It’s late in the year, and you’re closing the books for your clients. Extensions are filed, projections are updated, and you finally turn to your own return. The number jumps off the screen: you’re staring at a significant check to the IRS.
You know the drill. You’ve walked clients through every available deduction, nudged them to fund their plans earlier, and reminded them about SECURE 2.0 changes. Yet when it comes to your own situation, it’s tempting to just sigh, write the check, and move on.
There’s another path. Instead of sending that entire amount to Uncle Sam, you may be able to redirect a meaningful slice of it into your own future—using qualified retirement plans designed specifically for business owners. The strategy isn’t abstract theory. It’s a practical, repeatable approach that lets you trade “tax pain” for long-term retirement funding.
This article focuses on how CPAs who own their firms can stop overpaying the IRS by deliberately structuring and stacking qualified plans. The goal is simple: when you have a high-income year, you want as much as possible going to your future self, and as little as reasonably possible going to the government.
Why CPAs Are Uniquely Positioned To Use Qualified Plans
Most business owners need outside help to understand the trade-offs of different retirement plans. You live in that world every day. You already speak the language of contribution limits, compensation definitions, and deduction timing.
What many CPAs underestimate is just how far these tools can be pushed when they are designed with their own facts in mind. You’re not limited to the same off-the-shelf 401(k) plan a mid-size employer offers its staff. You can choose:
How much flexibility you want in contributions from year to year.
How much complexity you are willing to tolerate in exchange for higher deductions.
How aggressively you want to fund your own benefit versus staff benefits.
When you treat your practice like any other high-value client and build a plan around your actual numbers, qualified plans stop being an afterthought and start becoming one of your main levers for reshaping your lifetime tax picture.
From Annual Tax Bill To Lifetime Tax Picture
Tax season tends to compress your perspective into a single year. What’s deductible now? What can I still do before December 31? How do I get this year’s bill down?
Qualified plans force you to zoom out. Each dollar you send into a plan with pre-tax dollars may reduce your current taxable income, but that’s only part of the story. Those dollars then grow tax-deferred for decades. Eventually they come out as taxable distributions, or in some cases tax-free if you’ve used Roth features.
For many CPA firm owners, the numbers work in your favor:
You are often in a high federal bracket during your peak earnings years.
Your business profits can support contributions well beyond basic IRA limits.
In retirement, without large W-2 or K-1 income, your effective tax rate may be lower.
That creates an opportunity to “move” income from high-bracket years to potentially lower-bracket years, while also harnessing tax-deferred growth in the middle. Instead of just trimming the edge off this year’s tax bill, you’re smoothing your taxes across your entire working and retirement lifetime.
This is the same long-term perspective you recommend to clients. The difference is that when you own the practice, retirement plan design is one of the few tools that can materially change your own trajectory.
The Qualified Plan Toolbox For CPA Firm Owners
There is no single “best” plan. There is the best plan for a specific firm, at a specific stage, with a specific cash flow pattern and staffing profile. The combination that works for a solo CPA in her 40s with volatile income is very different from what works for a 60-year-old partner with stable seven-figure profits and a small team.
Most CPA owners fall into one of three broad planning tracks:
A high-simplicity track, where SEP IRAs or SIMPLE IRAs provide meaningful deductions with minimal overhead.
A 401(k)-centric track, where a Solo 401(k) or safe harbor 401(k) with profit sharing maximizes defined contribution limits.
A “maximum shelter” track, where a cash balance or defined benefit plan sits on top of a 401(k) to dramatically increase deductible contributions.
You may move from one track to another as your practice grows. Early in your career, when cash flow is less predictable, simplicity tends to win. Later, when your income is both higher and more stable, complexity becomes a fair trade-off for much larger deductions.
The Three Planning Tracks
Move between tracks as your practice grows
Using SEP IRAs To Capture Big Deductions In High-Profit Years
If you run a solo practice or have only one or two employees, a SEP IRA often serves as the first step toward using qualified plans strategically. The appeal is straightforward: you can potentially contribute up to 25% of compensation, capped at the annual defined contribution limit (for example, $70,000 in 2025), with almost no administrative burden.
For a self-employed CPA, the math is a bit more nuanced because “25% of compensation” effectively translates to about 20% of net self-employment income after the SE tax adjustment. But the core opportunity is clear. A year with $200,000 of net income could support around $40,000 into a SEP. Double that income and you’re quickly pressing up against the annual cap.
From a tax standpoint, that contribution is a deductible business expense. Instead of showing $200,000 of taxable profit, you might only show $160,000. If you are in a combined high federal and state bracket, that one decision can move tens of thousands of dollars from the IRS column into your retirement column.
