Bob the Swimmer

I'm recalling that if the company pays dividends and you set up a K-SOP, the dividends are deductible under IRC 404(k). Another plus which might apply.

Great question---My own opinion having worked 8 years in the trust business at the beginning of my career is if you have a preexisting trust document, that should be sufficient, because unless there is a new trust provision that you want to/need to adopt, that law does not need to be updated.

We have an actuary that we have worked with for 30+ years, very common sense approach and reasonable fee schedule. I have used him for my own DB which was a wonderful strategy in retrospect. If you send me your email to rjones5335@aol.com, I am happy to send you his contact info.

I agree with Luke --any plan with a self-employed individual as the owner would have the title of HR-10 Plan--back in the day, HR 10 was the title for the Congressional legislation setting up plans for self-employed individuals and I recall that Congressman Keogh was the sponsor.

Nice hypothetical Sammie--my name is Bob Jones Agree that it is not CG

Having been in this situation many times I believe that none of the IRA should be deductible.

I am a comp consultant for more than 44+ years (I started when I was 12)---why a signing bonus (since they already know well his skills) ? We've only done one year arrangements which meet the short-term rules ----not sure about 457. But from a governance standpoint, 2 years seems like a long time frame in my experience.

Agree with Rather be Golfing and ESOP Guy-- incomplete returns are forever open to review in risk terms. The only ray of sunshine I can see is if the last short year is < 6 months, you could do the two audits in one visit rule , but that is a small plus in an otherwise difficult situation.

MIKE--I responded the way I did because of his sentence below which seemed to be a discovery to him (unless I missed a nuance which is quite possible). "I have also filed 1 5500 form (the filing as an EZ was something I asked IRS 15+ years ago and was told that it was ok to do EZ filing since both entities are spouses)."

I would think that the tax return for 2018 which took the larger (unavailable) deduction would need to be amended also.

Jakyasar, as long as there is one plan for 2 spouses, you only need 1 Form 5500.

Relius (formerly Corbel) has a very good Manual of issues (not a checklist) if you utilize their plan document for any 457 plans.

Be careful---we had a couple of large plans near our southern border (Texas) where SSNs were sold to immigrants who tried to use them to participate in qualified plans. Was an oddity but you never know.

I agree completely with Bill in keeping the solely for the benefit of the participants as the main foundation and would just add that if the KSOP company pays dividends, the dividends can be deductible as one of the few places in the IRC (404(k))where this can happen.

Never hurts to prepare a reasonable cause argument which worked under the right circumstances. See below Penalty Relief Due to Reasonable Cause Individuals Businesses and Self-Employed Small Business and Self-Employed Employer ID Numbers Business Taxes Reporting Information Returns Self-Employed Starting a Business Operating a Business Closing a Business Industries/Professions Small Business Events Online Learning Large Business Corporations Partnerships Charities and Nonprofits International Taxpayers Government Entities First, check to see if the information in your notice is correct. If you can resolve an issue in your notice, there may be no penalty. Reasonable Cause is based on all the facts and circumstances in your situation. We will consider any reason which establishes that you used all ordinary business care and prudence to meet your Federal tax obligations but were nevertheless unable to do so. Typical Situations The IRS will consider any sound reason for failing to file a tax return, make a deposit, or pay tax when due. Sound reasons, if established, include: Fire, casualty, natural disaster or other disturbances Inability to obtain records Death, serious illness, incapacitation or unavoidable absence of the taxpayer or a member of the taxpayer’s immediate family Other reason which establishes that you used all ordinary business care and prudence to meet your Federal tax obligations but were nevertheless unable to do so Note: A lack of funds, in and of itself, is not reasonable cause for failure to file or pay on time. However, the reasons for the lack of funds may meet reasonable cause criteria for the failure-to-pay penalty. Facts Establishing Reasonable Cause Facts we need in order to determine Reasonable Cause: What happened and when did it happen? What facts and circumstances prevented you from filing your return or paying your tax during the period of time you did not file and/or pay your taxes timely? How did the facts and circumstances affect your ability to file and/or pay your taxes or perform your other day-to-day responsibilities? Once the facts and circumstances changed, what actions did you take to file and/or pay your taxes? In the case of a Corporation, Estate or Trust, did the affected person or a member of that individual’s immediate family have sole authority to execute the return or make the deposit or payment? Documents You May Need Most reasonable cause explanations require that you provide documentation to support your claim, such as: Hospital or court records or a letter from a physician to establish illness or incapacitation, with specific start and end dates Documentation of natural disasters or other events that prevented compliance Call the Toll-free Number on Your Notice Is the information on your notice correct? If there is an issue you can resolve with your notice, a penalty might not be applicable. Call the toll-free number on your notice either to resolve the issue with your notice or to request penalty relief due to reasonable cause, if you feel you qualify and have the necessary supporting documentation. We may ask you to mail or fax your written statements to us. Is Interest Relief Available? Interest cannot be abated for reasonable cause. Interest charged on a penalty will be reduced or removed when that penalty is reduced or removed. If an unpaid balance remains on your account, interest will continue to accrue until the ac

