Bird

I don't have a cite but I'm quite sure it is required. It is a "summary" of the annual report, and there was an annual report, so why not? Otherwise there would be a gap in the (useless) information in the SARs.

We just had a discussion here. The conclusion, or at least my conclusion, was that you report it as an excess deferral (not 415 excess which ties your hands to taxation in the year received I think), taxable in 2020. As wrong as it might sound to us, the accountant takes a deduction in 2020 against the negative income, which washes out the taxable income.

I take the following to mean that online payment is just that, payment, and nothing else is required except the regular filing. Remember, if you pay online, you need to electronically submit the original filings to EFAST2 to participate in the DFVCP. Acceptance of the online payment does not constitute acceptance to the DFVCP.

Good luck with that ?

There are three basic choices in a situation like this: 1) do nothing and hope nobody notices, 2) go to the IRS and ask for approval for a fix, or 3) try to fix it yourself and hope the IRS doesn't come knocking, or if they do, that they find your fix reasonable. #2 costs some money upfront in fees and corrections, although from what I've heard the corrections may not be as draconian as you might think (I don't generally work in the "fixing" end of things so don't have much direct experience). #1 is obviously the worst case scenario if caught, and #3 is where you are...yes there could be consequences to the sponsor for not correcting the failure properly, and generally the IRS is going to want a pound of flesh if you didn't come in voluntarily. As far as the attorney's liability, I would imagine he gave the sponsor some options and the sponsor made the final decision on how to proceed so I doubt the attorney has liability unless he said "yes this fixes things perfectly" which is highly unlikely.

Not in my world. Why on earth would anyone want to complicate things like that?! Assuming it even says that in the document, which is unlikely.

That particular comment was not about a situation with negative earned income, but...no, I can't point to anything. I gave a scenario where things could be manipulated and I think it was compelling from a logical standpoint. I'd be one of the first to say that logic has nothing to do with retirement plan rules, but in the absence of clear-cut guidance I think that can and should be a form of "internal" guidance. (Nobody asked but I'll go off the deep end here and say I think we have too many regs...not necessarily from the standpoint of complexity [which is of course a valid point] but from the standpoint that, as exhibited here, there is a sense that if the Code and regs don't prevent something it must be ok. I'd be happy with "don't be a freakin' pig" and people would probably self-limit; of course there would be the need for some court cases for egregious piggery. Oh well, sorry to digress and I don't know where that came from!) Yeah, well maybe that's why there is a feeling it is ok. I'm no guru but I've seen enough cases where I absolutely positively know that the IRS wasn't thinking things all the way through...e.g. ASPPA Q&A sessions, especially towards the end when they take new Qs that haven't been pre-vetted. (But if informal guidance agrees with my position I'll take it! ?)

It's ok

You can't have a SIMPLE in the same year as any other plan. The general thinking is that creating a new plan(s) invalidates the SIMPLE, so if contributions have been made...well, that's where it breaks down a bit for me; it's messy and ugly but I think they can be disgorged as excess IRA contributions or perhaps treated as regular IRA contributions if under the appropriate limit (but they went to a SIMPLE not an IRA). But the new plan(s) actually has no problem.

No problem at all with the S corp having a loss but don't see how that is relevant or makes a case either way. In case it wasn't clear, what you are saying is that this scenario is ok: sole prop has $0 profits but plenty of cash decides to pay an S corp owned by himself $125K for consulting, creating a loss of $125K S corp pays him a salary of $100K and takes a $25K PS deduction That creates a $25K deduction from nothing.

what does that mean?

I thought I replied to this - sometimes things go to a black hole - but maybe not, as it is complicated and as Bill Presson notes, not sure we can help. Frankly I'm surprised your employer did as much as he did. I'm guessing that they (attorney and ER) were taking the one employee's original election to not contribute as an ongoing election, which is valid. But yes there is supposed to be an annual notice about the ability to contribute and what the employer would contribute so that's problematic, although there is no requirement to get a new election every year. But he did get additional monies deposited so other than some irritation that the employee had to beg, is this such a big deal? It boils down to 4 former employees...if I were handling it I'd certainly tell the employer he should make corrections for them as well, but, I don't know, that's a really bitter pill to swallow and I can see the reluctance to include them in the fix. In any event VCP stands for Voluntary Correction Program and it involves paying a fee and submitting things to the IRS. It might be possible that they did this but I can guarantee that, given the time frame, the IRS did not grant approval for the fix; it takes...well, way longer than a couple of months for that. I suspect they just did something that they thought was reasonable and did not submit through VCP.

That's not how I read Mike's answer and I disagree with your conclusion. I believe when he said "combine the amounts" he was referring to compensation. If you are calculating contributions separately and combining contributions, when there is a $0 contribution for the sole prop due to a loss, it would be very easy to manipulate losses and W-2 to generate a deduction when there shouldn't be. For example, let's say someone owns two businesses that combined have $0 net revenue - the corp has $100K of W-2 for the owner and the sole prop has a loss of $100K. (IMO) you can't say "oh the corp can make a $25K contribution, the sole prop has a loss so $0 contribution, add them together and do $25K." If the sole prop has a profit, then I think, in a scenario with no employees, that calculating contributions separately and adding them will give the same results as adding compensation before calculating contributions, but with employees, and/or a loss in the sole prop, I think there are a bunch of reasons you need to add comp and then calculate contributions - 415 and various non-discrimination tests. Of course calculating comp for the sole prop could be (more than) tricky but so be it. Simplicity is not a valid reason to do something incorrectly.