SEP IRAs are particularly powerful as a backstop when you miss other deadlines. A Solo 401(k) often must be established before year-end to make salary deferrals. A SEP, by contrast, can frequently be set up and funded by your tax filing deadline, including extensions. That means when you’re preparing your own return in March, April, or October, you can still run the numbers, determine the maximum allowable SEP contribution, and decide how much you want to fund for the prior year.
The trade-off is that SEPs are purely employer-funded. Employees do not defer their own pay, and if you have eligible staff, you must contribute the same percentage of compensation for them that you do for yourself. That can limit the practicality of a SEP for larger teams, but for solo or very small shops with healthy margins, it remains one of the cleanest ways to turn a large tax bill into a large retirement contribution.
SIMPLE IRAs As A Transitional Strategy For Growing Practices
When you add a few employees and want to involve them in their own retirement savings, SIMPLE IRAs can provide a middle ground between “no plan” and a full 401(k). The contribution limits are lower than a 401(k), but the administrative burden is also much lighter, with no annual testing or Form 5500 requirements.
In a SIMPLE setup, your employees elect to defer from their paychecks, and you commit to either a matching formula or a small nonelective contribution. For you as the owner, every dollar you defer pre-tax reduces your current-year taxable wages, and every employer dollar you contribute is a deductible business expense.
This structure aligns well with younger CPA firm owners who are still building their practices, paying down debt, or managing cash flow swings. You may not be in a position yet to commit to the higher funding requirements of a defined benefit plan, but you still want to avoid the default of having no plan at all.
From a tax planning standpoint, a SIMPLE can still make a noticeable difference. A CPA under age 50 who defers up to the annual limit and matches herself based on a reasonable salary can meaningfully chip away at the tax bill, while simultaneously promoting a saving culture inside the firm. When your profits grow to the point that the SIMPLE limits feel constraining, that’s often your cue to consider migrating to a 401(k) or a 401(k) plus cash balance structure.
401(k)s For CPAs Who Want More Control
Once profits and headcount reach a certain level, a 401(k) plan becomes the foundation of a more intentional tax strategy. For solo CPAs with no common-law employees, a Solo 401(k) lets you wear two hats: employee and employer. You can make salary deferrals up to the annual elective deferral limit, then layer on an employer profit-sharing contribution up to the overall defined contribution ceiling.
For example, a Solo 401(k) might let you combine a full employee deferral with an employer contribution that together approach the same annual cap that applies to SEPs—but with different levers. That can be especially useful at mid-range income levels where a SEP’s percentage limitation would otherwise force you to leave room under the annual maximum.
If you have staff, a safe harbor or profit-sharing 401(k) can still be designed to steer a larger portion of the overall contributions toward owners, while providing meaningful benefits for employees. This is where plan design becomes part art, part science. Compensation definitions, eligibility rules, and allocation formulas all affect how much you end up contributing to staff compared to owners.
The reward for this complexity is control. You can:
Dial in how aggressively you fund your own account each year within statutory limits.
Use Roth deferral options for a portion of your contributions if long-term tax-free growth fits your broader plan.
Pair the 401(k) with a defined benefit or cash balance plan to dramatically increase total deductible contributions without blowing up staff costs.
For many CPA firm owners in their 40s and 50s, the 401(k) is the main workhorse plan. A SEP or SIMPLE might have gotten you started. A cash balance plan might lie in your future. The 401(k) is the bridge.
2025 Contribution Limits
Annual maximum by plan type
Cash Balance And Defined Benefit Plans: The Tax Hammer For Late-Stage CPAs
If you are in your 50s or 60s, your firm is consistently profitable, and your personal retirement savings feel behind, a cash balance or traditional defined benefit plan may be the tool that finally moves the needle.
Unlike defined contribution plans with fixed annual limits, defined benefit plans work backward from a promised retirement benefit. An actuary calculates how much must be contributed each year to fund that promise, based on your age, compensation, years until retirement, and assumed investment returns. Older owners, with fewer years left to fund a given benefit, can see very large allowable contributions—often in the six-figure range annually.
From a tax perspective, this can be transformative. Instead of maxing out around the typical defined contribution cap, a cash balance design layered on top of a 401(k) might allow a high-income owner to contribute a combination of 401(k) and DB dollars that rivals or exceeds what you could save personally over an entire decade using only IRAs and a basic plan.
The trade-offs are real. Defined benefit plans bring:
A recurring funding obligation, with less flexibility to skip contributions in lean years.
Higher administrative costs, including actuarial services and more complex compliance.
The requirement to provide some level of benefit for eligible staff, which must be factored into your overall compensation model.
