Protecting the Tax Advantage of Your Deferred Compensation

The American Jobs Creation Act of 2004 imposed strict new rules for non - qualified deferred compensation plans. From 2005 to deferred compensation programs that are not taxed in accordance with the new rules as wages , slapped with a 20% excise tax , plus interest charged billed .
Given the potentially huge tax consequences for non - compliance with the rules, you should check with your company benefit specialist and your tax professionals to find out how you could be affected by these new rules your compensation advice.
Deferred compensation plans are often used to provide for the deferral of salary, bonus (ie , commissions or bonuses ) or additional compensation for top executives , independent corporate directors and individual board members. The new rules apply to non- qualified deferred compensation plans on taxable and tax-exempt organizations .
Check one option for independent corporate directors and individual board members who can receive income for their services in 1099 , is freeze their nonqualified plan and adopt a qualified plan such as the "one person defined benefit " plan , called the Solo - DB plan . Qualified retirement plans are the requirements of the American Jobs Creation Act .
The Solo - DB plan allows the highest possible deductible contributions to a qualified retirement plans . For example, in 2005 you can contribute up to $ 170,000 compensation in a tax-deferred Solo - DB plan .
Defined benefit plans have been around for a long time. But , the recent pension legislation has increased the contribution and deduction limits and simplified plan fund requirements. So have defined benefit plans such as Solo - DB much more attractive to higher income people with self-employment income . The Solo - DB plan allows you to fund your retirement aggressive in cutting your taxes significantly .
Persons responsible for the solo - are classified DB plan individual entrepreneurs , independent contractors and small business owners age 45 or older who can contribute more than $ 41,000 per year to the plan for at least three years.
For more about Solo DB plans Lamaute Capital website at :
Daniel Lamaute , CEO of Lamaute Capital, Inc. specializes in setting up retirement plans. Visit  a free calculator that will help you estimate what your maximum contribution could be accessed under different plans.