I agree that taxes take precedence over deferrals. The objection from the auditor is improperly stated - were deferrals not "calculated prior to FIT" or not withheld because there was nothing left or because they were overlooked? In any event how big a fuss is the CPA firm making over it, and can('t) you just say "so what do you want to do about it?"

It's not easy. One of the many reasons it is not recommended to hold illiquid assets in a plan. I'm assuming these are self-directed accounts. Best scenario is the trustee sells it, somehow, someway. Or wait for it to liquidate (may take a while and there is a 10 year window for bene payouts). Or find an IRA custodian that is willing to hold it (but assuming death was after 12/31/2019, you still have the 10 year payout requirement). Or distribute the partnership interest. And THAT's why...

Fair Q. Probably a programming mistake. Wouldn't be the first time.

You said that you only had $8000 in in the plan, so a return wasn't needed at all, unless you had employees. My thinking was that an amended return couldn't be late since it isn't required. But I guess they could say "gotcha - it's optional but you chose to file and your optional return was late." (But you haven't actually filed?) If you already did the DFVC filing then that should take care of it, but I think a case could have been made that you didn't need to file at all and just decided to stop your optional filings. I'm a bit all over the place because I'm not sure about the fact pattern but it appears you created a problem by trying to do things yourself and are now trying to fix things yourself and maybe you are being penny wise and pound foolish.

The implication then is that a deduction should be (have been) taken on the 1040, and the taxable distribution would offset it. I'd normally say it's crazy to be taking a deduction against a loss but I think that is how it needs to be done. So this requires an amended 2018 1099-R with whatever code saying it is taxable in the prior year, and an amended 2018 1040.

Agree, but maybe not necessary. st3rv, it might be that you triggered this by filing the wrong form (regular 5500). If it was not required, you may be able to fix this by filing an amended return, a 5500-SF with the "one participant" box checked (or a 5500-EZ but I think the SF is better). I strongly suggest you get some help from a local (or not so local) third party administrator - plead some mea culpas for trying to do it yourself. Thanks for posting. It's a poster child for how these do-it-yourself plans give you enough rope to hang yourself.

Um, comparing the RMD to the total payments...?

While I don't find the referenced RR particularly illuminating, I think they are saying that if terms are rehired then they're not going to forfeit so there is no partial termination. (It doesn't seem to contemplate that they might take their money immediately and in fact forfeit, but I don't see the need to look for trouble.) I see it as general guidance - but don't see the relevance to sale of a business, closing of a plant...unless of course they are rehired, but those would appear to be highly unusual circumstances. I mean if you sell a business, you're probably going to terminate a plan associated with that business and 100% vest everyone anyway. Are you theorizing about un-selling a business? If a business is sold in a stock sale and the plan goes with it, then I don't see terminations and rehires happening.

It's not clear if the corp exists yet. If not, I have no problem simply losing the amendment. Think what you want about me. If the corporation exists and will be needed as the plan sponsor eventually, I would currently date but retroactively amend the plan to add the sole prop as an adopting employer. I'm not 100% sure that is a valid fix but it does not concern me (if it did concern me I don't think I could handle more than about 5 plans).

This is exactly correct. I think it is worth noting that the reason recordkeepers prefer to do mapping is that it is easier* - they just suck everything out the prior recordkeeper's system and don't have to bother with enrollment materials or anything until after the conversion. *At least, easier than starting from scratch and having everyone re-enroll; a default conversion is of course pretty easy. In my perfect world, we re-enroll with new elections, make sure there is a seamless and timely change of deposits from old to new, and the conversion of existing money can happen later. But my perfect world involves more work that recordkeepers would like to do in the environment where everyone wants computers to do everything. And my world is small plans. This is where we disagree; I see no reason that a change in recordkeepers should justify a delay, given that there are ways around it. Granted one of the ways is pretty silly (setting up a checking account to hold money for a few days or weeks).

kateatthebeach, my best guess is that if you only worked there one year, you received some employer money (either match or profit sharing) that was not 100% vested and that should have been forfeited instead of being paid to you. But that's just a guess, with a big company like that it is possible that the letter itself is a mistake. I'd be inclined to ask for more details (again, with a big company like that you might get just as far by talking into a garbage can). The downside of ignoring it all (or refusing to repay if they have a cogent argument for doing so) is that you might get a revised 1099-R showing the money was not eligible for rollover, in which case your tax return would have to be amended, and the money should come out of the IRA. But maybe not; I have a feeling they are just going through the motions of asking and won't do anything.

Well, I guess the IRS has only updated the language once this year in Notice 2020-62, although FTW gave us updated language in February for the items noted above by C. B. Zeller, with his quote coming from the Notice (just issued recently). They also added some text about "disasters" reflecting the CARES Act and made some other tweaks. (My point isn't well made but I was confused when reading this thread, as I thought the SECURE Act language was already provided by the IRS.) In any event it is one of those things where we do our best (we will start using the new notices immediately) but have no concerns at all about whether an "old" one slipped out. I think for there to be any consequences someone would have to sue, which implies they read the notice, which is a preposterous assumption.