SIMPLE IRA and 401(k) in a Controlled Group

[CTipper]

You know and I now that you can't have a SIMPLE and a 401k plan at the same time. The IRS' web site even has a nifty little FAQ that helps make that clear to non-pension professionals.

The client has a controlled group. Yes, we've asked them every year about family members owning other businesses. Yes, every year they've told us "no." Turns out they've got a controlled group.

The company I knew about is my client. They sponsor a 401k plan. The company I didn't know about has a SIMPLE.

Only 1 NHCE contributed to the SIMPLE this calendar year. Do you just disallow the deduction to the SIMPLE and go forward?

I've looked, but I can't seem to find anything that gives me a hint as to how to fix this thing.

Thanks

Christopher