Flashcards in Ch. 22 Keogh Plan Deck (12):
covers a sole proprietor or partner who works in their own business
When is it indicated?
2. owner of unicorporated business
3. shelter self-employment income from tax
4. has self-employment income and salary
designed by banks, insurance companies, mutual funds or other institutions
1. contributions deducted from gross income and tax deferred
2. investment income tax deferred
3. 10 year averaging
4. more liberal than IRA contributions
5. non-owner employees must participate
6. possible business tax credit of $500
1. cost and complexity of qualified plans
2. cost related to nondiscrimination rules
3. penalty and tax on early withdrawals
4. follow the qualified plan distribution rules
Types of Keogh plans
1. defined contribution plan
2. 401k plan
3. money purchase plan
4. defined benefit plan
How are Keogh plans different from other qualified plans?
Special rules regarding earned income and life insurance
for self-employed, what does earned income take the place of?
What is earned income?
the net income from the business after all deductions
How is life insurance treated?
can be used as an incidental benefit that covers a self-employed person
What portion of life insurance premium is tax deductible for self employed
amount that exceeds the pure protection value