Starting a retirement plan like a SEP, SIMPLE IRA, or 401(k) for your employees can earn your business a tax credit of up to $5,000 per year for three years. This credit offsets the ordinary and necessary costs of setting up, administering, and educating employees about the plan, reducing your taxes dollar-for-dollar.
Who Qualifies?
You may be eligible if:
•You have 100 or fewer employees earning $5,000+ annually.
•At least one plan participant is a non-highly compensated employee (NHCE).
•Your employees didn’t participate in a similar plan sponsored by you in the last three years.
How Much Can You Claim?
•50 or fewer employees: Up to 100% of eligible costs, capped at $5,000.
•51-100 employees: Up to 50% of eligible costs, capped at $5,000.
Additional credits are available for contributions to plans for up to five years, hiring military spouses (up to $500/year), and adding auto-enrollment features ($500/year for three years).
How to Claim
File Form 8881: Credit for Small Employer Pension Plan Startup Costs to claim the credit. Remember, you cannot deduct expenses already claimed as a credit.
For full details on this opportunity, click here.
You can also reach out to Compass Investment Services to receive more information and resources for you and your employees.