Most of us are in the throes of organizing and filing taxes. And yet it's never too early to begin thinking about 2014 tax tips, especially if you're among the 9.3 million self-employed U.S. workers tracked by the Bureau of Labor Statistics, Fool contributor Tim Beyers says in the following video.
Your best option might be a Solo 401(k), a retirement savings plan designed specifically for solo workers and their spouses. In 2014, you can defer up to $17,500 in wages each, or $23,000 if you're over 50.
You can also match contributions from reported profits, up to as much as 25% of compensation. And since each dollar contributed is tax-deferred, you'll enjoy a healthy deduction on your federal 1040 filing. The catch? Your account has to be opened in the calendar tax year in which you plan to claim benefits. Opening and funding a Solo 401(k) account won't help cut your 2013 tax bill.
But again, why pass up a good deal if you've the funds to start contributing? Getting started is easier than you think -- all you need is an administrator. Big employers tend to use full-service suppliers such as ING U.S. (NYSE:VOYA) and Wells Fargo's (NYSE:WFC) retirement group, which serve 1.9 million and 3.1 million retirement plan participants, respectively, according to a November tally published at Workforce.com.
Each provides different options. The advantage of an institution such as Wells Fargo is that it offers everything from banking to loans to retirement plan administration. Call it one-stop financial shopping, which helped Wells generate more than $13 billion in wealth management, brokerage, and retirement services revenue last year. ING, by contrast, is more of a pure-play service-provider whose ticker, "VOYA," refers to a collection of products designed to help Americans on their "voyage" to their golden years.
Self-employed workers can probably steer clear of both firms, especially now that discount brokers have started offering low-cost Solo 401(k) plans. Just be sure to read the fine print before signing on the dotted line, Tim says. While most plans mirror options offered through full-service retirement groups, some won't allow for loans or other benefits common to larger-scale plans. (Get a closer look at what many brokers offer at our Broker Center.)
Please watch the video to get all of Tim's tax tips for self-employed workers. When you're done, leave a tip of your own. How are you balancing the burden of owning and growing a business while meeting tax obligations?