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When I wrote the author the e-mail, I used a similar example to Austin's. Here's mine:

WEll, this is what Austin said, and he seems to know what he's talking about: Whether the payments come from payroll deductions or your savings account is completely irrelevant. It is literally the same question as to whether the money comes out of your right pocket or left pocket. You got the money tax free, paying it back with after-tax dollars is even steven. I think if you think about it for as long as I have (a wicked long time!) it will start to make more sense...

I think my clients & brokers are reading this--I've had to answer several "in case of a lawsuit" questions today...

There doesn't NEED to be basis in the plan to zero out the alleged after tax repayments on the loan. Let me give another example (without interest, to keep the numbers simple): You take out a loan for $10,000 and put it in your left pocket. You earn $15,000 taxable, pay $5,000 tax, and put the remaining $10,000 in your right pocket. You then take $5,000 out of your left pocket, and $5,000 out of your right pocket and pay back the $10,000 loan. The plan (your account) is in the same position it would have been had no loan been taken out. In your pockets (both of them combined) you STILL have $10,000 (the net after tax total of your taxable income). Upon distribution of your account, you will pay taxes on the $10,000 (say, $3,000) in there - but that is taxes YOU WOULD HAVE PAID HAD THEIR BEEN NO LOAN AT ALL, leaving you with a net of $7,000. Had you NOT taken the loan, you would have paid $5,000 on the $15,000 income you earned anyway (leaving $10,000 in your pocket), and $3,000 in income taxes on the $10,000 plan distribution when you take it, for a total tax of $8,000, and $17,000 left in your pocket ($10,000 net earnings and a net $7,000 of your distribution).. Since you take the loan, you pay $5,000 in taxes on your $15,000 income (putting $10,000 in your right pocket), ZERO taxes on the loan proceeds (leaving another $10,000 in your left pocket). You then take $5,000 out of each pocket to pay back the loan (leaving $5,000 in your left pocket and $5,000 in your right pocket), and now restore your plan account with the $10,000 repayment. At this poiint you take a distribution of the $10,000 from the plan, pay your $3,000 tax, and put the net amount - $7,000 in your pockets (I don't care which one). GUESS WHAT? Under either scenario (no loan or loan) and EVEN WITH at least "partial" repayment of the loan with "after tax money" (your right pocket money) YOU HAVE EXACTLY THE SAME AMOUNT OF MONEY IN YOUR POCKETS (a total of $17,000), and YOU HAVE PAID EXACTLY THE SAME AMOUNT IN TOTAL TAXES ($8,000). No difference. None, nada, zip, zilch. NO DOUBLE TAXATION OF LOAN REPAYMENTS. QED... Add in interest, and that does cause some money on which you have paid taxes on to be taxed at distribution, BUT YOU HAVE ALSO HAD TAX FREE USE OF THE LOAN PROCEEDS DURING THAT TIME - which is a time value of money discussion (essentially, that's the "rent" you pay for having the use of the loan proceeds TODAY as opposed to waiting for a distributeable event.)

Are you sure? I take out $10,000. Unlike BG, I don't make it rain and take selfies, I just like looking at a $10,000 stack of non-taxed cash. I then get paid $10,000 and I mix my taxed cash with my non taxed cash. I repay the loan with $10,100 ($100 interest)from the mixed stack and Im left with $9,900 in my stack. Out of my $20,000, $10,100 went to repay the loan. I only paid taxes on $10,000 out of the $20,000. How much of my loan was taxed twice?

Same idea, but you win by a mile on entertainment value. Bravo. Bravo!

The story doesn't end when you pay back the loan. The account isn't closed and zeroed out. When you take out a loan the money you took out was replaced with after tax dollars. Those same dollars are taxable upon your final withdrawal from the account. There is no basis created in a qualified plan for loan repayment. Tax is paid twice = double taxed. no? I've gone round and round with this too...and EdgarBeaver is a tired rodent

An extra "like" for the use of wicked long time on a dragging Friday!

I agree, it would be a deemed CODA.

If the HCE's get to decide if they want a NEC and if one of them says "no" what happens? If they are simply given that amount on their pay check then don't you have a back door 401(k) deferral instead of a NEC? (I might not be using the exact term here) Once you give a person a choice between having money put into a plan or paid to them that is NOT a non-ELECTIVE contribution. Once it is elective doesn't it have to be tested on the ADP test not as a new comp allocation? If an HCE who says "no" simply gets no extra cash in either the plan or outside of it then why would any of them say "no"? At which time I doubt you pass the test will you?

