Corrective ADP distributions

[Guest Joyce Perez]

Is it true that for the 2008 ADP/ACP excess distributions made during the first 2 1/2 months are taxable in 2009?

If distributed after March 15th, does the 10% excise tax apply?

[Tom Poje]

yes, this was one of the gifts of PPA. makes life a lot easier. in addition, no GAP earnings.

[Guest Joyce Perez]

yes, this was one of the gifts of PPA. makes life a lot easier. in addition, no GAP earnings.

Thanks. What about the 10% excise tax for post March 15th distributions?

[rcline46]

The excise tax still stays, unless you have an EACA, in which case it applies after 6/30.

[BG5150]

FWIW, this year it's either March 13 or March 16 depending on how conservative or agressive you are with your procedures when the 15th falls on the weekend...

[John Feldt ERPA CPC QPA]

What about an excess deferral and the April 15 deadline. Taxed in which year and what about the gap period earnings?

[Tom Poje]

excess deferrals are always taxed in the year they were made. the govt adds up all your W-2s so they know about them wether you claim them or not. whether you notice if you had tehm or not.

if you don't take a distribution by April 15th, you still get taxed. however, now they are stuck in your account and you will be taxed a second time when someday down the road you take a distribution.

WRERA eliminated GAP period income. probably in a year or two you will be able to adopt the emendment that retroactively puts this into effect.

[John Feldt ERPA CPC QPA]

Yep - thanks for confirming. The 401(k) answer book has it wrong in question 18:54 (I have an on-line version).

edited to add: However, question 9:18 has it right.

[zimbo]

Does anyone think we still have the OPTION of including Gap Period earnings in our refunds? With the losses in most accounts in 2008 reducing the amount of the refunds, applying Gap Period losses would further reduce the taxable refund amounts.

[Earl]

OK, real scenario:

Partner has K-1 with $0 earnings from self employment in line 14. He deposited $15,500 in 2008. (all checks dated 2008)

So I have a 415 refund that I will process on Monday.

It seems the refund amount is taxable in 2009. But with no earned income it would not be deductible in 2008.

So is this double taxed? (Seems unlikely) Is it not taxable in 2009? (Also seems unlikely)

(I double checked with the CPA, line 1 = $150,000; Line 14 = $0. Which I don't understand but that is not really my job.)

Any thoughts on this?

Thanks