austin3515

I'm being told that NOL's do NOT reduce SE income. I just wanted to make sure that an NOL does not reduce my earned income amounts in any way. Hopefully someone can confirm!

Missed this one until I saw it in my emails!🤣

Client has an old 403b, pre 1/1/09 contracts. They need to sign off on distributions and she wants to know if she has any fiduciary liability with respect to these old contracts. They are all individual contracts, such that they cannot move them to a new provider without consent and they cannot change the funds available as they would in a 401k because they are essentially IRA's. I gather the answer is "yes" but curious if anyone has an article I can provide that sort of delves into this issue in some amount of detail. Also curious what others are doing about the these "ancient frozen Non-ERISA plans" and the related plan documents. A lot of sponsors don't even know these plans are out there (they only find out about them a participant comes out of the woodwork for a distribution).

Odd. I guess I feel better that what I have been telling people for 15 years was not wrong.

Well the difference I guess is that 404a6 doesn;t apply to a defined benefit plan. Th crux of the case is that 404a6 makes it obligatory to treat as deposited on last day of prior year.

I actually saw an IRS training manual in which the IRS said "it's their choice" and its on theor website. This "individual" said he wasnt thrilled about relying on a 20 year old document... But I will send!

(6) Time when contributions deemed made For purposes of paragraphs (1), (2), and (3), a taxpayer shall be deemed to have made a payment on the last day of the preceding taxable year if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof). According to a "national legend" this leaves no wiggle room. If you deposit in the window described it as though you actually deposited the money on 12/31/2020 and you must deduct on 2020 return. HE said the only way to really accomplish this was to wait until after the due date of the return and deposit in the 415 grace period (which is 30 days after the deduction due date). I did not have time to poll a few CPA's as I am really confident that they are doing just this "fairly regularly." (i.e. deducting contributions on a cash basis). OBviously it is not the norm, but some do it for example because they are "trapped" as it was done once that way and they don't want to double up the deductions in one year. Anyway I thought it was important to share this update with y'all!

It’s a nice little arrangement we have, he relied on me flr free advice and I rely on him for free referrals!

His position to ask me the proper treatment..

How about relying on this though from the EOB. It appears to only relate to 401ks/PS but it seems to be pretty on point... "9. IRS permitted return of “excess” contributions due to errors made in computing earned income. In PLR 200639003, a limited liability partnership encountered a number of errors made with respect to the LLP’s accounting, as a result of a change in accounting systems, including: (1) overstatement of certain income, (2) treatment of certain non-billable costs as billable, (3) double inclusion of certain advances, (4) certain income understated as a result of a failure to implement certain accounting changes, and (5) certain income that was reported not being supported by journal entries. The net result of these errors was that the LLP’s income was overstated. As a result, the earned income of the equity partners was overstated, resulting in excess profit sharing contributions made to their accounts. The IRS ruled that the profit sharing contributions made with respect to the overstated income were made as a result of a mistake of fact. Therefore, the plan could return the excess contributions to the employer without violating the exclusive benefit rule"

It actually doesn't really seem to fit...

As long as you agree it would be reasonable to assume that the treatment would be the same for employee and employer contributions. I suppose it makes sense that it would be the same? Do you agree?

I'm trying to find something that is written by the IRS or perhaps a prestigious law firm that talks about the proper treatment when a schedule C proprietor has negative self-employment income but has already funded his or her simple IRA contribution. Does anybody have such a resource? My assumption is the contributions are refunded, adjusted for gains. Because the deduction will not be taken in 2020, my assumption is that solely the investment earnings will be taxable in the year distributed. But I would still like to find something written on the topic in a formal way that I can provide to a CPA I work with.

Depending on the language in your pre-approved doc (if that is what you are using) that might not be workable). Ours is sufficiently flexible that it would be allowable such a cap to be implemented operationally, but someone mentioned at one point to treat it like a New Comp allocation and prepare a written certification as to the allocation. I'm not seeing a super-excellent field in our document to include such a cap. Maybe yours has a good field for it...

