I put in $4000 in 2005, never bought any securities, then withdrew $4000 later in 2005 for an emergency.

Using tax software it is telling me that I need to pay $1800 tax but I don't think that's the case. My understanding is that this is a Unqualified distribution but it is also originally contributed funds so I'm ok.

What is complicating things more than they already are is that the 1099-R I received from my broker doesn't explicitly say everything related to the background for the distribution (of course).

What should I do? Do I use the software or print it out and send in with some notes? I know that to ignore the 1099-R would send a flag since its being sent to the IRA also.

If anyone has any ideas on how to proceed, please let me know.

Is a governmental plan allowed to use a vesting schedule longer that that which is allowed for in EGTRRA? For example, a 10 year schedule for a matching contribution?

I imagine that there are threads on this board somewhere on this topic, but I can't seem to search them out. I am looking for a good set of self-audit guidlines for a DB plan to conduct an internal audit. Anyone know where some could be found?

I realize that the IRS has audit guidelines, but think they would be too much for most plan administrators. For some reason, I thought that someone (IRS, DOL, Corbel, ASPPA, etc.) had created something like this, but I can't seem to find them anywhere.

Thanks in advance!

What section of the Code sites someone has to take a RMD from each retirement plan? (Not referring to lumping of IRAs to determine RMD but rather true retirement plans). Thanks.

Owners of Subchapter S Corp have the following info on their W-2:

Box 1 Wages $111,204.33

Box 5 Medicare Wages $120,000

Box 12a Deferral $18,000 (catch-up included)

Box 14 Other: $ 9,204.33 SCor Med

So - what compensation would you as a TPA use for 401(k)? If you're a CPA, what compensation would you tell TPA to use?

Thanks....

Participant has submitted a claim for reimbursement for premium for group health coverage from spouse's group health plan. Is this the type of coverage pernmitted under IRS Notice 2002-45?

Thanks.

I want to start a Roth IRA account, and deposit the max $4K for 2005, possibly another $4K for 2006.

Right now I'm looking at Fidelity & Vangaurd (leaning towards the latter because of low expense ratios) but it looks a bit more involved than just giving a company my money and have them invest it. So many different plans to choose, and I could use some advice! Looks like each company has many different funds, small cap, large cap, growth, value, blend, international, domestic, etc. They also have targeted retirement year funds (2030, 2040, etc), which seems like an easy choice, but do they perform well?

Vanguard Target Retirement 2035 Fund (VTTHX)

http://flagship3.vanguard.com/VGApp/hnw/Fu...&FundIntExt=INT

Fidelity Freedom 2035 Fund (FFTHX)

http://personal.fidelity.com/products/fund...shtml?315792655

One thing I haven't really found in any FAQ of the companies: I'm wondering which of these companies will be more flexible... what if 10 years from now the economy changes a bit and I realize that my money would be better invested in a mid-cap value fund rather than the large-cap growth fund that I chose at first? Will these companies allow me switch funds like that? Will there be a fee/penalty? I don't know if that's a dumb question or not, but I want to invest NOW and not worry too much about choosing the perfect fund.

I'm 27 years old, also looking to buy my first house soon. Which brings up a 2nd question:

I have $18K right now, would my money be better served with a bigger down payment? ($14K down/$4K IRA) Or starting off with a bigger chunk of money in an IRA? ($10K down/$8K IRA)

15 year loan probably, around 5.5% APR? Looks like an extra $4K down for the house would only save me $350 a year, not much. And with lots of new bills, I doubt I'll be able to make the max $4K contribution to the IRA each year, $2K a year sounds realistic. Investing that sounds better, yes?

Thanks for any advice!

Hi,

I'm 53 years old and my company is an S corp with a SARSEP started in 1976. I am the only employee. I didn't pay myself w-2 wages last year because of the economy, but did have about $40,000 commission that the company received on the last day of the year.

Here is the question.... Is the contribution to a SARSEP dependent on W-2 wages only? So if I didn't pay any W-2 wages... can I make a contribution to my SARSEP?

Thanks in advance...LaRae

This message board has participants from all sorts of companies, and at varying levels of experience. I'm curious about what everyone's professional title might be.

I'll start this off: my title is "Senior Tax Manager" (although I usually force my colleagues to address me as "Her Loveliness").

On a qualified trust's financial statements, every number is rounded to the nearest $1,000. For example, interest income of $859,247 gets reported as $859,000.

The client wants the related plan's Form 5500 to be prepared using actual, precise dollar amounts (the $859,247 instead of the $859,000). In other words, the financial statements, as attached to the return, won't agree to the numbers disclosed on the return.

