Appleby

Franky, The transaction is actually a direct rollover- not a transfer. A transfer is a non-reportable transaction.

Yes the SIMPLE assets can be moved to a qualified plan, however, not as a transfer – it must be as a rollover. The two-year limit does apply.

I don’t see why not. According to the final regulations, the new RMD rules , effective 01/01/2003 and optional for 2002, applies to all participants and beneficiaries.

So true Kirk So true!

It does not say here that the participant remarried. Generally, the determination of who is the beneficiary (when the former spouse is still reflected within the documentation as the beneficiary), becomes an issue when the participant remarries. In this situation (assuming he did not remarry), it appears the former spouse is still the beneficiary.

I don’t think so. You math applies to the 404 limit. For the 415 limit, you would subtract contributions for common-law employees, , if any, and one-half of your self-employment tax from the net earnings. With the example of an ANBI of $15,000, the net earnings is approximately $16,250.00. Since there are no common-law employees in this example, all we subtract from the net earnings is 1.5 of the SE tax, leaving us with $15,000.

I just noticed that the question assumes $15,000 is the ANBI. The maximum contribution would then be Maximum Salary deferral = $11,000 ( the lesser of $11,000 or ANBI) Maximum Profit sharing contribution = ANBI x 20% * Maximum Profit sharing contribution = 15,000 x 20%=3,000 Maximum contribution = 11,000 3,000 _________ 14,000 Total ( as stated earlier) -Plus catch up contribution , if age 50 or older by year end

For a Sole proprietor with a net income of $15,000, the maximum contribution is determined as follows. ANBI= Net income-(1/2 of S/E tax) ANBI= $15,000-1162.5 ANBI =13,837.5 Maximum Salary deferral = $11,000 ( the lesser of $11,000 or ANBI) Maximum Profit sharing contribution = ANBI x 20% * Maximum Profit sharing contribution = 13,837.5 x 20%=2,767.50 Maximum contribution = 11,000 + 2,767.50 _________ 13,767.50 Total Plus catch up contribution , if age 50 or older by year end * For a sole proprietor, the deductible limit is 20%, not 25

Check these out as well- these are free and not too bad. http://www.irs.gov/retirementplans/display...3D82834,00.html http://www.irs.gov/retirementplans/display...%3D6951,00.html

They are right. The accumulated earnings on the post tax contributions should be included in the check representing the pre-tax amount.

I agree with Belgarath. …Would like to add that for a partnership, the partner cannot establish a plan- it is the partnership that established the plan.

According to the IRS instructions for filing 1099-R, distributions made on or after the individual attains age 59 ½ must be coded as normal (code 7). This includes amounts that are part of a 72(t) payment. An exception to code 7 would be a direct rollover.

Good point, The exact wording is “These new tables also may be used to determine an employee's (or IRA owner's) life expectancy, or the joint life and last survivor expectancy of an employee (or IRA owner) and designated beneficiary, for purposes of calculating the amount of substantially equal periodic payments under section 72(t)(2)(A)(iv)…” This would suggest that it is optional.

Belgarath According to the Final RMD regulations, he may use the new tables beginning this year. Next year, the new tables are mandatory. Even if he was already using the old tables, he is permitted to transition to the new tables. According to the final RMD regulation, this will not be considered a modification of the 72(t) payments. MarZDoates The value used depends on whether or not you are basing his calculations on a fiscal or calendar year. For example, if he is starting now (June) you may assume that his year starts June ( fiscal year) and use his market value of the IRA as of month end May. That’s one option. Another option is to use the market value of the account as of 12/31/2002. This option is used if the distributions will be taken on a calendar year basis. According to PLRs issued by the IRS, someone who starts their 72(t) in mid-year, and will take payments on a calendar year basis, has two options for the first year. 1. Play catch-up and take the amounts that would have been distributed for (in your case) January to May, has he started in January - in other words, the full annual amount is taken for this year and subsequent years Or 2. Divide the annual amount by 12, and take only the amounts due for June to December. The annual amount for the first year will be less than that for other years, but the IRS indicated that this would be a permissible exception. The full annual amount must be taken for subsequent years. Should you determine the amount you need to have in the IRA to meet the annual payments, you may transfer such amount to a separate IRA and take the payments from this IRA.. The amount transferred to the IRA would be your market value. Bear in mind also that the life expectancy method is not the only method of choice. He may also use the amortization or annuitization method. These two methods give larger annual calcualted amounts, than the life expectancy method.