I agree completely with Larry's great advice--would only add that your employer/HR department will have some written materials on these funds that you should review carefully and save for future reference.

SHUO--- I agree with you that for some people, inertia takes over and they just forget to move their funds, except in this economy maybe less so. I have seen a couple of pros and cons of keeping your retirement benefit with your former employer on web sites from some of the large mutual fund houses in my memory (they helped me to make my decision for two fairly large rollovers). One of the big issues I found is that an IRA provider might not conceivably provide fund fees as low as a large employer--this was more true 20 years ago than now- most mutual fund fees especially indexed funds are now historically low for both IRA providers and plan sponsors. One academic issue I also remember is that IRA assets might be lost in a bankruptcy of the provider whereas qualified plan assets can not be, but that is more an academic argument today---ie, if a Vanguard or Fidelity go under, we're all in trouble. One other wrinkle: I believe that advising a participant as to what to do with their funds (stay or rollover) may now potentially trip the new fiduciary rules, so it's an area to be careful about. Hope that helps.

We have not encountered this firm before. However, years ago in the early 90's there were 2 companies mainly that offered this type of insurance for the entire plan--AIG and Lloyds of London. The cost was very high to get a binder on insurance alone--my recollection is $15,000 just for the binder then- and I don't recall what the premium was. But a client bought the policy and then it ended up paying when the company in a very public proceeding went south. That's the only client we've ever had buy the insurance probably because it requires a number of high-paid executives to make it worthwhile, plus the levels of risk that go with it. I would say (my own opinion) that they tout Corey Rosen for his expertise on ESOPs (and he is and has been definitely a leader in that area)--but I have always thought that you really had to be quite large to offer this type of insurance coverage --or to use a large insurance company as your sub-contractor.

Don't believe they would, but few clients want to run that risk, which is still fairly remote.

Agree with most of what's been written so far. This is an essay question and one of our actuaries would need to discuss goals and objectives with the client to determine the best answer. There are a number of limitations that apply here on the amount that should be discussed as well.

Our practice for 30+ years has been to file the last 7-8 years. We have never had a client questioned for doing that. On the other hand, the omission is open literally forever and there is no statute of limitations so there is some caveat emptor.

Read today in WSJ that some significant IRS staff are being called back to DC. Article said the mail had been building up, but did not say when it would be opened/received.

If it is not filing 5500s---initially filed an exemption certificate and therefore is exempt from such filings, there would be no need to tell IRS of a change or plan termination in any event.

Larry is absolutely right--in my opinion, DOL professionals understand that the regular audit is expensive for many small- to medium-sized businesses and would never impose such a requirement although their data show that firms that don't do very many audits tend to not do a very professional job at this.

I have not filed for an org to get tax-exempt status in several years, but my recollection is that the instructions to the 1023 are the Bible. This question sounds like the juxtaposition of a union situation with a tax -exempt org and could be problematic. I would follow the 1023 instructions to the letter, and I am also thinking that there should be one or more publications on NFPs out there that would clarify this more fully.