I have spent the last few hours working on my income tax return. In an effort to decrease my tax liability for 2007, I have opened a SEP-IRA. A SEP-IRA (Simplified Employee Pension) can be established and funded by a self-employed owner of a business. Since ‘No Credit Needed’ managed to make a little money in 2007, I can make contributions, on my own behalf, to a SEP-IRA.
For more information on SEP-IRAs, please see the IRS website or this article from Investopedia.
I used this handy calculator from Vanguard to calculate how much I can contribute to my SEP-IRA for 2007.
According to multiple resources, sole proprietors have until April 15th, or their extension deadline, to make contributions if they want a tax deduction for the prior year.
The real problem that I have – right now – is that I have been trying to rebuild my non-retirement savings AND fully-fund my son’s ESA for 2007. Adding the SEP-IRA at such a late date is really going to slow my savings progress – and could even jeopardize my ability to fully-fund his ESA. But, I think that I can manage to fully-fund the ESA AND contribute to the SEP-IRA, if I slow my non-retirement savings.
I have decided to hold off on actually filing my taxes until April – so that I can have a little longer to contribute as much as I can to the new SEP-IRA. I hate the idea of slowing my non-retirement savings progress, but I hate the idea of paying taxes even more!
Please note: I am not a tax-professional, and I most certainly do not play one online. Please, before you make any decision about your taxes, consult a qualified tax-professional.