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Startup Auto Enroll Tax Credit - Owner and Spouse Only Plan

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Would they be able to receive $500 tax credit for adding auto enroll in Plan? It is only Owner and spouse in Plan. I know this isn't the spirit of the tax credit but if it is in Plan Document would it be able to be used? If anyone would be hired they'd be auto enrolled.

I'm of the understanding that they wouldn't qualify for any of the other tax credits since there are no HCEs.

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The small employer startup credit of IRC § 45E has a requirement that the plan cover at least one participant who is not a highly compensated employee.

However I believe the original question was about the auto-enrollment credit of IRC § 45T, which does not contain the same requirement. The requirements under 45T are that the plan be a qualified employer plan as defined in 4972(d), that the plan include an EACA as defined in 414(w)(3), and that the employer is an eligible employer as defined in 408(p)(2)(C)(i). Scanning each of those sections, I do not see anything that would restrict the ability of an employer to claim the credit merely because their plan does not cover any NHCEs.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.

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Even if the credit might be correct, some might be reluctant, for such a small amount, to invite any IRS attention.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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