Guest Taxlady1040 Posted March 6, 2014 Report Share Posted March 6, 2014 I have a heckuva mess on my hands and need some help sorting out the solution. Client was sole prop/no employees in 2012, and opened a SEP/IRA with Vanguard in June 2013 (missed the solo 401k setup deadline) Contributed a total of $32,909 to the SEP in June 2013 for tax year 2012, of which $17,000 was erroneously included as deferred compensation, and is an excess contribution. This mistake was just discovered this week. Formed S Corp in early 2013, and opened a solo 401k with Vanguard also in June 2013 for 2013 contributions. No employees. Salary deferrals for 2013 reported on W-2 as 12DD are $17,500, but only $14,318 has been contributed so far. Remaining contributions to be made by April 15 to bring the total employee contributions to $17,500. Employer contributions to the 401k for 2013 total $14,530.50. There are additional employer contributions accrued on the books, but have not been made yet. My questions are: 1. Can I get the plan administrator (Vanguard) to return the 2013 employer contributions to the 401k of $14,530.50 without penalty if done so before the tax filing deadline plus extensions? 2. Can I recharacterize or rollover the SEP/IRA excess employer contribution of $17,000 into the 401k plan without triggering penalty or a taxable event, since the SEP/IRA contribution was made in June 2013? 3. I realize I have to file an amended 2012 tax return for the client, but because she was a sole prop in 2012, there are no amended W-2's to deal with. Any help or advise is greatly appreciated. I am sweating the penalties I will have to pay if this scenerio isn't feasible. Link to comment Share on other sites More sharing options...
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