Starting a business for some tax shelter?

[runjmc]

So, I'm looking at my tax situation for the coming year, and I realized that I'm just $2500 shy of earning a little bit of that sweet Saver's Credit. Since I'm gonna be maxing out 401k and IRA contributions, even squeaking in at the 10% level will net me the maximum $2000 credit. I currently have health insurance through my employer, so at the moment an HSA isn't an option. Current estimated AGI is $32982 and the cutoff for the Saver's Credit is an AGI of $30500 for those of us filing Single.

I'm currently walking a dog a few days a week to earn about an extra $1500/year (unreported) and get out and enjoy the city a little more, but I was wondering if it would be worth it to leverage this 'self-employment' income into some sort of small business. Would that open up an SEP or SIMPLE IRA that I could also use as a tax shelter to nab that Saver's Credit? Would it be worth it to report this dog-walking income through a small business to gain access to these SEP/SIMPLE IRA tools? Would I be able to contribute enough to these accounts to make a large enough dent in my AGI? Would having access to a 401k and traditional IRA somehow bar me from also having access to these SEP/SIMPLE IRA accounts?

Are there any other ways that I might be able to lower my AGI to the point that I could get this credit?

[epipenguin]

The saver's credit is not that sweet - you don't get a credit of $2000. If you just squeaked down into the top of the income bracket, your maximum credit is $200. At the top income, the credit is 10% of the amount you save, up to a maximum contribution of $2000. 10% of $2k is $200.

Also, if you're already contributing to a 401k, the contribution limit for the SIMPLE IRA is cumulative with that, so you won't get extra space.

From IRS: If an employee participates in any other employer plan during the year and has elective salary reductions under those plans, the total amount of the salary reduction contributions that an employee can make to all the plans he or she participates in is limited to $17,500 in 2014 and $18,000 in 2015.

From: http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-SIMPLE-IRA-Contribution-Limits
 

[runjmc]

Aaaaah. I didn't realize that the Saver's Credit scales down as the phase-out is implemented. :/

Alright, I guess it really isn't worth going through the process of setting up a sole proprietorship or anything to nab a measly $200.

Thanks for the help!