Masonry Magazine June 2001 Page. 29
Masonry Contractor's Tax Deduction
While also increasing the value of those shared profits to the employee/recipient. This is possible because a formal or "qualified" plan eliminates the recipient's tax bill on any amounts "shared" and even, in some instances, generates further tax benefits for both parties involved.
Sharing the Wealth with a Retirement Plan
An employer who wants to provide retirement benefits share the wealth with employees will customarily establish a formal pension, profit-sharing or stock bonus plan that qualifies for preferential tax treatment. This includes a tax exemption for the fund that is established to provide benefits, deductions by the employer for contributions made to the fund, tax deferred income for the employee for his or her contribution and earnings from the plan. In some instances, those tax benefits can mean favorable tax treatment when the plan's benefits are paid to the participant.
Sharing the Wealth with a Profit-Sharing Plan
An employee benefit plan that entitles employees to a share in the profits of a masonry contractor are common even among smaller employers. When the masonry business does well, the employee gets a bonus; when the masonry business loses money, employees receive only their regularly established pay.
Since employer contributions to a profit-sharing plan are ordinarily based on profits, the masonry contractor is not required to contribute any particular percentage of profits. Of course, under the rules, contributions must be substantial and reoccurring. Remember, however, in order to qualify for the tax benefits, a profit-sharing plan must have a definitive written formula for allocating profits among the individual accounts that are maintained for the participants and be classified as a defined contribution plan.
Stock Bonus Plans and ESOPS
A stock bonus plan is a defined contribution plan that provides benefits similar to those of a profit-sharing plan.
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MASONRY-JUNE, 2001 29