Guest LTurner Posted January 14, 2003 Share Posted January 14, 2003 new client has 100% ownership of C-Corp and S-Corp businesses. Family members are all paid from C Corp and all employees are paid from S Corp C Corp has a SEP plan (was not offered to S Corp) This has existed for some time (mom, dad, and kids only) S Corp has a SIMPLE plan (not as old as the SEP) includes employees only - no family I presume this is a problem since there is common ownership, as the SEP should have included the employees from the S Corp. What needs to be done to correct or fix this situation? Or is this really ok? Link to comment Share on other sites More sharing options...
Gary Lesser Posted January 23, 2003 Share Posted January 23, 2003 Neither plan is any good. The SEP is discriminatory; and the maximum allowable contribution percentage, as corrected under proposed regulations is 0 percent. The SIMPLE (now a "Complex") is not valid (it failed to cover all employees and because there were contributions to another plan). I'm assuming there is no union exclusion applicable or other wierd facts. Nondeductible E/er contributions to both plans are subject to a 10 percent CUMMULATIVE non-deductible excise until corrected (i.e., amounts included on applicable Forms W-2). [Form 5330] The excess to SEP are subject to a CUMMULATIVE 6 percent nondeductible excise tax until corrected. [Form 5329] It does not appear that the 6 percent tax applies to a SIMPLE-IRA since it is ommited from Form 5329 (a SIMPLE IRA is not a traditional IRA). Code Section 4973 doesn't specifically mention it either. Arguably, excesses are to be reported in box 1 of Form W-2 (but not box 12). [see intructions on back of Form W-2.] Arguably, the amounts distributed will be taxable (again). Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now