Profit-Sharing contribution followed by withdrawal

[imchipbrown]

A client is past retirement age, under age 70 1/2 and still working. He's the only employee and participant in his profit-sharing plan. He's dithering about whether to make a contribution or use the money "to cut some trees".

I was thinking, why not make a contribution and get the deduction (he has the cash and a tax liability), then take an in-service distribution? The plan allows in-service after reaching retirement age.

[david rigby]

It isn't the deduction that is relevant, since $$ coming out of the plan will come back into his income. It's the permanent exemption from FICA tax.

(But hey, I'm not giving tax advice.)

[imchipbrown]

Thanks David.