Bird

I'd say no, if it is purely discretionary; the next paragraph reads: A special rule applies to certain plans in which it is impossible to determine whether or not an amount (other than earnings) will be allocated to an individual's account for a given plan year. If, with respect to a particular plan year, no amount attributable to forfeitures, employer contributions or employee contributions has been allocated to an individual's account by the last day of the plan year, and contributions to the plan are purely discretionary for the plan year, such individual shall not be an active participant for the taxable year in which such plan year ends. If, however, after the end of such plan year, the employer contributes an amount for such plan year, an individual to whose account an allocation is made shall be an active participant for the taxable year in which the contribution is made.

That's right, the rule for 2010 returns is that you have to have a PTIN but there's no place to put it. I'm taking that as a hint to not be overly concerned about it and let it play out.

Right, the reduction in tax is for the 'EE part, and the adjustment to subtract "half" of the SE tax was to take into account the 'ER part, and there's no change in that. Your old formula is fine but if someone were to literally use half of the total SE tax that would be wrong.

Repeating what XTitan said, this does not impact SS. "They" are reducing SS taxes but making it up from general revenues (in reality, borrowing). (I'm not saying it's ok.) I'd love to get inside the heads of the people who think this stuff up. I'm in the camp that thinks, if you get yourself in trouble by borrowing, it's not the greatest idea to borrow even more. Words like "insane" "disgusting" etc. aren't really strong enough. We need a new vocabulary.

But if we don't think of it as a participant loan, I'm not sure that's an issue. The plan prohibits such loans; the PA just ignored the plan provisions. So we fix it by paying the PT tax and returning it to the plan with interest. I'm not saying it's a good thing to plan for; I'm just trying to determine the degree of badness (sorry to get so technical). I do think if it is done repetitively it could DQ the plan.

I agree; the codes are the same whether it is an RMD or a regular distribution. The real question is whether you need two distribution election forms; I think the technical answer is "yes."

You're right, this isn't the ideal scenario for this type of plan. I think you can do what you propose; I would definitely be uncomfortable arguing that "as soon as administratively feasible" could mean waiting until after the end of the plan year. But I would include any employee contributions that were made in the interim, and any employer contributions that are definite - a fixed match with no EOY provision, e.g. I guess arguably the Account Balance to be paid doesn't include those items since they are technically allocated as of the next val date, but who is going to argue that point?

Owner arbitrarily takes money from the plan; he thinks of it as a loan. The plan doesn't permit loans, which sort of doesn't matter because there was no effort to comply with what would have been in place anyway. So...is it "just" a Prohibited Transaction, subject to penalties and interest and all that? All things considered, that's a relatively painless fix. That's how we see it. Would there be further consequences or concern if there was a pattern?

I agree, absolutely not a PT.

You don't need to pass the ABT to use cross testing, as long as each rate group (you only have one rate group) is over 70%. If no one else contributes, I can see how the ABT would fail, but fortunately it doesn't matter. It sounds like you're probably on the right track...but you could probably do a 4% discretionary match on top of the SH before figuring out the PS to max the owner.

See this thread.

If you're maintaining your QPA with ASPPA that will cover most of the continuing ed for the ERPA, I think (I hope).

Let us know how far you get when you try to file a final return on a plan that still has assets.

We advise self-employeds to make an election of a dollar amount by Dec 31, and make the deposit within 7 business days of Dec 31. Using a dollar amount avoids the issue of calculating a percentage of an unknown number in order to make the deposit in a timely manner. I do believe that they have until the time of filing their tax return to make the deposit and claim the deduction. But I'd rather avoid the issue of "late" deposits.

I don't think she has to be eligible. It's not a controlled group or shared employee situation, and Ketchum doesn't need the prior service to establish his/her own eligibility.

