Lou S.

You need to track the basis if you want to recover it tax free. Yes, that can be a pain. Your wife could convert all of her regular IRAs to ROTH-IRAs, but you would have to pay taxes on the conversion since you can't just convert the basis which would be simple but isn't easy to do in the tax code due to having prorate withdrawals between basis and earnings. ROTH conversion may or may not result is a large unexpected tax bill next year depending on the size of her IRAs. The form is per individual, so if you have no non-deductible IRA contributions to tract, you only need to hers. To answer your question, it would be singular you as the form is by individual even if married filing jointly.

Wouldn't that assume the owner took an allowable in-service withdrawal and a 1099-R would have been issued? Since the thread title is "impermissible withdrawal" I'm assuming that there was no paperwork or even distributable event for the withdrawal and this is a PT that should be corrected as such. I agree with Bri above.

You can't deduct more than 100% of the earned income for the sole proprietor so in your case the deduction would be limited to $18,800. You MIGHT be able to recharaterize the non-deductible 401(k) as ROTH since it doesn't exceed 415 limit though I'm not sure the mechanics of that or if there is authority in the code to do so.

A agree that acm_acm laid out a perfectly acceptable method for testing the plans. Test the premerger Plan on its own and the postmerger plan on its own including all participants after the merger. I think another reasonable method since it is a stock acquisition forming a controlled group during the year and not using the transition relief would be to test the plans together as a single aggregated plan for the year. In either even you will have 2 5500s.

As long as the fee is allowed by the plan, is reasonable, and disclosed in the participant fee disclosure notices I don't see a problem with it, though maybe I'm overlooking something. There are things you need to send participants beside payments at retirement or RMD age and if they don't notify you of address changes someone needs to pay to locate them, I don't see where charging the participant is problematic if it is part of the Plan's on going operations and uniformly applied.

I bit late because of the holidays. I'm not aware of any additional duty imposed in this situation. Lay out the correct option as you see it, quote the fees, if the client takes the advice great, if not resign and move on. Or as Ernie says, refer them to their counsel.

The advantage is it is done and they can open a trust account and fund right away. The disadvantage is as David D says, the client can no longer change their mind once they sign the document.

The correct way to do it is as David D suggests. Resolutions and amendments to terminate the plan and file a first and final $0 5500-EZ. How fmsinc describes it is likely what most people do. Just pretend like the plan never existed. No one ever elected to defer, the sponsor never funded plan. It's not the correct course of action but the odds of the IRS auditing a solo-k that never put any money into and presumable never took any tax deductions is probably quite small. But if you are a member of one of the alphabet soup organization you are problem subject to one or more code of ethics standards. The penalty for plan disqualification wouldn't be anything since there is no money so no disallowance of deduction or tax on trust income since there is none, but there is potential penalty of $250/day up to $150,000 should the IRS decide to press the issue. I'm not sure they would but they could.

I believe that is in the case where the required minimum contribution exceeds the sole-props Schedule C net income, and not all cases where the employer simply makes a contribution larger than the maximum deductible amount.

I agree with Paul's suggestions. Take reasonable precautions to prevent fraud since it is already suspected in this case.

And remember as WCC notes it is FICA wages which are W-2 Box 3. Those could be different from Box 1 wages, 414(s) compensation, 415 compensation or eligible plan compensation.

Speculating but if you filed PBGC premiums and not a 5500 that might trigger a response from the PBGC but I don't know for sure. You could discuss with your client reaching out the PBGC directly with a copy of the e-mail asking the PBGC to verify the authenticity. If it is from the PBGC, and there are no missed MRCs you could let the PBGC know their information is incorrect. If there actually are missed MRCs, you could file the required Form 10(s). But if there are also still missing 5500s, the plan may have some additional issues to fix.

Since you said they are still working (and presumably now getting W-2 wages) and are not a 5% owner in their 1st RMD year, then they are not required to take a 2025 RMD unless they separate service before 12/31/2025. if I misunderstand the facts, that could change things.

Employee Locator — Best Of The Best Employment Screening! and PenChecks Trust - A Leading Provider of Comprehensive Retirement Plan Payment Processing Services – and more I found both easy and provided quick results. I have had various levels of success finding participants with the results, but you do get reports showing you complied with the DOL search rules for your files. I found APscreen a little more through in the reports they generated. There are quite a few others out there that all seem reasonably comparable on pricing. If you have a lot, you might look for a company that offers a bulk discount.

Thanks Artie. No, the situation has not come up in the past. The Plan Administrator agrees that whatever they do decide on in this particular case will be documented and used as a model should the situation arise in the future. FWIW the participant is not a highly compensated employee. For now, they are seeing if the vendor can handle this situation and will adjust its administrative policies accordingly to reflect the decision.