Bird

There might be legit reasons to get a new EIN but if it's the same company the successor plan rules apply.

Are you talking about a new company with a different EIN? Is the ownership the same? Why is there a new EIN?

It might depend on how the individual is reporting those other payments - all on one Schedule C, or two? If all on one, then no worries, if two, it's probably ok with just EIN-2 being an adopting employer but I might list the sole prop ("Name/SSN") as well just to be sure.

You can generally adopt an amendment within 65 days of year end to increase benefits. I think that is more of a pension concept but it might apply here; just throwing it out.

He doesn't need a DBA but if he got one just to have one, that is ok. DBA = Doing Business As which means it is just a name and not a separate biz. No control group; it is one company.

Not from what I read in the post, if they are using the max cure period: "All loan payments were deducted from shareholder’s pay in 2020...In March, 2021, the shareholder sent a personal check for $20,000 payment on the loan."

I would show the $20K as a prepayment on scheduled payments. I doubt you had a default; it would appear he is way ahead of schedule. I would plug it all into a spreadsheet and make sure actual payments equal or exceed the payment that should have been made. It's paid off when the spreadsheet says it is.

I'm pretty sure the PS distribution is simply reported as it was and the participant reports it as non-taxable on his return. I don't think you worry about the 5498 although be prepared to show backup of the money coming in when the IRS asks about it a couple of years later. Sorry I don't know about the pension reporting as you laid it out but would have been inclined to do a retro amendment to allow it and then handle it the same way; isn't that easier?

We have customized forms, but it's hard to cover all of the possible scenarios and helps to figure out ahead of time what the participant wants, and the bacckground for that discussion is mostly in my head. Off the top of that leaking head, s/he can 1) take the policy as part of a distribution (taxable, but cumulative PS-58 costs can be recovered); the balance can be taken in cash in which case WH on the insurance must also be taken, or rolled over in which case you don't have to WH on the taxable part of the policy, 2) surrender the policy and add it to the other monies distributable and do what they want (but still, PS-58s are recoverable), or 3) buy the policy so the cash paid becomes part of the rest of the monies (but PS-58s are still recoverable). There is a twist on #3 where the plan borrows "a lot" of the money from the policy and the loan proceeds become part of the other monies, and the participant buys the stripped down policy and that payment also becomes part of the other monies, or, in a perfect world, they borrow just enough to leave the policy worth exactly the cum PS-58s, and then the policy is distributed effectly tax-free. They must understand that the stripped-down policy will probably require loan repayments to keep it going. Of course the agent understands all of this and can help explain. Bwa-ha-ha! Let me know if you need to see what the forms look like and I'll see what I can find. If is thankfully a very rare occurence these days.

That is certainly a concern. Depends on how the plan is written, ages of employees...

Did I miss something? I have no idea what happened and don't know if there was a default. Somehow it seems $20,000 was "paid" but it is in some sort of limbo.

I see...to be honest, I don't know if that has been reduced or not. Best to ask the accountant. I know there are certain expenses that are taken on the personal return and should be subtracted out and it seems likely this is one of them.

It sounds like a Schedule C. First you have to reduce the Sched C income by 1/2 of SE tax. For simplicity let's assume that net number is 25000. I think his hard max is 25000. If he takes the max employer contribution - which is 5000, not 6250 because the contribution reduces the income that is subject to the 25% limit - then that reduces his compensation to 20000. He could do 19500+500. Or just forget the employer part and do all deferrals - 19500 regular plus 5500 catchup.

Mmm, above my pay grade, sorry. I agree it's a bit dicey; I think you'd have to argue that NHCEs were eligible but I don't really know.

I don't think there is any Q that you can retroactively amend the plan by the end of the year in which it happened, although there might be issues with proper notification. When did it happen?

And just for the record (sly grin as you see where this is going), "record-keeping" may or may not include "third party administration" functions. So they might keep track of the sources but not do compliance or 5500 work. I don't know but just wanted to give a warning so everyone doesn't run to Ascensus without understanding the whole picture.

I'm not even sure what "gross K-1" means. If the accountant says the number flowing from the K-1 is 93,150, that's what we're using. (Unless someone convinces me otherwise.) The W-2 is what it is.

Did the $20,000 make its way into the plan? It's not clear what happened. Personally, I would not be concerned that loan payments were not made by payroll deduction, as long as they were made. The concern is if the loan defaulted and it's not clear if that happened or not.

If the payment is reducing income for federal income tax purposes, and it is, then I think you have to subtract it.

yes

I think we've talked about this before and apparently I'm a cowboy for saying that you can accrue the distributions and show $0 assets at end of year. How about a DB plan that terminated, paid everyone out, but had excess assets that weren't sent to a transfer plan until early the next year? Actual situation; in this case I am uncomfortable accruing that transfer (it was not initiated until after EOY). I'm not sure if the software/IRS computers will accept 0 participants at BOY.

It may not be "needed" but it is recommended and might eventually come back to bite you if not done. e.g. husband and wife plan; just throw money in a pot...years later, who is entitled to what? Ditto for different sources - it might make a difference how much is employee 401(k) vs. employer later on (of course definitely if there is Roth money commingled). That said, I do not believe the work and fees are comparable to a plan with employees.

"Super integrated" I kind of miss the creativity and cleverness (?) of having to do that, as opposed to having everyone in their own group.

Egold, not only is that amount allowed but much more. The overall max for 2022 is $61,000; the catchup doesn't count towards that so effectively it becomes $67,500. Can he get there? Well if we subtract 20500 from 61000 we get 40500. The employer contribution is limited to 25% of pay, which is 50000. 40500 < 50000 so 40500 is ok as an employer contribution...if we are talking about a corporation. If it is a sole proprietor then you have to subtract the employer contribution and part of the self-employment tax to get net/net compensation, and that number would be somewhat less than 40500. The gist of your question seems to be whether the employer safe harbor contribution counts against the 401(k) limit and the answer is emphatically "no." As others have noted, there is no point to the safe harbor if he is the only participant. It doesn't actually hurt but is probably causing confusion.

If he is "paid from the financial firm he works for" then he is in fact in business and is, presumably, a sole proprietor, whether he has a business name or not. He should (must) be getting a 1099-Misc from the firm. John Doe is both an individual and a sole proprietor - part of being a sole prop is that the business is indistinguishable from the individual, at least for liability - and can establish a plan as a sole proprietor. (But if he wants to have a plan he must get a tax id number, otherwise he does not need one.)