spiritrider

A small clarification to that link quote. It is not when you make HSA contributions that necessarily matters. Your HSA eligibility ends up to six months before your Medicare enrollment. That establishes your months of HSA eligibility and the maximum pro-rated contribution amount. If you + your employer's contributions were pro-rated monthly maximums, it would be exactly six months. That is because the total contribution would match the pro-rated maximum based on your months of HSA eligibility. If the monthly contributions were less than a pro-rated maximum, the contributions could continue up to even the date of Medicare enrollment or anytime before the tax filing deadline, as long as the total maximum contributions based on your months of HSA eligibility were not exceeded.

Enrolling in Medicare only makes you ineligible for HSA contributions not an HDHP family plan. It is possible to continue on a HDHP family plan and your spouse to be HSA eligible for family plan contribution limits. However, if due to company policy or cost effectiveness, you are no longer covered on 8/1 and it becomes an individual HDHP plan on 8/1, her contribution limits change. Her HSA eligibility would become 7 months family plan and 5 months individual plan. Under the rules for married people she could make a base contribution of ($6900 * 7 / 12 = $4025) - your $3916.67 base contribution = $108.33 for the first 7 months. An individual base contribution of $3450 * 5 / 12 = $1437.50 for the last 5 months. For a total base contribution of $1545.83. She is an HSA eligible individual for all of 2018 and can make the full $1000 catch-up contribution. Her total contribution for 2018, if switching to an individual HDHP plan on 8/1, after you made $4500 in contributions for a family plan 1/1 - 7/31, is $1545.83 + $1000 = $2545.83. Hope that makes sense.

Your HSA eligibility will be for seven months of 2018. Your maximum catch-up contribution will be $1000 * 7 / 12 = $583.33. Your maximum base contribution "would" be $6900 * 7 / 12 = $4025. However, your $4500 total contribution - $583.33 allowed catch-up contribution = $3916.67 deemed base contribution. Your wife is HSA eligible for the entire year. Assuming that the family plan continues for the remainder of the year (calculations will be different if not). Under rules for married people if one spouse has a family plan, both are deemed to be covered under a family plan. The full family plan limit ($6900) can be allocated as agreed by the spouses. Your wife's base contribution = $6900 - your $3916.67 base contribution = $2983.33. Your wife's can make the full catch-up contribution $1000. The bottom line if you make a total contribution of $4500, your wife can open her own HSA account and contribute $2983.33 + $1000 = $3983.33.

That is not how an FSA works. The employee enrolls for a fixed amount per pay period. The total amount for the year is fully available for reimbursement on the first day of the year. If the OP has valid reimbursements that exceed their contributions to date, the reimbursements must be paid and the employer is prohibited from seeking any repayment from the employee. This works both ways. If the employee has contributed more than than submitted qualified expenses. Any balance remaining after separation is forfeited.

I would add that since neither a one-participant 401k plan or IRAs receive ERISA creditor protection. That protection is subject to state law. There are a handful of states that do not provide unlimited creditor protection for IRAs. There are also a few states that because of quirks in the way their statutes are worded do not provide creditor protection for one-participant 401k plans. I'm not sure, but I seem to remember that they were mostly or all different states. So the bottom line is that nothing short of state specific legal counsel is sufficient to make a determination on which has the best creditor asset protection in a particular set of circumstances. Personally, I think self-directed retirement plans are a disaster waiting to happen. I have known more busted plans due to prohibited transactions with catastrophic consequences than plans with superior returns. Nobody ever expects it will happen to them, but it happens a lot more than the self-directed custodians will admit. You would be doing your clients a favor by cautioning them to stick with marketable securities in their retirement plans and take their risks in taxable accounts. It will probably fall on deaf ears because their greed is driving them with tales of riches.

You do realize this thread is three months old. Are you sure you really need/want one. Last I knew, two mainstream custodians with prototype SEP IRA plans were Schwab and ML. If you want somebody to make money off of you, I'm sure there many advisor-based firms that will oblige you. Your best bet might be a SEP IRA/one-participant 401k plan pair through a TPA.

I tend to agree with Bird. Why would this loss be deductible The contribution was not qualified to begin with. Even if you could, the general rule for deducting losses in pre-tax IRAs require the distribution of all balances in all traditional, SEP and SIMPLE IRA accounts. Only losses up to the non-deductible basis in all such accounts can be deducted on Schedule A as miscellaneous deductions subject to the 2% floor. Note: The tax reform removed all miscellaneous deductions subject to the 2% floor. Starting in 2018.

