Appleby

Since he filed his return by the due date, he has until October 15 to correct the excess. Any earnings would be taxable the year of the contribution. He cannot change it to 2019. But, if he leaves it in the account past the correction deadline, it automatically becomes a 2019 contribution and he would owe the IRS a 6% excise tax for 2018 ( The excise tax would continue to apply for every year it remains as an excess . For instance, if he is still ineligible 2019, then it would be an excess for 2019 and the 6% excise tax would apply for 2019). An amended return would be required only if earnings needs to be added to his 2018 income. Remember that he can recahracterize it to a traditional IRA as a 2018 contribution, as long as he was under age 70 1/2 as of 12/31/2018. If it is treated as nondeductible, Form 8606 would need to be filed.

Could this be a fulltime insurance salesman /statutory employee by any chance? They usually get both. But, only the W-2 wages count for retirement plan purposes I.R.C. § 7701(a)(20).

Hi Mike, I deal with SIMPLEs. You are right. ( caveat: there are exceptions to the SIMPLE being the only plan maintained by the employer)

Hi Luke, They would still have to use the life expectancy of the oldest beneficiary. They would be able to use each child's life expectancy only if each child was named as beneficiary under separate sub-trusts, and the sub-trusts were named as beneficiaries of the IRA. PLR 200537044 ( though not authoritative) . I think there is a more recent PLR on this isssue- I will check.

Distributions from inherited IRAs cannot be rolled over. An exception applies to spouse beneficiaries, which would permit the amount to be rolled over to the spouse's own ( non-Beneficiary) IRA . As a result, the answer to your question "If a distribution is made from the IRA funds, can it be rolled over to an inherited IRA for the trust beneficiary? " is no. However, depending on the provisions of the trust and how accommodating the custodian is willing to be, the assets could be transferred to inherited IRAs for the trust beneficiaries. If they want to keep the (Non RMD portion of the) assets in IRAs, then they must not distribute the amount - because the distributions would not be eligible or rollover. Where you said " First distributions were made from the taxable account", is that what you meant to say? ----because , you mentioned a 401(k) and an IRA in the first sentence.

It depends. If he is eligible for a $4,000 contribution, then he does not have an excess.

Not for purposes of calculating contributions to the plan. For corporations, only W-2 wages can be considered.

Good point. Well taken.

In understand. We are all just trying to help. I merely wanted to correct where you said the following Because, it's not that " the money being rolled into it will become withdrawal restricted as well". The money cannot be rolled over at all, during the first two years. If it is rolled over, it becomes an excess contribution ( ineligible rollover) and must be corrected by removing the amount, along with any applicable earnings.

You are right. It's either zero, or at least 10% for non-periodic distributions.

I agree with Kevin C. And add: Yes- the physician can establish a SEP for himself based on SE income from Sch C The physician is not limited on SEP contribution due to participation in the 401(k) , because the two businesses are not part of a controlled group or affiliated service group ( I am assuming the physician has no ownership in the hospital. If that is not the case, please let us know.) As Kevin C indicated, if the business has common-law employees, they must be covered under the SEP IRA, if they meet the eligibility requirements.

What kind of 457 is it?

I agree. Distributions must begin by 12/31 of the year, following the year of death. If separate accounting occurs by 12/31 of the year, following the year of death., they can each use their own life expediencies to calculate post death distributions. If not, then the life expectancy of the oldest beneficiary must be used.

Hi ETA, The rollover would be ineligible- resulting in an excess contribution to the SIMPLE IRA. Participants could rollover their 401(k) balances to traditional IRAs instead.

Hi Bird, Thank you for confirming that there is such a thing as a Solo(k), which is the crux of the debate. I agree with the general sentiments of your comments, from a purely regulatory perspective. However, we should also consider the intent of the providers. See, for example, the T. Rose Price instructions, which state in part "

Tell that to the IRS, as they too have acknowledged these plans, by those names. If a sole proprietor wants to adopt a 401(k) plan, and does not plan to hire employees, are you saying you are going to have her complete 60 pages of paperwork, and she could accomplish the same thing with 2 pages?

You have a case where someone who do not understand the rules sold a product to your client, for which your client was not eligible. That does not mean that the product is nonexistent. A Roth IRA would still be a a Roth IRA, even if it is sold to someone who had too much income to be eligible for it.

It is true . Those plans are designed for that very purpose. If common law employees become eligible, then the business would have to amend the plan to a regular 401(k) plan.

You are on the right track... This is one of the 'products' that came out of EGTRRA, . And , they are also better than just a profit sharing plan, depending on the individual's compensation amount. Under EGTRRA, salary deferral was no longer counted for purposes of the maximum deductible contribution limit.

It's a brand name given to a 401(k) plan for which only the the business owner/s is/are eligible to participate. Different companies use different brand names, including Individual-(k), Solo(k), and Uni(k). Once upon a time, it might have been called a Keogh 401(k). It's still just a 401(k), but the branding sends a message to the self-employed, that the plan can be adopted without worrying about the usual high volume paperwork, testing and 5500 filing that usually applies to 401(k) plans. ( 5500 filing is usually required only when assets exceed $250,000.

Agree. And agree about Natalie.

No RMD, because death occurred before the RBD.

Distributions of less than $10 need not be reported on Form 1099-R. And, even if it was reported on Form 1099-R, it need not be reported on his tax return. It costs much to distribute 30Cents. There is no good reason to do it- none that I can think of.

Agree. To add: Even if he receives/makes no contribution under the 401(k) and he is married, his eligibility to claim a deduction could depend on whether his spouse is an active participant under an employer provided retirement plan. If only employer contributions are made to the plan, his active participant status ( considered by an employer plan status) depends on whether the employer contribution is made this year or next year.

The fact is, companies are marketing a trimmed down version of the 401(k) using these brand names. Yes, it is just a 401(k). But, when a product is labelled as a Solo-K/Individual-k etc., one knows then, that it is established with a shortened form of an adoption agreement, and there is no nondiscrimination/top-heavy testing. Why stand there arguing that there is no such thing as a Solo-K, when the customer has a product in hand, labeled as such? Sometimes- it is important to speak the language of the vendor and the end-user, so that one can respond accordingly- as long as the end results are in compliance with the governing regulations. If you know what the other party means, you can guide them appropriately.