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Erroneous "contributions" to SIMPLE 401(k)


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This comes from a CPA we work with.  I'm not familiar with SIMPLE plans, so hoping others here can help.  The client had a SIMPLE 401(k) plan, with the 3% match.  The owner somehow managed to start automatically sending money from her personal checking account to the SIMPLE plan on a monthly basis.  Normal contributions were made through the company, no excess from that.  No match was made on the personal funds.  It started in September 2022 and she discovered the error recently.  About $5500 in 2022 and again in 2023.  Can this be self-corrected by removing the personal funds with earnings?

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  • 2 weeks later...

The situation went on for too long and involved the owner who very likely has multiple fiduciary roles.  There also some additional potential complicating factors such as how were the personal contributions treated on the owner's personal tax return, and what are the total annual contributions made to the plan by or for the owner.

It sounds like a VCP is in order.

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