As an individual and a business owner, the choices you make today will significantly impact your future, the future of your employees, and the future of your business. This is especially true when planning for retirement and making decisions about benefits. One such choice is determining which type of plan—401K or IRA—is best for you and your employees.

Sure, both options can build wealth for retirement. But understanding the details of each plan type—like contribution guidelines and tax treatment—is crucial before making this important 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.

❓ 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 investment options, 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, start by considering the following:

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

👉 401K: In 2024, you can invest up to $22,500 a year in a 401K, not including any employer match. And for those 50 and over, you can add an additional $7,500 per year.
👉 IRA: The contribution limit for a traditional IRA in 2024 is $7,000. 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 business attract and retain top talent, but with a 401K plan, you can offer an employer match.

❓ Begin Asking the Right Questions

To optimize your retirement planning while you are building your 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 roll over a 401K to an IRA

Asking the right questions about your particular situation is important for you, your employees, and your business. For example, did you know that an individual 401K plan can 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, the number of 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 firms 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.

Amazon is one of the biggest companies on the planet, serving countless people and employing an equally impressive number. In addition to seeking traditional employment with the company, practically anybody can create an account and sell items online lucratively and efficiently.

If you put in some real effort, you can use this outlet to become a very successful online merchant. However, an inexperienced Amazon seller filing taxes might not know that there are nuances to the task that might not be immediately intuitive.

Typically, there are three different types of Amazon sellers:

1️⃣ Retail Arbitrage

This is where the typical Amazon seller begins their journey. Retail arbitrage involves buying discounted products from retail stores and reselling them on Amazon. This technique is widely used and very popular, especially for beginners. It allows a budding entrepreneur to get used to the process of e-commerce without having to commit or invest too heavily.

2️⃣ Private Label

This is the most scalable model for selling products on Amazon. Creating a brand and selling under a consistent name is what most entrepreneurs aim to achieve. This technique can be executed by buying from a manufacturer who can make your product in bulk at a low price. You’d then make some adjustments to the product, like adding your logo, and resell it under the brand you’ve created.

3️⃣ Wholesale

Wholesale sellers buy products directly from major brands at wholesale prices and sell them on Amazon. The difference between this and private label selling is that the products come from an already established brand and are sold under their name with their approval.

These are some of the different ways to sell on Amazon, but on the tax end, it doesn’t vary too much. Here are four tips for Amazon FBA sellers filing taxes:

1. The 1099-K Form

The 1099-K form specifically handles income received from third-party payment processors. It’s an IRS information return used to report payment transactions to improve tax compliance.

As an Amazon seller, you agree that Amazon will handle collecting payment information from customers. This is a huge perk for new sellers, as Amazon takes care of this aspect while you focus on selling products. The 1099-K form details the total amount in dollars that Amazon receives and transfers to you.

2. Sales Tax Policies For Sellers

It’s crucial for every seller to understand the sales tax policies in the states they operate in. The laws change, and the amount of tax often depends on various factors. Sales tax is a tax on items paid to a governing body. As an Amazon seller, you’re responsible for collecting sales tax and charging buyers the correct amount in each state you operate in. You then must remit the collected taxes back to the state. Failure to comply could lead to significant penalties, including the seizure of your business assets.

Establish whether you have a nexus with a state. This can be tricky, but some common nexus-creating factors include your location, the use and location of warehouses, other forms of inventory, and personnel based in other states.

3. Deductibles

Deductibles are reductions in your taxable income, typically due to expenses made to produce the income you’re taxed for. As an Amazon seller, you can deduct more than you might think; charitable contributions, advertising, auto expenses, and payroll fees are just a few examples.

4. Consider A Licensed CPA Accountant

Dealing with Amazon taxes, both as an individual and as a business, can be complex. You’ll want to maximize your profit while avoiding an audit or other stressful issues. While some e-commerce business owners handle their taxes efficiently, many struggle.

Hiring an accountant can be incredibly beneficial. A team of professionals experienced with Amazon sales tax and Amazon FBA can help you effectively. Not only will they complete your work accurately, but they’ll also provide valuable insights to help you learn for the future.

Ready to simplify your Amazon taxes? Reach out today and let our experts help you thrive in the world of selling online. Don’t navigate the complexities of Amazon sales tax alone—let us guide you to success!

eCommerce Tax