I have a self-employed individual who has a solo-401(k). Typically, I perform the classic circular calculation involved with SE-tax to arrive at plan compensation and contribution amounts.

This particular individual has a written exemption to US Social Security taxes because of employment activities and coverage in the Canada Pension Plan.

How does this affect my SE-Tax calculation?

Anyone have any links to reading material on this? IRS website?

Here’s an interesting compensation question:

Partnership 1 is owned by Company A, Partnership 2 and Person C.

Partnership 2 is 100% owned by Person C.

Partnership 2 received a K-1 from Partnership 1

Person C receives a K-1 from Partnership 1

Person C receives a K-1 from Partnership 2

Retirement plan is sponsored by Partnership 1

Partnership 2 is not a sponsor of the retirement plan (neither is Company A).

The CPA believes that “pension law” dictates that the K-1 pass-through income from Partnership 2 onto IRS form 1040 Schedule E for Person C should be included for Plan Compensation purposes. My gut feeling is that Person C nor Partnership 2 are adopting employers to the plan and only the K-1 from Partnership 1 is Plan Compensation and only their K-1 from Partnership 1 is eligible Plan Compensation subject to the an EIC.

If Partnership 2 adopted the plan too, that seems to resolve this question going forward except Person C’s ownership in Partnership 1 would only total 34%.

Should the K-1 self employment income from Partnership 2 be included in the eligible plan compensation?

Thanks

Participant took a 401(k) loan, proceeds of which came from his Roth 401(k) source. Participant has left the company and cannot repay the loan. Question is: Is the default considered taxable? I have never encountered this before, and the 1099-R received by the participant for 2013 indicates that the entire defaulted balance is a taxable event. To me this seems as if this is being double taxed.

Any replies would be helpful, thanks!

In applying the 9.50% of the "Federal Poverty Line" for a single individual in the state where the employee is employed also apply if he is covering his dependents too. In other words, do I apply the 9.50% x$11,670.00=$1,108.50/12+ $92.38, even if I'm covering 1 or more dependents?

I believe these two LLC's are a control group. Owner A and Owner B each own 50% of LLC #1.

Owner A owns 26% of LLC #2 and Owner B also owns 26% of LLC #2. Owner C owns 49% of LLC #2. None of the owners are related. There are 5 or fewer individuals who own 80% or more of LLC #1 and 5 or fewer who own more than 50% of LLC #2. This would be a brother sister control group, correct?

LLC #1 has a safe harbor non elective 401k plan. LLC #2 does not have a retirement plan. LLC #2 has one employee. I have read that a safe harbor plan and a non safe harbor plan cannot be aggregated for testing. How about a safe harbor plan and no retirement plan situation? Do I have to include the employee of LLC #2 if she met eligibility in the 410B coverage testing?

We have a 401(k) plan with eligibility of age 21, One year of service (1000 hours). Plan entry is 1/1 and 7/1. Initial eligibility starts from date of hire. This applies to all contributions in the plan.

A participant was hired on 7/2/2012 who was over age 21, still employed, and worked more than 1000 hours easily (is full time). Does she enter the plan on 7/1/13 or 1/1/14?

The eligibility period in the document states: "means a 12 consecutive month period beginning with an Employee's Employment Commencement Date and each anniversary thereof".

Would you say that the employee satisfies the One Year of Service on July 1, 2013 or July 2, 2013? I think the 12 month period ends on July 1, 2013 in which case I would put her in on 7/1/13.

But reading the above document language, the "anniversary date thereof" would (to me) mean the initial eligibility period ends July 2, 2013, which puts her in the plan January 1, 2014. But if this is correct, doesn't that really make the eligibility period one year plus one day? Is that really what is intended?

Thanks

Does anyone know where I can get a copy of Rev. Ruling 80-155?

A client dumped a whole bunch of money into her plan in 2013 and now is upset that we are allocating all of it towards 2013. It is a cross tested plan, so the principals reach their 415 long before the entire amount is allocated, so the NHCE end up getting a really large profit sharing to use up all of the deposits. The deposits do not exceed the 404 deduction limit.

She is the kind that need the source material, so from what I can find, Rev. Ruling 80-155 is what I need to send her. I can only find a couple of IRS items that reference 80-155, not the actual text itself.

The plan document says that participants are limited to 415, and if the 415 excess is due to a discretionary employer contribution, that the contribution is simply limited to not violate 415 for those participants.

If not Rev Ruling 80-155, then some other good source material?

Thanks!

Section 404(a)(1)(A)(i) contains a parenthetical clause .....(or for any prior plan year). It seems that this subsection is now bypassed for single employer plans and instead goes straight to 404(o) which does not have any reference to prior plan years. 404(o) seems to read that the deductible amount is the larger of the cushion type maximum and the minimum for plan years ending with or within the taxable year.

