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Small Employer Pension Plan Startup Credit

Posted on June 6, 2012 by Leasa Magnuson in Business Tax

Did you know there is a credit for small businesses that adopt a retirement plan for their employees? The credit is equal to 50% of the administrative costs with a maximum credit of $500. You can claim the credit for the first 3 years the plan is in place.

A small business is one that did not employ more than 100 employees with compensation of at least $5,000 in the preceding year. The plan must cover at least one non-highly compensated employee. It must be available to all employees who have worked with the employer for at least three months, and you can’t play any games like starting a new company and moving all the employees from your current company to the new one.

The retirement plan can be a 401(k), SIMPLE, or SEP. So if you are looking at ways to provide benefits to your employees without giving them a raise, providing a retirement plan might be an option you should look into.

Business Credit, Pension Plan Startup Credit, Retirement Plan Startup Credit

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