Government Safe Harbor 401K Deadline

Those unfamiliar with the Government’s Safe Harbor 401(k) plan are usually unfamiliar with Safe Harbor deadline for setting up a 401(k) as well. To ensure you are able to file for tax relief in your small business 401(k) plan for 2011, you will need to purchase your plan one to two weeks prior to the October 1st deadline.

Doing so will allow your business to contribute the maximum allowable contribution that satisfies the IRS requirement for small businesses. That annual contribution amount is $16,500 in 2011 or $22,000 if the individual is 50 years of age or older. It allows members to tax-defer a significant amount of their current earnings in the current year to later years.

In general, the “safe harbor” match allows businesses avoid what is generally referred to as government discrimination testing and allows you to defer significant taxes, especially if you are in the higher taxable brackets. So, small businesses can work to lower the tax liability in the current year and the match of any small business owner to employee 401(k)s are also tax deductible. Finally, a $500 tax credit each year for the first three years is given to the plan to help offset any administrative costs to the program.

Starting a small business 401k is not only easy, but well worth it for both the short and the long run. This is just a friendly reminder that planning your 401(k) account to coincide with Uncle SAM can save you some coin.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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