I've never encountered this situation until now, and I can't find any guidance. Every cell in my body, however, is screaming "foul". I think that the two documents have to be consistent. Or, if the consistency isn't required, surely the inconsistency would raise a flag with DOL?

Has anyone ever dealt with this matter? What did you do?

I think I'll change my username to "I Hate Benefits".

Please forgive a silly question, but a doubt has been placed in my mind.

An individual working for a public school system participated in a 403(b) plan, left employment, found new employment working in a for-profit corporation, and is told by 403(b) custodian that deferrals from the corporate wages can still be made into the existing 403(b) account. Does this make sense?

ESOP owns a modified endowment contract ("MEC") on the life of insured/participant. ESOP also has unrelated taxable income ("UBTI").

Q: If the ESOP withdraws money from the MEC, what type of taxes and penalties apply to the ESOP and to what extent?

A: If the ESOP becomes taxable while it owns the MEC (say, the ESOP receives unrelated business taxable income "UBTI") and then withdraws money from the MEC, those withdrawals would be taxable as ordinary income, at least to (i) the extent of the gain in the MEC and to (ii) the extent that the ESOP is a taxpayer (that is, has UBTI). As for the 10% penalty for early withdrawal, that penalty depends on the age of the policyowner, not the insured/participant. The ESOP itself has no age, so my read is that there would be no 10% penalty applied.

Any thoughts, particularly as to the (ii) part of the above analysis?

Can a person under age 50 contribute $14,000 to a 403(b) plan during the year, leave his/her job, start a new job and contribute $14,000 to 401(k) in the same year? The second plan allows for immediate contributions. But is that considered excess contribution for the year? Or is the annual addition limit of $42,000 for 2005 the magic number to look at?

Company A maintains a DB plan and a DC plan. Company A acquires the stock of Company B, which has a DC plan only. Must employees of Company B be given credit for their service with Company B prior to the acquisition under both plans of Company A, or can Company A disregard their pre-acquisition service under the DB plan since Company B did not have a DB plan?

I think this has been addressed, but here is a question.

Plan Doc has comp as a participant. Participant enters 7/1. Plan is 401(k) SH with Cross-tested formula. Plan passes cross-testing using 1/2 comp while giving 3% SH + 1.44% PS. However because of TH, the 3% of full comp is more then the above on 1/2 comp.

Am I correct in giving 3% of full, but cross-test using 1/2 comp?

Situation:

A participant's wife murders him, and is shortly thereafter convicted and sent off to jail. She is currently appealing her conviction. She was his named beneficiary for the 401(k) Plan.

Simple question: can she take the money out.

Follow up: Does the brother, as executor of the deceased participant's estate, have any claim to the money for the estate?

Further: If she is not entitled to the money now, but her conviction is overturned and she is cleared and released, would she then again be entitled to the money? Would the Plan Administrator be well advised to wait until the appeal is finished?

I've read a little bit about these "Slayer laws", but I am not clear as to what the ultimate answer is, if there is one. Any insight is appreciated.

A former Japanese owner of a business has now moved back to Japan and wants his balance in the DC plan wired out. Is there an exception to the withholding rules in this case?

Someone referenced a US/Japan treaty that gave us the ability to ignore withholding. Any ideas?

A prospective client wants to discontinue their SIMPLE IRA plan on March 31, 2006 and establish a 401(k) Plan on April 1, 2006. Is this permitted for April 1 or must they wait until January 1, 2007?

Also, can SIMPLE IRA money be transferred into a 401(k) Plan?

I have a client with a non-top heavy 3% safe harbor 401(k) plan. The plan is run on a calendar year. Eligibility is one year of service and age 21 with dual entry. The employer wants to change the plan to allow immediate eligibility and participation on the 401(k) portion of the plan. There is an employee that was just hired and he will make more than $100,000 in calendar year 2006, therefore he will be an HCE for 2007. He will be the only HCE in this situation; all the other new 401(k) entrants will be NHCE’s. He will enter the profit sharing and safe harbor portions of the plan on 7/1/07.

The question I have is this: Do you have to run an ADP test for the first half of 2007 for the otherwise excludable employees? Or, since this employee will enter the safe harbor portion of the plan on 7/1/07 he will become an includable employee who is receiving the safe harbor contribution (for the latter half of the year) and therefore would not have to be tested with the other excludable employees for the year?

Thank you for any input.

A small company wants to start a 401(k), but the employer is very much against the idea of a profit sharing contribution and does not want any PS language in the plan at all. He's OK with a match. My question then is can we prepare an otherwise regular 401(k) plan document with only k and match contributions, with no allowance for a profit sharing? And also, if the plan become top heavy (which is a good possibility), does that in effect mean that a PS contribution has to be allowed, since the 3% goes in as a PS contribution?

Thank You