If you’re self-employed, you may be able to set up a retirement plan that allows you to make much larger contributions than you could make as an employee. Plus, if you set up one of the following plans by Dec. 31, 2012, you can make deductible 2012 contributions until the 2013 due date of your tax return:
1. Profit-sharing plan. This allows discretionary contributions and flexibility in plan design. The 2012 contribution limit is $50,000 ($55,000 for taxpayers age 50 and older).
2. Defined benefit plan. This plan sets a future pension benefit and then actuarially calculates the contributions needed to attain that benefit. So you may be able to contribute more to a defined benefit plan than to a profit-sharing plan. The maximum future annual benefit toward which 2012 contributions can be made is generally $200,000.
Various caveats and limits apply, so contact us for details while there’s still time to set up a plan for 2012.