austin3515

OK, here is what is bothering me. I have never had an actuary tell me "here is what the owner needs to deduct on page 1 of 1040." Are there actuaries out there who can attest to whether or not they provide that information? I think I would have seen it by now.

Sorry, so does that mean the portion of the DB contributions contributed to the plan that is allocable to the owner (allocated based on normal cost) is deducted on page 1 of 1040?

Except that you cannot differentiate what is on behalf of the owner versus everyone else.

Doing an SE calc for a Schedule C / 401k Plan, but they also sponsor a cash balance Plan. How are the contributions to the plan deducted? I assume they are NOT deducted the same way as the 401k employer contriubtions (i.e., on page 1 of 1040) but rather as a business expense to arrive at net income? Can someone confirm?

I've always been bothered by posts that place a higher expectation on people than is really reasonable. Perhapsh you'll be horrified by this comment, but for most partners they don't spend a lot of considering such things. They're just putting money in their 401k based on the assumption that because they've always been able to participate the same should be true this year. Therefore, I personally think no less of them when they find themselves in this situation. I actually sympathize with them because if they had been paid via w-2 wages for the "profitable" part of the year they would not be in this situation.

Any thoughts pon the mistake of fact approach to get it returned to the employer?

QDRO Phile, are you suggesting that partners in all cases should know that the last half of the year they will lose money? I think you're asking a bit much of mere mortals who haven't got the ability to see into the future. In many cases the margin between money making and losing is narrow too by the way. Not all partners make $100K.

So you think if they deposit that "projected" amount to the forfeiture account they could deduct it? It doesn't seem right. Even if it was a to a pooled account it doesn't seem right.

I think it needs to go to the forfeiture account. I actually think refunding it to the employer as a mistake of fact is not a bad option either though, but one would need to do some research. I think if you look up the criteria for mistake of fact refunds to the employer this might hit all the criteria.

This is not a 415 failure. These were not eligible deferrals. They had no comp, so they were not eligible to defer. That's how I see it anyway.

I just read through it again and I don't think I did. Short version: Deposit 100% of 12/31/2014 contributions on 1/31/2015 Deposit 100% of PROJECTED 12/31/2015 contributions on 3/25/2015. BOTH are deducted on the 3/31/2015 corporate return. Does NOT exceed the max deductible 25% limit.

3/31 Fiscal year end with a 12/31 plan year end. Client has lots of extra income for the 3/31/2015 plan year and is looking for lots of deductions. What they want to do is max out heir 12/31/2014 contributions, and then contribute/deduct the 2015 maximum in the first quarter of 2015. I know that one of the requirements for deducting contributions made AFTER the end of the year is that it must be allocated as of a date within the fiscal year. Is the same true for contributions made/deductible before the end of the year? Safe Harbor 3%, funded each pay-period. I don't think anyone would have a problem deducting this on the 3/31/2015 return. Full profit sharing. There are 3 other employees. The client essentially wants to fund 100% of the projected 12/31/2015 contributions in the first quarter. There are NO Allocation conditions. Any way to make that work?

3% Safe Harbor Nonelective excludes HCE's. Need I concern myself with the definition of compensation/414s? So for example, may I exclude bonuses and overtime from the calculation of the Safe Harbor? I will be doing some profit sharing for the HCE's, but all of the nondiscrimination testing would of course be done using a 414s definition of comp.

As an example, NHCE is 55. He contributes $23,000 in 2014. Match formula is 100% of deferrals excluding catchups. The 45 year old HCE has ALL of his deferrals matched when contributing $17,500, and therefore 100% of his contributions are matched. Only 85% or so of the NHCE's are matched (I did not break out a calculator). I'm having a hard time coming up with a scenario that might actually come into play under an ACP Safe HArbor Match, or even a Basic SH Match. But then I suppose my original question is one answer - a pay-period match. My NHCE in November and December gets no match, while the HCE gets it.

Two plans, one with all the HCE's and one with all the NHCE's. The HCE Plan uses prior year testing and the NHCE Plan uses CY testing. I need to aggregate to pass coverage. Is EPCRS my only option? [obviously, no one knew about the coordination rules - the operation of the entities was quite disparate].

I know that a plan MUST match catch-ups as part of the Safe Harbor Match Calculation. What about a discretionary match that otherwise satisfies all of the ACP Safe Harbor Requirements (in my case, the match is 50% of the first 4%, no allocation conditions). I know what you're thinking, 18,000/265,000 is way more than 4% anyway so who cares? The catch here is, the match is calculated each pay-period, and as such towards the end of the year eligible deferrals will be zero. So it actually does end up making a difference. Corbel's document seems to prohibit excluding catch-ups for either the ADP or ACP safe harbor's. Fidelity's on the other hand seems to apply exclusively to Safe Harbor Match calcs.

Gray area, but you're probably right.

Maybe "employees who only work between June and August and the month of January" would work....

Kevin, interesting... The short plan year regs I think only say "you must be safe harbor fort he next year" and do not specify that it must be the same safe harbor? That is very very interesting!

That is really odd. I think it is valid because it is not based on service for the Employer. But how do you find out who is a college student? How could you possibly enforce it? That would be my concern. What if they drop out and forget to tell you? What if they were not in college before, but subsequently enroll, and forget to tell you (or intentionally withhold the information?). The plan should not include criteria that is not based on information it can verify. That is just plain silly.

So many threads on these boards about this. Do a quick search and you should find them. The answer is YES. People take this way too far. Shame on the IRS for instilling paranoia. I swear some of these questions are akin to "can I tie my shoes if they are untied?" Don;t get me wrong I'm not saying it's a stupid question at all. My frustration is aimed 100% at the IRS for being insane about this.

1.416-1 Questions and answers on top-heavy plans. M-7 Q. What is the defined contribution minimum? A. The sum of the contributions and forfeitures allocated to the account of any non-key employee who is a participant in a top-heavy defined contribution plan must equal at least 3% of such employee's compensation (see Question and Answer T-21 for the definition of compensation) for that plan year or for the calendar year ending within the plan year. Based on the above, I concluded that she gets the THM on full year pay, No wiggle room at all. The same regs by the way indicate very clearly that union employees do not get the THM. So if the exclusion related to union v non-union I believe it is very clear that the union wages would be excluded. Actually it's clear in the internal revenue code too. 416(i)(4) (4) Treatment of employees covered by collective bargaining agreements The requirements of subsections (b), ©, and (d) shall not apply with respect to any employee included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and 1 or more employers if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers.

That would probably be used as evidence that you misclassified the "consultant" in the first place. The auto mechanic is actually a terrific example of what the IRS wants to see for a 1099 contractor. It's really for that situation exactly, and nothing else. If someone is working for you and only you, on a project that you designed the strategy, to be completed in the time-frame you dictated, and in the manner you dictate, if they are working in your office, with your supplies, with support from your staff, they are probably your employee. "He was only working for me on a special project" is not the criteria. No matter how many times I hear it, it is not the criteria.

1099 income is not eligible because only non-employees are getting 1099's and you'll disqualify your plan in a New York minute if the plan is not for the exclusive benefit of employees. I cannot imagine a scenario that justifies giving an employee a 1099 for a special project under any circumstances. If you pay your employee for any services rendered, the rules are clear, they get a W-2. That's true even for Board Members who are traditionally paid via 1099. If they are employees, any comp for being on he board is w-2.

Because you union people are specifically exempted from getting the THM I think that one is more clear cut that they don't get it for the portion of the year that they are union.