We've done this and I don't see a problem with it. The top heavy issue noted is worth considering but we're always doing it in conjunction with an employer contribution anyway.

dude, it's not a text message, you can use complete sentences. My first reaction was "huh?" But after reading it a couple of times, I'm inclined to think, no, just because the word "proceeds" is used, that doesn't direct the trustee to distribute the entire IRA immediately. "Proceeds" can be distributed over a long time, potentially. Whether that can be accomplished by passing the proceeds through to inherited IRAs is another matter; I don't know.

I've probably either asked this or opined on it, but here goes (again)... Partners in LLCs are commonly taking W-2 comp so they can have withholding handled through the company's payroll system and not have to make quarterly tax deposits. But then they also have profits (or losses) and I guess we have to net the two; it's just not quite as simple as adding draw and profits and then applying the SE tax deduction, I think we should do the SE deduction on the profits only, then reduce the profit further by the contribution to get compensation. And if there's a loss, then I suppose we subtract that from their paid salary, and reduce further for the contribution. But can you take a contribution deduction on a 1040 if you have a loss? If they wind up with a loss then I think they will have overpaid on SE taxes; not my problem. And of course some accountants are taking the salaried partners' plan deductions on the partnership return, which means we do NOT pull it out when determining comp since it's already reducing profits. Any disagreement or comments?

Geez, 12 years? I've "found" insurance polices once or twice; some TPAs feel that it is appropriate to exclude them under the the theory that they are guaranteeing benefits (I disagree). We just bring the policy back on the books and show a gain for the one year and move on with our lives.

Interesting; I guess that's another example of why one shouldn't assume SEP and SIMPLE calcs are the same as qualified plan calcs. I stand corrected. (ii) Self-employed In the case of an employee described in subparagraph (B), the term “compensation” means net earnings from self-employment determined under section 1402 (a) without regard to any contribution under this subsection. The preceding sentence shall be applied as if the term “trade or business” for purposes of section 1402 included service described in section 1402 ©(6).

There's a new reg that says - I think - that EAs and ERPAs will be required to get PTINs and that the fee is reduced to$30 since part of the PTIN fee is for background checking that is done on the EA/ERPA registration/renewal process. But they haven't said anything about not requiring it for 5500s and I'd be surprised if they did. The best hope is that they will limit it to those primarily responsible.

IRA - no. SEP - yes. IRS article SIMPLE - yes. IRS article

You're supposed to take that number (profit) and subtract 1/2 of the self-employment tax paid on it (let's call that "profit after SE tax"). Then take that number and subtract the 3% contribution and then multiply that by 3% to get the contribution. Since those last steps are interdependent, the contribution is .03/1.03 X [profit after SE tax]. (.03/1.03 is a little less than 3%, 2.913... ) That assumes the deferral contribution being matched is at least 3% of the ultimate net compensation deriving from these calcs.

I've had that happen a couple of times. I know that IRA custodians are difficult to deal with when it comes to incorrect deposits, and yes, anything that goes out of the account, they want to treat as a distribution. I can think of one time where it was fixed properly, just as if the money never went in, and another where we let them treat it as a rollover since it went to a particular participant's account and at the end of the day was a wash (clearly not correct but it just wasn't worth trying to get it done right). So...if the contribution was for just a single participant, and you can "roll" it into that participant's 401(k) account, you can consider going the (wrong) "rollover" route. Otherwise, you'll just have to bang your head against the wall until the IRA custodian "gets it" and returns the money. You might want to have the sponsor write a letter right away saying how it was just a mistake and that they are formally requesting that it be returned and that if it isn't, they expect the custodian to bear all costs for losses and anything else you can think of - just a lot of bluster to at least make them start to think about it. Then pester and harass them until they finally take it to the oracles in the legal department, who will probably agree to return it as long as the sponsor signs a letter of indemnification or some other officious-sounding parchment that they can ooh and aah over and think that they accomplished something for that particular month instead of just getting in other people's way.

We have filed under VFCP once or twice after receiving those letters and ignored them other times. So far, the ignored once have not resulted in follow-ups. Take that (in)action at your own peril, but for an $8 interest payment I'm prepared to withstand any scolding they might muster for not filing.