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Advice: Retirement savings plans for small businesses

How can a small business set up retirement plans? Also: Which supplies are deductible on a business tax return?

March 14, 2011|By Karen E. Klein

Dear Karen: How can I save for retirement?

Answer: There are simple retirement plans designed for entrepreneurs. You set them up and deduct contributions yourself, without a plan administrator or complex tax reporting, said Margaret A. Kruse, assistant vice president of Allianz Life Insurance Co. of North America.

SEP- and SIMPLE-IRAs are tax-advantaged retirement plans. If you have employees, you can contribute amounts equaling up to 25% of their compensation into the SEP-IRAs. A SIMPLE-IRA allows employees to contribute up to $11,500 of their own salaries. You may be eligible for up to $500 in tax credits to cover the cost of establishing these plans, Kruse said.

Read IRS Publication 3998 on small-business retirement plans or attend a free webinar, Easy, Low Cost Ways to Start Your Small Business Retirement Plan, on April 7 at 11 a.m. Pacific time. You can sign up at http://www.irs.gov/retirement.

• Which supplies are tax-deductible?

Dear Karen: What types of business supplies are deductible on my business tax return?

Answer: Monthly or quarterly expenses for items such as rent, telephone and Internet service and office supplies can be deducted as what the IRS calls "ordinary and necessary" expenses in the tax year they are incurred.

Purchases of assets that will generate revenue over time, such as office furniture, computers and vehicles, are called capital expenses and must be deducted slowly over time through depreciation or amortization. More information is available in IRS Publication 535.

Small-business questions? E-mail Karen at smallbiz@latimes.com.

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