One of the main benefits of contributing to Ira is that you can defer your tax. On top of that, your earnings for those contributions are also tax-deferrable. Depending on your income, you maybe entitled for tax deduction for your contribution. You can open your Ira account and it will be done as soon as you complete your application. However, do keep in that the deadline for opening Ira account is on the 15th of April every year, the same date for funding your account.
You can only open an Ira account if you are under 70 years old and have earned income, which means is the income you have earn by working, such as salary and wages. However, it does not include the dividends that you get from stocks and shares, interest from your deposits in bank or the allowance that you receive from your pensions.
Ira practically allows funds to be diverted into a retirement account that will grow and it will not be tax until withdrawal. When an employer contributes to Ira, it is called the SEP Ira. Although the lines between sole proprietorship where the owner can be consider employee and employer at the same are somewhat blurred but when it is a business entity that contributes to Ira, it is still considered as SEP Ira. SEP Ira is very popular among the small business owners. If it is applied to larger companies, they however prefer the 401k plan.
With the new law that has just been passed by the government, the Economic Growth & Tax Relief Reconciliation Act of 2001, you can contribute up to 5,000 dollars or 100% of earned income per year or whichever less. However if you are 50 years or older, you are allowed to contribute an additional of 1,000 dollars as a catch-up contribution.
However, for business entity the amount differs from the individual, the general contribution limit is 49,000 dollars in 2009. It also depends on how your company is setup, as the limit actually differs. It is best if you consult your local Ira offices.