A Keogh (occasionally called H.R. 10) plan affords a self-employed person -- either a sole proprietor or a partner -- most of the retirement funding benefits available to the working owners of a corporation. A self-employed person may take a tax deduction for annual contributions to the plan on his or her behalf and on behalf of any eligible employees.
Although the laws governing Keoghs once varied widely from the retirement plan options for corporations, recent changes have left only minor distinctions. Keogh plans follow rules basic to either defined benefit or defined contribution corporate plans. There are limits, but generous ones. For example, you cannot fund a retirement payout that is greater than your self-employment income or that tops an annual cap that is adjusted yearly for inflation.
You must establish plans by the end of the year (December 31) for which you are making the contribution. Once established, you have until the tax return filing date -- including extensions -- to make the contribution.