I have always understood this is rather broad. For example it says: Such presentations include, but are not limited to, preparing documents; filing documents; corresponding and communicating with the Internal Revenue Service; If a TPA prepares an 8955-SSA for a client you just prepared a document (they will most likely file it also). I don't know a TPA that doesn't prepare the 8955-SSA for their clients. They are governed by Circular 230. It has been a long time since I have been part of discussion if just doing a working paper the client uses to prepare an 8955-SSA counts but at that point I don't see the point of just not following the rules. I also quote: or other plan or arrangement having a potential for tax avoidance or evasion; and representing a client at conferences, hearings, and meetings. Isn't helping a client determine a maximum PS contributions giving "advice with respect..(a) transaction...(has) a potential for tax avoidance..." Circular 230 isn't that hard to comply with it is mostly common sense and if you are an attorney, CPA, enrolled actuary.... it seems like your professional ethics are going to cover it. So to more directly answer your questions I think you are missing something. As shown above I am hard pressed to see how a TPA isn't practicing before the IRS once they start filling out forms that are filed to the IRS. It has been a long time since I have had discussions of this topic with experts. I know plenty of TPA's that don't do the little Circular 230 messages at the bottom of their e-mails like maybe they should (I forget if they are required also) but when push comes to shove I don't see how they aren't covered by it.

Well the original question was " For which situations does a TPA get a Form 2848 to represent a taxpayer before the Internal Revenue Service?" That is probably why everyone is focused on the 2848 The new question seems to be: If you are not representing a client before the IRS (presentation to the Internal Revenue Service or any of its officers or employees relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service), and you are not rendering written advice to the client, is it still practice governed by 230? I think I will use the old law school answer of "it depends". There is that little qualifier in the definition If you are subject to 230 and part of your practice is something that does not neatly fit the definition, could those actions still be practice under 230? I think so. Is it possible that they are not? Yes.

If so, then maybe you could send the 1099-R to the Treasury. Oh never mind, they don't pay taxes.

Bottom line, though: find out what happened before you start amending W2's and making people re-file taxes.

I agree, if events occurred exactly as described. But I'd want to know why/how the W-2s show only $18,000 before doing anything; something about this sounds screwy.

Another approach would be to start with basic principles which Mike outlined above instead of the worksheet in Pub 560 . Let D=deferrals , EI = Earned Income , and N = Net Earnings From Self-Employment - then we want D+(.25)EI <= EI or D<= (.75)EI ; now we also know that EI= (.80) N and so D <= (.75)(.80) N or (.60) N ; now if we set D=18,000 we get N = 30,000 & Profit Sharing contribution = (.20) N or 6,000 - in summary D=18000 , PS = 6,000 & Catch-up = 6,000 since we know as Mike pointed out that the Catch-up doesn't fall under the 415 limitation . Mike , please double check what I've laid out above & thanks again for your time and insights .

The Court also should have a copy of the order in it's files. You may have to appear in person at the clerk's office to get a copy (domestic relations matters are typically not publicly available).

That sounds like it would be fascinating reading...

Let's not get hasty... ;)

TPA Jake - We are a TPA who could easily double our fees and be a 316. We struggle with what additional value we are adding. I can already mail notices without being a fiduciary, and I'll charge an hourly rate to do so. Compile the census? Give me a payroll download from your payroll provider and I'm good to go. But listen, to rebeat a dead horse. If you have a client who neglects to tell you who the family members are; or if the client census does not use the proper definition of compensation; or if your client failed to automatically enroll a participant who is eligible; or if they reported incorrect hours for someone and the vesting was incorrect; or if they hired a temporary employee without telling you this and did not recognize that service for eligibility; or if the client deposited Johnny's money into Susan's account and Susan already took a full distribution by the time it was discovered; or if the client forgot to send in the 401k withheld from the bonus run; or if the plan document does not exclude bonus, but the client failed to withhold 401k and therefore match from the bonus; and on and on and on and on; who is responsible? I've just listed the kinds of problems that have gotten my clients into trouble. And as a 316 I cannot figure out how to take responsibility for any of it. Have you had a critical matter arise related to a Summary Annual Report, or the formality of signing a 5500? How about a critical issue related to a fidelity bond? the answer for me is no and no and no. So what the heck would I be charing all of that money for? Listen, I hope you have an answer, because I would LOVE to double my fees, and that's the God's honest truth.