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401K vs. IRA: Retirement Planning for You & Your eCommerce Business

401K vs. IRA: Retirement Planning for You & Your eCommerce Business​

As an individual and as a business owner, you’re making choices every day that will significantly impact your future, the future of your employees, and the future of your business. When you’re planning for retirement and making decisions about benefits, the same is true. One such choice is which type of plan — 401K vs. IRA — is best for you and your employees. 

 

Sure, both options can certainly build wealth for retirement. But examining details of each plan type — like contribution guidelines and tax treatment — is an important step before making this critical decision. 

 

Keep reading to learn how each type of plan works and what questions to ask, so you can make the best decision and maximize your savings and earnings over time.

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401K vs. IRA: What’s the Difference?​

 

A common retirement savings plan offered by employers, a 401K plan enables employees to save for retirement. The participant chooses how much they’d like to invest and that money is automatically deducted from the paycheck and transferred to the 401K account.

An IRA is an individual retirement savings account that you can open and manage on your own. 

 

The key differences are that IRAs typically offer more investments, but 401Ks allow you to contribute more each year.

 

Considerations for an Important Decision: 401K vs. IRA

IRAs are popular with small business owners, but 401K plans can be the right fit for some e-commerce businesses. To make the right choice for you and your business, begin by considering the following:

 

Contribution guidelines. IRAs cap employee contributions at lower amounts than 401K plans.

 

  • 401K: In 2022, you can invest up to $20,500 a year in a 401(k), not including any employer match. And for those 50 and over, you can add an additional $6,500 per year. 
  • IRA: The contribution limit for a traditional IRA in 2022 is $6,000. Those 50 and older can tack on an additional $1,000.

 

Control and investment options. Because an IRA has no plan administrator to choose (and limit) the investment options, participants have more control and more variety when it comes to investment options.

 

Tax treatment of contributions. 

 

  • 401K: Your contributions lower taxable income in the year they are made.
  • IRA: Contributions may be deductible. 


Employer matching contributions. Both retirement plan options can help your e-commerce business attract and retain the best and brightest employees, but with a 401K plan, you can offer an employer match.

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Begin Asking the Right Questions

To optimize your retirement planning while you are building your e-commerce business, you need to understand some complicated issues. These issues involve things like:

 

  • Legal and fiduciary requirements
  • Income break-even points
  • If and when it makes sense to match employee contributions. 
  • Whether you need a plan administrator
  • How to rollover a 401K to an IRA

 

Asking the right questions about your particular situation will be important for you, your employees, and your business. For example, did you know that an individual 401K plan can likely maximize retirement savings if you’re a business owner with no employees other than your spouse? 

 

And, of course, 401Ks and IRAs are not the only options out there… 

 

Based on your cash flow situation, how many employees you have, and a variety of other factors, there may be options you’ve never even considered — like the SEP-IRA. This simplified employee pension plan has generous contribution limits and opens up the potential for tax deferrals. 

Dig into Your Wealth-Building Options with the Right CPA Accounting Firm

Whether you’re just getting started or need help optimizing your current strategy, making the right decisions is easier when you have a financial expert on your side. 

 

Building a comfortable future for yourself, your family, and your employees begins with a plan. Our year-round wealth management experts analyze tax structure, risk tolerances, estate considerations, and financial goals to deliver a clear course of action so you can build and protect your wealth.

 

While many accounting and bookkeepers can take care of your business, they don’t necessarily consider building personal wealth for business owners or employees. Only Insogna CPA looks at you and your business holistically so that you can build wealth while you grow your business.

 

Get answers to your questions and confidently explore retirement plan options that are right for you, your business, and your employees. Get in touch with us today.



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The E-commerce Business Owner’s Guide to Accounting, Tax, and Accumulating Wealth

How an eCommerce CPA Helps Business Owners

Look for a Licensed CPA that gets E-commerce

Hiring the best E-commerce CPA accounting firm to contribute to your team’s success is serious business. It takes time, know-how, and diligence to stay the course to find the right solution for you and your growing eCommerce or online retail business. 

Knowing what type of tax strategy, plus putting a plan in place to implement it, is an important step in securing the financial success of your business – and your own personal wealth. 

There are three key components of a fuss-free accounting process for e-commerce businesses:

#1. Get a licensed CPA accountant that gets eCommerce.

#2. Use the best-of-breed accounting software and technologies, and implement efficient accounting processes and systems.

#3. Work together with your licensed CPA accountant to help you build wealth with your eCommerce business – no matter the size.

This may sound complicated, but a licensed CPA accounting firm with experience in e-commerce can guide you through these challenges.

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Caution: An Unlicensed Accountant May End Up Costing You More

Using an unlicensed accountant who lacks professional experience in e-commerce and taxes can actually end up consuming more of your time and potentially costing you a lot of unnecessary taxes.

Don’t just assume that all accountants know what they are doing. Accountants are human and make mistakes too! A licensed CPA accountant should be checking key performance indicators (KPIs), COGS, inventory assets, Sec179 investments, and estimated taxes. This can help you get an idea if things might be off and provide you with upcoming cash flow estimates. 

