We have received, on behalf of a client, a positive letter ruling from the IRS that permits the client to do a late recharacterization of their improper 1998 conversion.

A key factor in the discussion was that the request was made prior to the IRS coming after the taxpayer. This concurs with my previous discussions with the IRS that they would be more lenient with taxpayers who voluntarily come forward rather than wait for the IRS to come to them.

Has anyone heard of the IRS contacting a taxpayer on an improper conversion since the 12/31/99 recharacterization deadline? I'm wondering if the IRS is trying to give taxpayers as much time as possible before they take action.

I have a question about filing taxes for 2000 related to converting a rollover IRA to a Roth IRA. Like a fool, it seems, I had 20% withheld for taxes on the conversion. I have received 3 1099-R forms related to that conversion.

In my tax software, I have entered everything that I thought was needed but the outcome is way out there. I need some advise.

For simplicity,

original amount = 50,000

amount withheld = 10,000

Isn't the original 50,000 supposed to be applied to my AGI? And a 10% penalty on the 10,000 for early withdrawl?

I can't figure out where this is supposed to go on the forms. Has anyone else had these problems and can anyone help guide me?

I understand that the IRS will soon be publishing model amendment language for 401(a) plans and Employer-sponsored 403(B) plans so that participants in these plans can take advantage of the new simplified RMD rules annount 1/12/2001. (see the article on PPCNet.) The article states that "Qualified plan sponsors that want to follow the 2001 proposed regulations when making distributions for 2001 and later years should adopt the...model amendment."

My question is--what about a non-ERISA TSA plan where the plan provisions exist only in individual annuity contracts? How will these plan be updated to reflect these changes? Will the insurance company need to draft an addendum to the annuity contract?

Anyone have any thoughts on this? Our plan participants are already starting to ask. Thanks!

I am hoping someone out there can give me some advice. I have a friend who is an insulin-dependent diabetic. She is currently covered under her mother's plan, but is about to reach maximum dependent age. This dependent is employed, but makes very little money and has no benefits. The mother, daughter, employer and plan are all in New Jersey.

I believe she could: take COBRA, buy individual coverage, or possibly qualify for Medicaid or some other assistance program. If anyone has any suggestions as to how to proceed or anything to watch out for, it would be most appreciated. Thanks very much.

We have a client with a plan that currently runs on a calendar year. The accountant is asking us if he can change his client's defined benefit plan year to 1/1/2000 to 11/30/2000 and pro-rate the deduction to 11/12ths. Then the next plan year would be from 12/1/2000 to 11/30/2001. He would also like to take this deduction in 2000. We realize this would kill any 2001 deduction. Is this possible??? And if so, where can we find it in writing?

I inherited a profit sharing plan. My 3 children (under 18 yrs. old) were secondary beneficiaries. I've been told by the plan that I can take all the money out or leave it in. If I leave it in I'm not allowed to make my husband the beneficiary. They won't give this to me in writing. I can't understand why I can take it all out & do whatever I want with it but can't leave it there and change it to my husband. Is there any place I can get info on this?

Can an employer who is ending a SEP and starting a SIMPLE IRA add the SIMPLE contribution to the existing SEP funds?

This is the first time I have been at a company offering PTO. They still track sick time separately. They believe there is a reason why they need to, but no one can articulate why. Any ideas?

I am interested in finding out how other companies treat comp time in general. Also, more specifically what if Sunday travel is unavoidable to get to a Monday meeting, how should this Sunday be treated, since it is not part of the scheduled work week. Also, in regards to special events where the employee is required to work the event and the event is on a weekend or weeknight? Thanks for your insight!

I know that the schedule of reportable transactions reports gains and losses based on a market to market approach. Should the same schedule attached to the financial statements use the actual cost in the "Cost of Asset" column since generally accepted accounting principles requires a cost to market approach? On the face of the financial statements, we combine realized and unrealized gains (losses) so the different method is not issue there.

Thanks for any help.

I requested my broker to convert $4000 from my traditional IRA to a Roth on 12/20. They did not do this until 1/16/01. They sent me an apology letter, indicating I should consult my tax advisor about a possible exception. Is there any way I can have these funds considered converted in 2000?

I have a client who operates a calendar year premium only plan. They are thinking of amending the plan to add a dependent care benefit to the plan. Am I correct in thinking that the effective date of this new benefit would have to be January 1, 2002? In other words, it is not permissible to make this new benefit retroactive to January 1, 2001 since the salary redirection agreements have to be in place before the start of the plan year (except for new participants of course).

Company A and Company B have adopted a Multiple Employer Plan. Person Z is a long time employee of Company A. Person Z quits Company A and goes to work for Company B. Does Person Z have to re-meet the eligiblity requirements with Company B?

Also forfeitures under this plan reallocate. Should forfeitures of Company A employees be reallocated to only Company A employees or should they reallocate to all participants reagrdless of employer?

When can an individual withdraw from a 401K and not be subject to the 10% penalty.

A woman was terminated from her job last year and took all the funds to live on. She was 55 last year.

How are the 401K rules different from the IRA rules or are they basically the same? Any suggestions on where to find this info on the web so I can read up on them.

Thanks for any help.

If an employee works for two unrelated employers and they both have simple plans, is the limit 6500 overall? I know simple plus 401k <=10500, but how about two simples. Logic says 6500 no matter hom many simple plans ee participates in. Vanguard told a potential client the ee (partial owner in both companies) could do up to 10500.

Once again Employers are late on deposits. I know that even if all the funds lost money, earnings still have to be deposited. Does anyone know where I get the percent rate to use on these late deposits? I can check on the "best" rate of return on the actual funds, but I think they ALL lost money in 2000 on this particular case. Thanks for any help.

Are the rules for late deposit of employee 403 (B) contributions the same as 401 (k). I have a 403 (B) client who has indicated she transfered some of the contributions late in 2000.

Thanks for any help.

A broker approached our company trying to sell the following product:

A health care spending account where the employee does NOT need to make an annual election. The employee receives a medical service, turns in a receipt, the employer takes out a pre-tax deduction for that amount from the paycheck, and then employee is reimbursed in the same check.

This broker said that this fell under Section 125 (he had no paperwork to back any of this up). This makes no sense to me. I'd be interested to hear if anyone else has heard about this new "plan."

Thanks.

What is the basis for distinguishing between S corp.'s and C corp's when deciding whether dividends on allocated shares can be used to pay off an exempt loan? The IRS has allowed C corp's to do this, but not S corp's. Why?

Wanted to get some confirmation or input on the following hypothetical case: Husband has sole proprietor business and wife helps out. They have always filed a Sch C with a single Sch SE with the husbands name on the Sch SE. They now want to sponsor a Keogh plan with the wife participating.

I have always advised they must form a partnership or pay the wife a W-2 comp as an employee for her to participate in the plan, so that she has earned income. Filing 2 Schedule SE's is not an option, because if the husband and wife are in business together, the IRS would say they have a partnership and must file a partnership return (and the partnership K-1's would show earned income for both). Community property laws in Texas, CA, etc. don't impact this analysis, as the earned income is assigned to one spouse per the Sch SE instructions and Pub 533 on Community Property and Income.

Correct? Thoughts or comments? Thanks.