amfam2, No amendment is required to the 5498 Randy Ehle I find that most employers find the reporting requirements disconcerting, because, if contributions are made in the current year for the previous year, the amounts reported on the IRS Form 5498, will differ from the amount they report on the employer's tax return. The IRS is well aware that this discrepancy will occur, because of the rules they made. It is important to note that the IRS does not require the employer or participant to include copies of the Form 5498 with their income tax return. Therefore, I would recommend that employers maintain records of the contributions and the applicable tax year for which they were made-. These records should be helpful in their reconciliation processes and help them to report the contribution appropriately on the business’ income tax return. For contributions that are clearly marked ' previous year' some firms will add a 'trailer' to the transaction, to the effect " contribution received current year for previous year". Other firms have modified their clients’ monthly statements to show the contributions in the year for which the client designates. For example, one section for 2000 contributions received in 2001 One section for 2000 contributions received in 2000 and so on… However the reporting on the 5498 would still show the contributions in the year they were actually received by the custodian.

Absolutely, Your contributions to an employer-sponsored plan do not affect the amount you can contribute to an IRA. It only affects your ability to deduct those contributions, which seems to be a non-issue for you, based on your question.

The IRS has issued revenue procedure 2002-29, within which she has outlined the general requirements for QRPs to be amended with respect to the proposed and final RMD regulations. Revenue procedure 2002-29 is attached.

Very diplomatic Harry

Please see above paragraph starting with “Another option is for the employer to leave …” Borrowing from the SEP rules in Pub 560, it would appear that this is an option. No income ( from the excess contribution) would be included on the employee's 2001 return. Employees would not be assessed any penalty and the employer would owe the 10 % penalty.

Carol, One of two things could be wrong here 1. You are looking at the 1986 ( 2001) version of the MDIB table. This table was updated and shows the new LE factors in the federal register issue April 17 or You are looking at the HTML version of the federal register, which has incorrect figures. Could you provide a link to what you are looking at?

It appears that the QDRO provides conflicting options. Harry O is right, the assets can be used for anything. The key factor is “ who is the alternate payee”. Since it is the spouse, then it is the spouse who should be responsible for adding the amount into income and paying taxes. However, the courts confuses the issue by stating that the participant is responsible for paying taxes, since the participant would be so responsible only if someone other than the spouse is the alternate payee. If I were the participant, I would seek clarification…

You’re welcome Jeanne

The IRS has not issued any guidance on correction excess contributions made to SIMPLE IRAs. However, until the IRS issued guidance, the employer may treat the excess similarly to how an excess SEP contribution would be treated, i.e. 1- notify the employee of the excess contribution 1- amend the employee’s W-2 so that the excess is included in the compensation reported for the year the excess was made 1- the employee would then be required to notify the IRA custodian and instruct them to remove the excess Another option is for the employer to leave the excess in the SIMPLE and treat it as a contribution for the following year. A 10 % excise penalty will be assessed and owed to the IRS. This option is given for SEPs in IRS publication 560, but it not given in the IRC… it would seem then that the IRS made an error in PUB 560.

See the attached URL http://benefitslink.com/boards/index.php?showtopic=14500

QDRO applies to qualified plans. For IRAs it is a divorce decree. In a recent private letter ruling (PLR), the IRS ruled that the reduction in the annual distribution from the IRA will not constitute a subsequent modification in his series of periodic payments, and will not result in the imposition of the 10 percent additional income tax imposed by section 72(t)(1) , when this reduction is as a result of the IRA balance being significantly reduced due to a “transfer due to divorce”. Note that a PLR is directed only to the taxpayer who requested it and may not be used or cited as precedent. However, most of the rules regarding 72(t) substantially equal periodic payments are based on PLRs, since they are hardly addressed elsewhere.