Retirement Plans.
Response to the following problem:
Diana has a consulting practice. She has no employees. For the 2014 tax year, Diana's gross consulting revenue was $155,000, and her operating expenses, not including retirement plan contributions, were $30,000. In addition to her consulting income, Diana also received $5,000 in 2014 for writing a chapter in a book about management consulting. During 2014, Diana established a defined contribution (Keogh) plan. The plan stipulates a fixed percentage of 10% of compensation as the amount of the required annual contribution.
a. What is the amount of self-employment tax that Diana must pay in 2014?
b. What is the required dollar contribution that Diana must make to her Keogh for 2014?
c. By what date must the Keogh be established in order for Diana to take a deduction for the contributions on her 2014 tax return?
d. By what date must the contributions be paid into the Keogh plan in order for Diana to take a deduction on her 2014 tax return?