Available Solutions Reversing Start-Up Costs

Department of Labor statistics have uncovered a trend in 401k plan participation. It seems that 64% of workers employed by large or medium sized business are participating in a retirement plan, whilst only 34% of workers employed by small businesses are participating in such plans.

Small businesses state that they are not offering retirement plans, due to their expensive nature. Owners worry about the costs of setting up as well as maintaining and administering such plan. Start-up charges have always been an issue for such small business who intended to start a 401k plan for their employees. Nowadays however, the EGTRRA has helped in minimizing this problem, thus opening the doors to employees who wanted to start saving for their retirement. This law has put into operation a form of credit, that helps employers offset the costs of starting up a 401k plan, and adequately educating their employees about its benefits and the way it works.

As a business owner, you are able to claim credit for costs that you have incurred during the tax years after December 31, 2001. These costs have to be related to the start-up of a retirement plan such as SEP, the SIMPLE or the qualified plan options. The credit you will get, will be equal to 50% of the cost you have paid in setting up and administering the plan, up to a maximum amount of $500 per tax year, for the first three years of the plan.

To be eligible for this credit, you need to have 100 employees or less receiving a salary of at least $5000 from your end.

Reference:
http://www.401khelpcenter.com/401k/small_business_tax_credit.html