Legal departments are not necessarily a good source of information unless they have attorneys with specific focus or supplemental support. With that said, you can set up FSA and/or HSA plans to coincide with your benefit year. However, you need to enforce the HSA contributions as calendar year limits. You need to make sure to limit HSA employer + employee contributions based on the current calendar year. The employee is ultimately responsible for excess contributions. However, employer HSA contributions are irrevocable unless the employee was never eligible or the employer solely exceeded the yearly limit. If you make an over contribution by mistake, even if it results in an excess contribution, IRS guidance prohibits the return of the excess contribution and earnings to the employer.

Huh, that is the opposite of what Larry said. Technically, it is W-2 Box 1 which should include health insurance premiums and HSA contributions if paid or reimbursed by the corporation, plus Box 12 Code D (401k) or Code S (SIMPLE IRA) deferrals. Box 5 Social Security Wages could be limited to the maximum wage base and neither Box 5 nor Box 3 Medicare Wages include the above compensation.

Pretty standard stuff. 2017 IRA Deduction Limits - Effect of Modified AGI on Deduction if You Are NOT Covered by a Retirement Plan at Work

You should be aware of a wrinkle in 1.415(f)-1(f) - Aggregating plans, with this fact pattern. If the 403b participant owns > 50% of any business (including thru attribution), The 403b plan must now be aggregated with other plans of the 403b employer. In this case the 401a. Separately, if a 403b participant has an employer plan through a business they own. The 403b must be aggregated with the businesses plan. You can have a situation where a 403b participant's 403b contributions are aggregated with both the other plans of the 403b employer and a plan of the 403b participant's business. You can actually have a weird case where total allowed contributions would be higher if the individual does not participate in the 403b.

Unfortunately, some people followed this snippet from IRS Notice 2004-2, Q&A 21 to the letter and contributed $6900 at the beginning of the year. "Although the annual contribution is determined monthly, the maximum contribution may be made on the first day of the year." Now couple this with the fact that any HSA custodian I know charges a $20 - $25 fee to remove excess contributions and earnings. If their custodian will not waive this fee, they would be better off leaving the excess in the account and file Form 5329 and pay the $50 * 6% = $3 excise tax. Any chance the IRS would determine that even this small penalty would be "against equity and good conscience"? After all the IRS was the one who told them what the contribution limit was and the following of IRS guidance put them in these circumstances.

Rather than trying to rationalize why it might be permitted. Why not amend the SEP IRA plan to a prototype plan effective 1/1/18 and then adopt the 401k also effective 1/1/18

A problem with this not being caught is that the employee doesn't get any SS earnings credits. This is aggravated by the SSA not sending reports every year.

Some issues to consider: Is the net self-employment earnings the only earned income or is the individual's W-2(s) (Box 1 Wages + (0.9235 * business profit)) is > the Social Security maximum wage base (2017 = $127,400). If it is the latter your SE tax calculation is incorrect. For purposes of discussion let's assume the former. You are missing an important point about the self employed health insurance deduction. In this case the allowed deduction is Form 1040 Line 12 Business income - (Line 27 Deductible part of self-employment tax + Line 28 Self-employed SEP, SIMPLE, and qualified plans). The important point is that Line 28 is deductible contributions. These are 401k traditional employee deferrals and employer contributions. 401k Roth employee deferrals are not included in Line 28. With $18,587 in net self-employment earnings an individual could make: $18,000 Roth employee deferral* $6,000 Roth catch-up contribution*, ** $294 employer contribution*** $8,108 self employed health insurance deduction $6,500 IRA contribution. $38,902 Total * Roth contributions do not reduce the amount available for either the self employed health insurance deduction or compensation available for IRA contributions. ** Catch-up contributions are not included in annual addition limits including the 100% or compensation limit. ***The employer contribution is limited to (net self-employment earnings - any employee deferrals) / 2.

I think there might be a misunderstanding, maybe even on your end. A SIMPLE IRA like a SEP IRA custodian does not care what year a contribution is for only what year it is made. This is not any different than the last pay period of the year where the contribution is not made until January. From the IRS 2017 Instructions for Forms 1099-R and 5498, Specific Instructions for Form 5498, page 22. Box 9. SIMPLE Contributions Enter employer contributions, including deferrals, made to a SIMPLE IRA during 2017, including contributions made in 2017 for 2016, but not including contributions made in 2018 for 2017. Trustees and issuers are not responsible for reporting the year for which SIMPLE contributions are made. Do not include contributions to a SIMPLE 401(k) plan. This contribution made in 2018 is properly reported on the 2018 5498 by 05/31/19

I don't know how it works in Alaska, but on the East cost. If you do the fishing yourself you receive payment for each day's catch. You decide when, where, how and what species. You use your own equipment and exercise full control. There isn't a cleaner definition of IC than that. Even if you sign-on as a one or multi-day crew member, they always get paid based on the catch. I have never seen anyone as a W-2 employee. The same fisherman will run his own smaller boat and sign-on as a crew member of different boats at different times.