But when your practice income is stable, your time horizon is shorter, and you’re in a high bracket, those trade-offs can be worthwhile. You may prefer to commit to disciplined, substantial annual contributions now, reduce your peak-year tax liabilities, and build a pension-like pool that can later be annuitized or rolled over to an IRA.
For CPAs who spend their careers optimizing client outcomes, it can be sobering to realize how much money they’ve left on the table personally by not exploring these structures earlier. The good news is that mid- to late-career is often exactly when the numbers start to justify them.
Timing, Deadlines, And The Year-End Window
The difference between an average tax year and a highly efficient one often comes down to timing. You already coach clients on this, but it’s worth applying the same discipline to your own return.
Many key decisions must be made by December 31 to affect the current year. Elective deferrals into 401(k) and SIMPLE arrangements generally need to be elected during the year and funded on a timely basis. Certain plan types must be formally established by year-end for contributions to count.
On the other hand, plans like SEPs and many cash balance/defined benefit arrangements allow some funding after year-end, up to your tax filing deadline, once the plan is already in place and the design decisions have been made. That gives you room to refine the exact contribution amount once the year is closed and your financials are clearer.
The practical takeaway is to treat the last quarter of the year as your planning season, not just your cleanup season. If you wait until April 10 to think about your own situation, you’ll still have a few levers left, but the biggest opportunities may have already expired.
Integrating Retirement Plans With Broader Retirement Strategy
A qualified plan is not a standalone solution. It’s one part of a broader retirement and tax strategy that touches Social Security, IRMAA, sequence-of-return risk, healthcare costs, and long-term care planning.
For instance, when you think about how much to defer into pre-tax plans, it makes sense to also consider how future required minimum distributions will interact with Medicare premium surcharges (IRMAA) and Social Security taxation. A plan that looks optimal on a one-year tax projection might push future income high enough to increase your Part B and Part D premiums or trigger higher taxation of your Social Security benefits later.
Articles like “How IRMAA Affects Your Retirement” and “Social Security Planning for Married Couples” dig into those issues from the client perspective. The same principles apply to you as a practice owner. The mix of pre-tax, Roth, and taxable savings you build now will influence how much flexibility you have later when planning withdrawals around IRMAA brackets and Social Security claiming decisions.
Likewise, a piece like “Navigating Retirement With the Three Bucket Approach” lays out a framework for balancing safety, flexibility, and growth. Qualified plans often occupy the long-term growth and tax-deferral bucket, but your plan design should still harmonize with the shorter-term liquidity and stability buckets that fund the first decade or so of retirement.
In other words, don’t view a cash balance plan or 401(k) solely as a way to reduce this year’s tax bill. View them as primary tools in an integrated retirement design that also accounts for healthcare, longevity, and behavioral realities.
Avoiding Common Mistakes CPAs Make With Their Own Plans
When we look at how CPAs handle their own qualified plan strategy, certain patterns keep showing up:
Many wait too long to move beyond basic IRAs or a simple plan, missing years when higher contributions would have been possible.
Some choose a plan primarily based on ease of setup, without modeling the long-term tax and retirement impact.
Others overfund pre-tax plans without considering how RMDs, IRMAA, and Social Security taxation interact in their 60s and 70s.
These aren’t failures of technical knowledge. They’re side effects of being busy, client-focused, and human. The best antidote is to treat yourself like your most important planning engagement each year. Build a simple projection that includes your practice value, target retirement age, Social Security assumptions, and a few different contribution strategies.
From there, you can run scenarios: What if you continue with your current plan? What if you add a safe harbor 401(k) and profit sharing? What if you layer on a cash balance plan for the next 7–10 years? How do those choices change your projected retirement date, your dependency on selling the practice, and your future tax profile?
You don’t need a 50-page report to make progress. You just need enough clarity to choose a direction and implement the next iteration of your plan.
The Tax Shift
Redirect dollars from taxes to your retirement
Bringing It All Together
As a CPA, you see every day how much tax planning matters for your clients. Qualified retirement plans are often the single biggest lever those clients have, especially in high-income years. The same is true for you.
Whether it’s a straightforward SEP to capture large deductions in strong years, a SIMPLE or 401(k) to support a growing team, or a carefully designed cash balance/defined benefit plan to play catch-up in your 50s and 60s, these are not just compliance items. They are engines that can shift dollars from the IRS column into your family’s future.
You can’t eliminate taxes, and there are no guaranteed outcomes. But you can stop overpaying by default. You can be as intentional with your own plan as you are with your clients’ plans, and in doing so, reshape your lifetime tax picture in a way that supports the retirement you want.
If you’d like to explore which qualified plan or combination might fit your practice and long-term goals, we’re here to help you run the numbers and weigh the trade-offs.
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