure they don’t rebuy the same investments within 30 days of the sale or the losses will be disallowed under the Wash Sale rules.
  4. Also speak with your investment advisors about rolling some of the gain from the sale into an Opportunity Zone partnership. Doing so will allow you to defer paying taxes on the portion of the gain used to purchase an interest in an OZ.  Please note that Opportunity Zones are investments made in distressed communities in the US, so they are inherently risky investments that also aren’t very liquid; which means that money may be tied up in that investment for a while. For more information, check out:
  5. And consider making a large contribution to your Donor Advised Fund the year you have a substantial gain. For more information, check out: and


Two Practice Financial Planning Lessons Parents Can Teach Their Kids In College

Did you recently drop off one or more of your kids at college? As we all know from our undergraduate years, a lot of what college kids learn is learned outside the classroom. Why not take this opportunity to plant the seeds for a few practical personal finance lessons as part of your child’s college experience? Here are two pieces of sound financial planning advice I gave my son as he prepared to start his freshman year.

Budgeting Basics:

Sticking to a budget is helpful for businesses as well as for households. While some people put together very detailed budgets each year, my son opted for a much simpler alternative to track whether he will end up sticking to his budget each semester.

During the summer before freshman year, my son opened his own checking account along with a companion savings account, and then deposited all of his paychecks from his summer job, plus any graduation gifts he received, into his new savings account. He feels he earned enough during the summer to have built a sufficient stash in his savings account to cover his books and spending money for the entire freshman year.

Here is the step that will help him learn about budgeting basics. In order to make this pool of money last throughout both semesters, he only transferred enough money from his savings account into his checking account to cover one semester’s projected spending. Doing so lets him easily monitor his cumulative spending as compared to his budget.

If there is any money left over in his checking account at the end of the first semester, then he successfully met his budget. Alternatively, if he ends up dipping into his savings before Semester One ends, he knows he’ll need to increase his budget for the second semester, which means he’ll probably need to get a job over winter break and/or work on campus when he returns to school in January in order to meet his second semester spending needs.

Begin to Establish a Credit History

My son is also taking this opportunity to begin to establish his own credit history. At the same time that he opened his companion checking and savings account, he also applied for a low-limit credit card connected to these accounts. I believe the limit for his credit card is just $800.

Each month, he plans to make a few purchases using his credit card. To make sure he won’t miss making the monthly credit card payment (which would end up hurting his credit score), he already set up for the full balance of the credit card to be “autopaid” out of his checking account prior to the card’s due date.

Establishing a consistent history of utilizing credit and then paying off the balance due in a timely fashion is a great way to establish a credit history and build up one’s credit rating. Graduating with 48 months of consistently good credit history will be very valuable to someone entering the work force, looking to purchase or lease a vehicle, hoping to rent an apartment, or doing anything else that would require someone to pull a credit report.

Two Great Lessons:

Learning how to budget and taking steps to establish and improve one’s credit are two practical personal finance lessons that my son won’t be taught in the 40 or so college classes he’ll be taking over the next four years. Instead, he has already begun to learn these two useful lessons as part of his college experience before even stepping foot into his first undergrad class.