Erica23

S Corp. I read that if a 2% shareholder is enrolled in a 125 plan, it could cause an issue. I understand the tax issue (and the 2% shareholder was not having any insurance premiums added to box 1 wages), but am just wondering how much of a concern this is plan-wise.

I thought it was common knowledge that 2% shareholders cannot enroll in a 125 plan? I read that if a 2% shareholder is enrolled, it can cause issues for the plan. Does anyone have any practical experience how this is handled? How would this have happened?

Yes, thanks. This is a shareholder of a corporation (law firm) who receives W2 income. Thanks for the clarification.

Thanks for the quick reply. The person must misunderstand because he is saying that he is authorized by the IRS to make a contribution for 2017 now (and up until October 15, 2018). I know for an IRA contributions can be made up until April 17 and that for a SEP IRA contributions can be made up to the date of a timely extended filing, but I did not think an employee, even if a shareholder, could after 12/31 want a deferral. It seems like that would be a hassle to have to correct W2s, as well as hold off on the tax return filing.

Is this the correct way to handle this situation? Employee (officer of corporation) wants to make max 401(k) contribution, effective 12/31/2017 now & wants a corrected W2 for 2017 ASAP. Also wants CPA to not yet file the tax return & update the return so that the 401k contribution amounts will be correct. Is this a normal request for a person to on April 15 ask for a corrected W2 and for the tax return to be changed? Thanks for any thoughts.