Form 5330 Excise Tax for corrective distributions

[401_noob]

Good morning,

I was wondering what other practitioners are doing regarding the calculation of the excise tax for failing to correct ADP/ACP failure prior to the 2 1/2 month deadline.

The EOB says that the 10% tax is calculated on the excess deferral or excess aggregate contributions prior to the G/L adjustment, but the 5500 Preparer's Manual says that the tax is calculated after the earnings adjustment.

So are your calculating the tax before or after the G/L adjustment?

Thanks in advance! 

[ETA Consulting LLC]

I've always done it on the excess contributions (not the gains & losses).  This was always a question the popped up on all the ASPPA Exams as well; and the answer has always been on the contributions alone.  I don't recall it ever changing.  Plus, I've never seen anything about an adjustment for gains & losses in Section 4979 of the Code.  Typically, if there was such an adjustment, it would state it there.  In addition to that, I don't see any instruction on the Form 5330 (that is actually used to pay the excise tax) that would require you calculate the amount on anything other than the 'contributions'.

Good Luck!

[RatherBeGolfing]

14 minutes ago, ETA Consulting LLC said:

I've always done it on the excess contributions (not the gains & losses).  This was always a question the popped up on all the ASPPA Exams as well; and the answer has always been on the contributions alone.  I don't recall it ever changing.  Plus, I've never seen anything about an adjustment for gains & losses in Section 4979 of the Code.  Typically, if there was such an adjustment, it would state it there.  In addition to that, I don't see any instruction on the Form 5330 (that is actually used to pay the excise tax) that would require you calculate the amount on anything other than the 'contributions'.

Good Luck!

It hasn't changed, still tested as excluding earnings.

1 hour ago, 401_noob said:

Good morning,

I was wondering what other practitioners are doing regarding the calculation of the excise tax for failing to correct ADP/ACP failure prior to the 2 1/2 month deadline.

The EOB says that the 10% tax is calculated on the excess deferral or excess aggregate contributions prior to the G/L adjustment, but the 5500 Preparer's Manual says that the tax is calculated after the earnings adjustment.

So are your calculating the tax before or after the G/L adjustment?

Thanks in advance! 

Do the calculation contributions alone.  

[401_noob]

Thank you both for your input and for the tip about the ASPPA exam. That will be one question that I will not get wrong!!

[RatherBeGolfing]

10 minutes ago, 401_noob said:

Thank you both for your input and for the tip about the ASPPA exam. That will be one question that I will not get wrong!!

I can't promise it will be on a test, but it is in the study guides