That's a good point actually...

Plan A wants to contribute $50,000 for the 2020 year but needs more deductions in 2021. Can they deduct the 2020 contributions (which are deposited in 2021) on the 2021 tax return (i.e., you can always deduct on the cash basis) and then use the special 404a6 timing rule to deduct 2021's contributions (which are funded in 2022) on the 2021 tax return as well? The combined deduction is less than 25% of 2021's comp (it's a virtual certainty so that is not a concern). My position has always been "of course because both deductions are perfectly legal, so why in the world 2 completely allowable deductions be disallowed?" There is simply no rule on the books that says you cant take them both. Now someone did mention that maybe there is some tax law that says you have to have consistency in approaches, and to that I can't speak. Anyone have some first hand knowledge on that?

I'm reading that there is not a lot of clarity on this topic regarding how to report these contracts on SChedule A, D and H. Anyone have some insight. I found this letter where someone who sounds like they know what they are talking about wrote the DOL to ask for guidance. https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/rules-and-regulations/public-comments/1210-AB63/00105.pdf My conclusion: From what I have gathered , the insurance component is separate from the underlying investments in the CCT. The insurance would go on A and H as an unallocated /general accounts contract and the CCT would go on the D. How it is reported on the H depends on if it is a DFE (I’ll bet it is). If a DFE you get to just report it as a CCT on the 5500. If not a DFE technically you have to report each asset class separately (stocks, bonds, mutual funds). Do I have it right? Does anyone have something more substantial written up?

Well I think this site is out of this world 😂

Payroll company, which by definition is in the business of processing payroll, asked my client to confirm tax retporting for after-tax contibutions. To which I responded, "can you please have your payroll confirm who the HCE's are for 2021"? (kidding of course). My understanding is that as far tax reporting goes on W-2s and 941s, these deductions are no different than 401k loan payment. Am I correct? i think its one of those things where I can't find any articles on how to reprot it on w-2's and 941s because there is simply no requirement to do so... I'm trying to prove a negative is the other way to look at it. Any help appreciated! I did find this in the w-2 instructions: Reported in box 14, but not in box 12. • After-tax contributions that are not designated Roth contributions, such as voluntary contributions to a pension plan that are deducted from an employee's pay. And Box 14 is apparently just a "whatever you want it to be" box, nothing regulatory about it.

Off topic but anyone know why our logos are outfitted with rocket ships? Did the Bakers end up making into space before Jeff Bezos?

Life is too short. Be Kind and send the Doc. It sucks to lose one believe me I know, but I don't see how withholding the document improves your situation one bit. You lost the case either way. And trust me your client will never forget you were a challenge to deal with in the transition and they might even tell their friends. Like others have said I bend over backwards for new TPA's when I lose a case because clients will never forget one way or the other if you were gracious and cooperative or a curmudgeon. And hey I can tell you clients have fired us and then realized what they were missing and came back (which they would not have if I chose the curmudgeon route...).

Don't ask Betty from accounting to bring her new baby into the office or ask her for pictures? Not likely 🤣

They certaonly would not be able to apply an aggregate 415 limit, but we should be able to use their goal functionality. i think I've cracked the code in terms of setting up an appropriate goal.

Well the sponsor has problems too... More work all around if the limit is blown.

I have a participant in the plan for whom we added after-tax contributions. Not to worry, she is not an HCE. She is married to a guy who is an "HCE" but he works for an unlreated company. But the bottom line is she wants to contribute as much as possilbe. What sorts of limit are people imposing on these contributions to make sure we don't blow the 415 limit? Can it be a one-off limit decided at the beginning of the year? For example, I want the client to be able to add a goal to the payroll system. I think it just occured to me that the payroll system's "goal" should be $58,000 minus 19,500 ASSUMING the Employer contributions will not exceed the Employer contributions (in my case they will not). Is that what people are doing? Other idea?