Flyboyjohn

If the auditors are just putting that BS in the Management Letter you can explain it away as just their attempt to justify the outrageous fees they charge (they have to find something wrong). If they're putting anything in the footnotes to the financial statements which get filed with the 5500 that's a whole different ballgame and they should be called to task (throw back in their face the wonderful accounting principle of "materiality).

Still interested if anybody knows of a preapproved SEP document that does NOT prohibit an active DB by the same employer.

OOPS, see my reply to your first post and let us know if you find a SEP that accommodates a DB/CB plan.

Read your SEP document/form, it almost certainly prohibits the SEP from coexisting with a DB plan. I recall running across a SEP document years ago that the sponsoring investment institution had gone to the trouble of having approved with a provision for combining with a DB plan but suspect it may no longer be available. If you uncover such a beast please post for us all to be aware.

On the contrary going to S corp could be more advantageous than staying Sch C. Think of it this way- the amount of SE income converted to S corp wages loses the 20% QBI deduction but the spread saves the SE tax, either 15.3% or 2.9% depending on income level (and isn't there an additional .9% Obamacare add on?) The give up on the wage component only "costs" 4.8% (20% x 24% bracket) in forgone QBI deduction. So lower income (under SSTWB) taxpayers come out way ahead (15.3% vs 4.8%) and higher income are only slightly disadvantaged (4.8% vs 2.9% or 3.8%).

Execute a new SEP adoption form listing employer as "ABC, Inc. as successor to ABC sole proprietor". My opinion you can continue same waiting period for eligibility and look back at prior years service with sole prop. Using same IRAs for deposit of new employer SEP contributions perfectly OK.

Reposting in hopes of getting thoughts from the experts, especially if I'm way off base (I've got a thick skin). Thanks

Scenario: SIMPLE IRA went "bad" (disqualified) several years ago due to failure to offer the SIMPLE to the employees of a related company. Cost to make corrective contributions under EPCableRS for the employees of the related company would be exorbitantly expensive so the only viable option is to treat the contributions as not having been made to a "qualified" SIMPLE IRA. There's no official guidance on how to handle this so our thought is: 1. For the year's still open under the statute of limitations have the employer amend the W-2s to add the deferrals and the match to Box 1 wages and the match to Box 3&5 SS and Medicare wages. There should be no income tax impact to the employer but will owe SS & Medicare tax on the match amounts (employer will also pay employee share).. 2. At the participant level treat additional income amounts as contributions to a traditional IRA. Depending on the employees situation the contributions may be deductible, non-deductible or excess. Employer will cover the costs associated with amending the employees individual tax returns and paying additional taxes but due to the small amounts involved it's believed that the vast majority will be deductible so the net tax impact to the employees will be negligible. Anything we're missing?

Taxpayer needed large 2017 tax deduction and was advised to adopt a DB plan in November 2017 with a November 30 plan year end. Taxpayer funded PYE 11/30/17 in November 2017, funded PYE 11/30/18 in early December 2017 and claimed deduction for both contributions on 2017 calendar year tax return. Sounds fishy to me, is this allowable?

Some plans/recordkeepers/payroll systems (including my current employer) require a separate deferral election with respect to the catch up amount. I think it's stupid/illogical and possibly some kind of violation but I have to be careful to go into our online plan portal and enter my "catch up" deferral election after I've hit the basic deferral limit. Point being you may not have a missed deferral opportunity depending on the plan's requirements for electing "catch up" deferrals.

B- I've heard the same comment about the employer's opportunity to retroactively correct anything during the restatement period which led me to post the question. FGC- The communications to employees support the ER intent so it doesn't appear we have a major issue there. Thanks

Eligible charitable organization signed (without reading or counsel) a "good faith" 403b plan document in 2009 as mandated by IRS. 2009 document erroneously provided immediate eligibility for the ER match despite the plan having been operated since 1992 using a permissible 1 year eligibility requirement. ER discovered the error when they recently received the vendor's preapproved 403b document which is to be retroactively effective to 2010. Since the 2009 document was only to be an interim "best efforts" stopgap measure, can they simply correct the error retroactively in the new preapproved document or do they have an operational error that has to go through VCP?

Employer wants to implement a student loan repayment benefit, often erroneously referred to as a "match" but we know is an employer non-elective contribution. Question is how much of the "program" needs to be addressed in the plan document vs. a much less formal payroll practice or policy. It would seem that if the plan document already provides (or is amended to provide) that each participant is in a separate non-elective allocation group, and the eligibility and vesting provisions conform to the employer's intent that there would be no requirement to have anything further in the plan document. When an employer determines in it's sole discretion how much non-elective contribution to allocate to each participant there's no requirement that the basis for the allocation be incorporated in the plan document. If an employer wants to reward certain employee behaviors by non-elective contributions ("you'll get $1,000 if you increase sales by 5%" or "you'll get $1,000 if you have no unexcused absences this year") those policies can be communicated informally and do not require plan amendments so it would seem that a student loan repayment benefit could likewise be crafted outside of the plan document. Any disagreement?

Agree, I probably misinterpreted his answer, sorry.

Respectfully disagree with Mr. Starr's flat "No". If your client is at least moderately aggressive and if the plan can be amended and the 2019 safe harbor notice distributed "quickly" (next couple of days) I would not hesitate going for it. Remember the IRS position that 30 days advance notice is deemed reasonable doesn't mean that a notice given 20 days in advance is automatically unreasonable.

You're understanding is correct and the forms/administration is/are incorrect. When implemented in 2020 the recently released HRA changes should at long last provide a mechanism for small employers to provide a tax free reimbursement of individual policies.

Mere eligibility for the 401k is not enough to make the client an "active participant in an employer plan" for IRA deduction purposes. If he doesn't contribute or receive any employer contributions his IRA should be deductible.

Yes but to avoid "where's your 5500" correspondence it might be easier to just go ahead and file, particularly if you know you're going to have to file next year. Also, if you knew when filing the prior year that you wouldn't need to file this year you could have entered a code 4R which tells the gov't not to expect a 5500 for this year.

OOPS, ESOP Guy you are correct, normal 20% withholding applies to US citizens, my bad.

ESOP Guy check the paragraph right above the paragraph you're quoting

If the check is going to be delivered outside the US to a US citizen then the mandatory Federal withholding rate is 30% (see the instructions to Form W-4P).

Will someone repost the link to the "Correcting a Bad SIMPLE" PDF? Many thanks.

An excluded employee can never "satisfy...the service requirements for participation" since their service is in an excluded class.

I would defend to the death the position that excluded employees are NOT "participants" and we use that position very often to structure plans to avoid needing the annual audit.

Why not exclude 2 NHCEs and avoid the need for the "too cute" amendment to add back the owners?