How to Set Up a Simple IRA
by admin1. Obtain IRS model form #5305 (5305-simple) by calling the IRS at (800) 829-1040.
2. Fill out a copy of this form.
3. Do not send back to the IRS; simply keep on file in case you need a record of it.
Hire Your Dependent Children Age 7 to 17
If you are a sole proprietor with children or grandchildren that will be going away to college or getting married someday, this part of the chapter is for you.
Suppose you have a 12-year-old daughter named Nicole. If you pay for Nicole’s college education, the tuition might cost you $12,000 a year or more. Or, if you pay for her wedding at some point, that bill could easily run you $25,000. Although college educations and weddings are not tax deductible, if you run a business you can deduct the equivalent of such.12
Here’s how:
First, you hire Nicole to work with you in your business. You pay her a wage,13 which is tax deductible because wages are one of the expenses of your business, and she then puts that money away in a college savingsaccount. At 18, Nicole takes that money and uses it for her own college education. Essentially, you have paid for her education after taking a tax deduction for it. If she decides to get married, instead, she could use the money to pay for the wedding, allowing you to pay for it with tax-reduced funds.
The beauty of hiring Nicole is that if you are not incorporated, wages paid by parents to children under age 18 are exempt from Social Security taxes. If she is under 21, she would be exempt from federal unemployment taxes as well.14
Taken from : Money Mastery “10 Principles That Will Change
Your Financial Life Forever