The client is not using the Schwab SEP IRA prototype plan documents for the TD Ameritrade SEP-IRA account. If the entire balance was rolled out 10 years ago, i wouldn't be surprised if Schwab hasn't closed the account and effectively terminated the prototype plan. TD Ameritrade has the SEP IRA plan sponsor complete the IRS Form 5305-SEP Contribution Agreement. This created a new SEP IRA plan and has no relationship with the Schwab prototype plan or its document. A Form 5305-SEP Contribution Agreement only amends/restates an earlier Form 5305-SEP. For example, if you had a pre-EGTRRA 5305-SEP. Now if it was the other way around, you could/probably should select an amendment and restatement of a prior plan on the Schwab prototype SEP IRA adoption agreement.

Fidelity's Self-Employed 401(k) Adoption Agreement, specifically allows for this. Under 2. Employer, B. The term “Employer” includes the following Affiliated Employers covered by the Plan: Why not follow Mike and Lou's suggestion and amend the plan with the new affiliated employer.

The compensation was increased to support the deposit. So I guess there is nothing to worry about.

An HRA can reimburse qualified medical expenses as defined in Publication 502. There is no restriction defined for foreign insurance premiums or medical expenses, except for specific minor restriction on prescription medications. You can include the cost of a prescribed drug you purchase and consume in another country if the drug is legal in both the other country and the United States. Under what basis do you think foreign government insurance premiums should be specifically disallowed, when Medicare premiums are specifically allowed.

Additional information relevant to your solution. The plan sponsor/participant of the one-participant 401k plan is also a participant in their primary W-2 employment 401k plan. The reason for the employer contribution to the one participant 401k was the intention, now reached of maximizing the employee deferral limit in their primary W-2 employment 401k plan. Therefore, the employer contribution was the only option in the one-participant plan. I'm questioning the advice of the CPA to maximize the employer contribution before there was any compensation paid. It appears that the CPA has a solution (how valid I don't know) to the accounting and tax issues of the S-Corporations losses. The employer contribution was paid from personal funds. What I am trying to determine is a problem/non-problem determination of the full year's maximum employer contribution before any paid compensation. If there is a problem, what would the corrective action be. Is there any guidance on any similar fact pattern.

All of the $40K in W-2 wages have already been paid at this point without any employee deferrals.

Another wonderful one-participant 401k situation, only this time aided and abetted by a CPA. An S-Corp individual's CPA advised them to make a $10K employer contribution in January (like an IRA). This was on anticipated net business income (excluding wages and payroll taxes) of $40K. I don't know where the CPA expected the $10K for the employer contribution to come from. When it became apparent that there would only be $30K in net business income, the CPA advised the individual to pay himself another $10K in wages. I have a hunch that there was no actual payroll just the filing of the appropriate Form 940/941 and their payments. I believe if the individual properly loaned the $20K to the S-Corp. This would provide the $20K in basis to actually deduct the loss on the individuals Form 1040. Although, I have a hunch based on the overall fact pattern that similar to payroll situation, the $10K in employer contributions were not routed through the S-Corp's accounts and came from personal funds. So back to the original question, would it be proper to make the entire year's employer contributions, before any compensation that contribution was based on, had been received. What corrective action would/could be taken at this point in time. What would be the consequences, except for a well deserved smack upside the head of the CPA.

First, as implied by Stephen but not explicitly stated. IRA custodians are required to ensure IRA contributions do not exceed the limit. Second, the $27K from the original withdrawal must be rolled over within 60 days of that withdrawal and the second withdrawal is a distribution that can not be rolled over. I don't know what you are trying to do, but bear in mind, the reason we are stuck with the one rollover per 12 month period is because some stupid lawyer ruined it for the rest of us. Him and his wife had multiple IRAs and they were rolling over from one account to another to facilitate essentially an extended loan. Then when he made the last deposit after 61 days, he compounded his problem and all the rest of us. He tried to fight the IRS., resulting in the exposure of the entire scheme.