Form 5500EZ line 10b

[Guest naveen]

Instrustions for line 10b form 5500EZ is as follows:

Line 10b. Enter the total cash contributions received by the plan during the plan year and the contributions owed to the plan at the end of the plan year including contributions for administrative expenses.

FACTS:

1. Owner & his wife are the only employees of the corporation

2. They both are covered by both the plans (One DB & a 401(k) - PS)sponsored by the employer

Should the amount on line 10b include salary deferrals made by the participants; especially, since deferrals were reported on their W-2?

This confusion has come up because the CPA wants to use amounts from the line 10b to compute the total deductions for contributions that can be taken by the employer. We have been trying to convince him that this will amount to taking a deduction twice on the same amount (Salary deferral portion). BUT........... we are unable to convince him. He insists that the amounts are contributions received by the plan. Therefore our dilemma.

Thank you in advance for any inputs.

Naveen

[Jim Chad]

I believe that line is not connected to deductibility at all. For example, it is legal to do this form on a strictly cash basis if the plan has no required funding. In which case some of the money received by the plan this year was deducted on the previous years' tax return.

I have been thinking about what I would do. I would send a letter to the PA saying waahat I think is deductible on 1040 or w-2 and what I think is deductible on the employer tax return. If that doesn't work a question needs to be asked...... Does the CPA want to take responsibility for the way the form 5500 is filled out? If yes, I would let him fill it out his way. The consequences on an audit won't be too serious to the employer....especially if the CPA has malpractice insurance.

Here are some ideas.....hope they help.

[Bird]

Yes, deferrals should be included. No, the CPA should not be looking at that line for deductions.