Failed ADP/ACP Testing

[Guest DP in CA]

We failed ADP/ACP testing the the HCE's received their refunds. What is the next procesdure in terms of amending w-2's and amending DE6, 940, 941, and DE7?

Thanks in Advance!

[Beltane]

There is no amending of W-2's, the distributions are reported on a 2006 form 1099-R. See the 1099-R instructions regarding distribution codes.

[Mike Preston]

Beltane is presuming a calendar year plan. If so, I agree. If not, while W-2's are not amended, sometimes the taxation is with respect to the earlier calendar year.

[Guest Twinky]

Just to add to Mike's response, although there is no amending of W-2's etc., the participant may have to report the distribution on their individual 2005 tax filing even though the 1099 will be a 2006 1099 (issued in January 2007). The 1099 may reflect (coded) that it was for 2005 depending on the amount of the refund. I believe the deminimus amount is $100 (and someone correct me if I'm wrong). If the distribution is under $100 it will be reported for 2006 regardless whether the distribution took place before or after March 15th.

If the distribution is over $100, and you said the distributions have already been made (prior to 3/15), they will need to report the distribution on their 2005 tax return even though they won't receive the 1099 until January 2007.

I hope this helps.