Available investment options for a contract employee

[rokid]

My son has just accepted a new job. The good news is that it is a lot more money. The bad news is that he doesn't appear to have any benefits except three weeks of annual leave. What tax deductible investment options are available to a contract employee and what are the contribution limits? Any help would be greatly appreciated.

 

[dell]

I believe he can start an SEP savings plan as a contractor. I am not sure how much he can contribute annually, but I understand it is subsrantail.

Dell

 

[GGal]

My son has just accepted a new job. The good news is that it is a lot more money. The bad news is that he doesn't appear to have any benefits except three weeks of annual leave. What tax deductible investment options are available to a contract employee and what are the contribution limits? Any help would be greatly appreciated.

Before anyone offers ideas, I believe we should nail down your son's correct status. The term "contract employee" can be misleading, especially if used incorrectly.

(1) Is your son an "employee", hired on a contract basis, meaning he is an employee under IRS definition, receiving wages subject to employment tax as an employee (where the employer is responsible for half of the FICA/medicare tax, and the employer is required to withold federal income tax)? And you are merely using the term contract employee to designate that he is hired on contract basis, and is not receiving certain other employee benefits, like insurance, etc.?

(1) Or do you mean that he is a contract worker,, holding himself forth as a self-employed person, and will be paying self-employment taxes rather than having FICA withheld from a pay check?

If number 1, then he can do one of the allowable IRA plans for employees, and if number 2 he can have an allowable SEP plan for self-employeed people, and either way, he just needs to check with his friendly banker or broker, like Edward Jones, and they will interview him and tell him exactly what he is entitled to.

GA

 

[rokid]

I believe he has W2 status. His employment is being handled through a temp agency for the convenience of taxes etc. In other words, your first example. Thanks for the response.