Hi,
Most small business owners skip setting up a retirement plan because they assume it is an expense they cannot justify. However, when you start a plan for yourself and your employees, the IRS will pay up to $16,500.
You do not need to already offer a plan or have a big payroll. If the below sounds like your business, there is a good chance you qualify:
- You have fewer than 100 employeesΒ
- Your employees earned more than $5,000 each last year
- You do not currently offer a retirement plan
- You are open to starting any plan – 401(k), SEP, SIMPLE, or defined benefit
Here is how the savings stack:
- Startup cost credit: 100% of what it costs to set up and run the plan, up to $5,000 a year for the first three years, if you have 50 or fewer employees. It covers the exact fees that scare owners off – recordkeeping, administration, and employee education. Businesses with 51 to 100 employees get 50%.
- Auto-enrollment credit: an extra $500 a year for three years just for turning on automatic enrollment, which most new plans are required to do anyway.
- Employer contribution credit: up to $1,000 per employee for the money you put into their accounts – 100% of it in years one and two, then phasing down through year five, for employees earning under $110,000.
That is up to $16,500 in startup and auto-enrollment credits over three years before the contribution credit, which stacks on top of it. These are dollar-for-dollar: a $5,000 credit takes $5,000 straight off your tax bill, not a percentage of it.
The credit only runs for the first three years of the plan and it is largest at the start, so every month you wait is a month of that window you do not get back. A plan established before year-end can count toward your 2026 return.
The catch is that this is only one of several credits and deductions most businesses never claim – and you cannot plan for what nobody is tracking. That is why we put everything under one roof:
- Monthly and annual bookkeeping with a dedicated bookkeeper
- Full-service payroll, multi-state, plus contractor 1099s
- Sales tax compliance
- Quarterly tax estimates so you know what you owe before April
- A full one hour review of every credit and deduction you qualify for – retirement plan credits and beyond – by the same team that files your return
- Personal and business tax returns handled by the same team
Reply to this email by Monday next week and we will set up a free 15 minute call with our senior tax advisor to go over your situation. Bring a quote from your payroll provider, plus your last invoice from your tax preparer and bookkeeper – so we can show you what having everything under one roof looks like.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com