Was this intentional(assuming I am reading it correctly) or can we still deduct minimum contributions for a prior plan year made during the taxable year which were not previouly deducted. I am reproducing the relevant language from 404(o) below:

(o) Deduction limit for single-employer plans

I'm trying I sort through a situation I'm facing, and I would appreciate any help I can get. Thanks in advance.

Assume a small law firm with two tiered partners - equity and non-equity partners. Non-equity partners are paid a guaranteed salary, do not get a portion of profits, and are not responsible for debts.

Firm tells the non-equity partners they must pay the safe harbor amounts out of salary - 1/3 of the amount it would take the Highly Compensated participants to max out.

Question: Should the employer or the non-equity partner pay this match? Where should I look for more information on this?

Again, thank you for any advice or information.

Opened a traditional ira in my wife's name for the tax break, this year. Didn't realize she is in a retirement plan at her work and our income is too high for the contribution to be tax deductible. It just funded today. Any way to get out of it and/ or transfer it to my name so we can get the tax break. My income doesn't involve a retirement plan.

If I am stuck with it, am I correct that I have put already taxed money into an account that is going to be taxed again when we withdraw it at 59 1/2?

I know, stupid!...thanks for any info

One of our clients has a participant who's home was damaged in Superstorm Sandy. If he is rebuilding his primary residence, does that qualify him to take a residential loan in the plan? In other words, does rebuilding qualify as 'construction of a primary residence'?

first rmd is taken March 2014. Calendar year plan. would that be for tax year 2013 or 2014? Would the participant be issued a 2013 or 2014 1099?

thanks

A number of providers are now using alternative reporting on their Schedule C reports. If alternative reporting is used and assuming all indirect compensation is eligible indirect compensation (and properly disclosed), do I still need to complete Part 1, Line 3 for each source of indirect compensation?

The provider is reporting 31 sources with all information except either the EIN or address of the source so the information is incomplete. If I do have to report this information, I would need to obtain the prospectus for all funds in the plan to get either the EIN or address.

I don't do many of these, so I appreciate the guidance.

There is an article linked to today's Benefitslink newsletter from PlanSponsor magazine that has me scratching my head, "The Cash Balance De-Risking Solution"

It states a number of reasons why using the actual investment return on a cash balance plan is a good idea, and not many, if any, reasons why it might not be a good idea.

But what about the accrued benefit? What happens if the investment return is 15% one year and the next year the sponsor is forced to freeze the plan?. Many documents I've seen say the monthly benefit at NRA is equal to the current account balance projected to NRA using the most recent interest credit. Doesn't that create a huge liability, whether the plan is frozen or not? Not to mention testing problems.

Am I missing something, or is the article?

Can a plan administrator who has a money purchase pension plan subject to QJSA as the normal form of distribution eliminate an optional form of distribution from the plan (i.e., installments). Meaning, if a non-married participant opts out of the annuity as the normal form of distribution, the only two options are lump sum and installments. Can the plan administrator eliminate installments from the plan as an optional form of distribution. Therefore only leaving a non-married participant that opts out of the annuity to only take a lumpsum. Does this violate the anti-cutback rules to eliminate installments?

Will someone please tell me that not even the DOL would be this rash?? There is literally nowhere else for the small plans to go...

http://lawtonrpc.com/lrpcs-weekly-insight-brokerage-account-windows-shutting-in-401k-plans/

What is the likely outcome? Most experts think the DoL will:

• Establish fiduciary guidelines and limitations for offering brokerage account windows;

• Require more notices for plan participants who have access to brokerage account windows;

• Bar their use as the only investment option in a retirement plan; and

Can a plan administrator who has a money purchase pension plan subject to QJSA as the normal form of distribution eliminate an optional form of distribution from the plan (i.e., installments). Meaning, if a non-married participant opts out of the annuity as the normal form of distribution, the only two options are lump sum and installments. Can the plan administrator eliminate installments from the plan as an optional form of distribution. Therefore only leaving a non-married participant that opts out of the annuity to only take a lumpsum. Does this violate the anti-cutback rules to eliminate installments?

This is a "Consent to Extend the Time to Assess Tax on a Trust" Basically the IRS is auditing 2010, is afraid they won't finish their audit in time and wants the taxpayer to extend the statute of limitations for another year.

It says right on the form: "The taxpayer(s) has the right to refuse to extend the period of limitations or limit this extension to a mutually agreed-upon issue(s) or mutually agreed-upon period of time."

Question: Why in the name of all that is logical would a sponsor sign such a form?

Can an employer who has hired a candian resident, who's working in canda and only earning Candian income (no us based income) allow that participant to participate in their 401k plan?

I have a new one partcipant plan (owner and spouse only).

The final regulations confirmed that so-called “one participant plans” are not subject to Section 408(b)(2). Does that mean they are not subject to 404(a)(5) fee disclosure as well? What about PPA periodic notice requirement?