Making sure your accountant is getting it right, will help you have the peace of mind that everything is running smoothly in your business. And you will have accurate numbers that will help you make better, more informed business decisions.

E-commerce retailing can be a dream way of becoming an entrepreneur. But speaking to a licensed CPA accountant, whether you are about to launch or have been in business for many years, will repay your efforts a thousand-fold in reducing anxiety and getting your accounting and taxes right.

Avoid getting lost in the Amazon Seller digital jungle.

Selling on Amazon is like getting lost in a digital jungle among thousands of other sellers. Amazon’s services do not cover your store’s day-to-day financials and accounting.

When it comes to your finances, ask yourself a few questions:

  • Are you collecting sales tax from the correct territories?
  • Have you calculated your Cost of Goods Sold correctly?
  • Are your books showing you the full financial picture of your business?
  • Do you really want to do all of this on your own?
  • Are you keeping proper track of your Amazon seller financial transactions?
  • Or, are you feeling like you don’t know what you don’t know?

Without solid bookkeeping and accounting, you might find your eCommerce business in some difficulties, especially once tax filing season comes around.

Insogna CPA specializes in eCommerce and Amazon selling accounting services. We don’t need to learn how it works. We can hit the ground running on day one. You can expect fast turnaround times, accurate records, and a true partner to help you through the financial side of your business.

In addition to accurate bookkeeping and accounting records, we also assist you in tax planning and paying the right taxes throughout the year.

With accurate financial statements, you can easily see and match payments, determine extra commissions, know which orders remain unpaid, and more.

Are you making a profit?

Tracking your day-to-day financial transactions is crucial. Without up-to-date accounting, you won’t know whether you’re truly earning a profit or simply making sales. It will also be difficult to gauge the success and viability of your Amazon store.

Make the Right Decisions

Always know where your money is. Documented daily operations assist you in making the right financial decisions as your business grows.

If all you need is your accounting done right, that’s okay. If you want tax planning guidance, payroll assistance, or direction on selling your business, we can help with that too.

Contact Insogna CPA to learn more about how we can help you take your Amazon store to greater heights.

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Automated Bookkeeping for eCommerce Sellers

We take your accounting worries away by creating monthly Balance Sheets and Profit & Loss statements you’ll be able to interpret and analyze over time.

Our team reconciles the sales data and organizes in a way that you can track of what’s happened in previous months and predict what your finances should look like.

Be on top of your cash flow and feel prepared for tax season, raising capital, and scaling your business with clean and consistent accounting.

Know your real-time financial situation so you can make data-driven decisions and solve problems proactively instead of reactively.

eCommerce Accounting Channels

We specialize in a variety of eCommerce accounting channels, including:

  • Multi-sales channel operations
  • Merchant account reconciliation
  • Website sales
  • Amazon
  • Ebay
  • Shopify
  • Retailers
  • Wholesalers

Let Insogna CPA ease your financial and eCommerce bookkeeping worries. Put your accounting needs in our hands.

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Top eCommerce Business Challenges + The Solution

How can you keep up with your eCommerce accounting when you also have partners to meet, logistics to worry about, and a business to run? Then, as your business grows, you’ll have increased compliance requirements, new markets to enter, and compounded tax challenges.

It’s impossible to do it all yourself. And, you’re not alone. Here are the top, four eCommerce business challenges we’ve identified; plus, how to solve them.

  • Sales Tax Liability—Over the past few years, eCommerce sales tax has gotten more complicated for the eCommerce business owner. Online retailers need to remit tax in nearly every area in which they sell. But, some challenges do it electronically while others require specialized knowledge of tax laws.
  • Seller Fees—Complex fee structures can be a challenge to track. There can be fees for transactions, listing, order fulfillment, advertising, and more. Without the right tools in place, this could leave you spinning.
  • Ruinous Records—Disorganized books can cause a lot of problems, such as fraud, deceitful tactics, and internal control nightmares.
  • Growing Pains and Money Management—With a limited understanding of your company’s profitability and the correct way to manage business finances, you may have a huge hurdle to cross.

With your busy schedule, the thought of trying to handle complex business accounting on your own can be overwhelming. That’s why Insogna CPA works with you to help you grow your business.

Take advantage of our expertise rather than spending time looking, hiring, and maintaining an in-house accounting team. Give us a call today.

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Accounting Experts For eCommerce Sellers

Stressed out? We help eCommerce and online sellers to drive profitable results by taking the bookkeeping headache away.

We understand your challenges. That’s why we focus on using our eCommerce accounting experience to help you and your business to reach their full potential.

Avoid taking a reactive approach to your bookkeeping by trying to fix problems after they’ve happened. Our team helps you make the most of your data by preventing financial mistakes without the stress of trying to manage them yourself. We help sellers like you with:

Take back your time and grow your wealth with customized, monthly business accounting solutions tailored to your needs.

Grow smarter with the perfect fit. Smarter technologies. Seamless processes. Everything you need to streamline your back-office.

Avoid the bookkeeping headaches. Work with a team that knows eCommerce, like Insogna CPA, inside and out. Give us a call today.

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