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Re: SEP instead of IRA?

You're welcome. You need the cite, in this case notice 87-16, for discussion with people such as Boglerocks's tax guy, certain financial planners, irs, and others. Once you tell the tax guy, with or without cpa designation, that it's notice 87-16, the ball's in his court to give you a countering cit...
by mah001
Tue Apr 15, 2014 8:07 pm
 
Forum: Personal Finance (Not Investing)
Topic: SEP instead of IRA?
Replies: 28
Views: 935

Re: SEP instead of IRA?

dsi and boglerock's tax guy: for the third time, see notice 87-16, items dealing with 'active participant status' in a d.c. plan; if memory serves there's a bit in the preamble and then several q and a's beginning around a-21 or 22. at least in the past, irs would see the double deduction (sep and t...
by mah001
Tue Apr 15, 2014 5:27 pm
 
Forum: Personal Finance (Not Investing)
Topic: SEP instead of IRA?
Replies: 28
Views: 935

Re: SEP instead of IRA?

A SEP that's begun today and deducted for 2013 means you and wife are 'covered by a retirement plan at work' for 2014. So your traditional IRA deduction possibilities for 2014 are potentially more limited. But a new SEP does not affect your 2013 TIRA deduction.
by mah001
Tue Apr 15, 2014 3:39 pm
 
Forum: Personal Finance (Not Investing)
Topic: SEP instead of IRA?
Replies: 28
Views: 935

Re: IRA Contributions AFTER 70 1/2 years of age??

TIRA's authority for deduction is section 219, which states you're done contributing in the year you reach 70 1/2. But SEP and SIMPLE's deduction is under section 404, which doesn't say anything about having to exclude old people. In fact, SEP and SIMPLE must cover everyone eligible, unless the empl...
by mah001
Tue Apr 15, 2014 3:30 pm
 
Forum: Investing - Help with Personal Investments
Topic: IRA Contributions AFTER 70 1/2 years of age??
Replies: 12
Views: 733

Re: SEP instead of IRA?

You're not obligated to contribute to SEP in the future. Though you can use the account as a TIRA going forward. It's not clear why tax guy would say only one of you or your wife gets a tira deduction? Maybe because it's not worth it once you're in the 15 percent bracket? Or maybe tax guy believes o...
by mah001
Tue Apr 15, 2014 10:18 am
 
Forum: Personal Finance (Not Investing)
Topic: SEP instead of IRA?
Replies: 28
Views: 935

Re: Confusing self-employed tax question

I'm not readily seeing any problem, based on facts as given. Line 15a = amount distributed. Line 15b is the one where it's more crucial to get it right.....amount of distribution that's taxable. You didn't give us the line 15b info but it sounds like it should be: 2010= $0 2011= $21,500 2012=$21,500...
by mah001
Mon Apr 14, 2014 8:20 pm
 
Forum: Personal Finance (Not Investing)
Topic: Confusing self-employed tax question
Replies: 8
Views: 611

Re: Overcontribution to 401k, how to reflect that on my taxe

Sounds like you did it wrong. Self employed person's SEP goes on 1040 as an income adjustment. Only employees' contribution goes on sch. c. IRS might pick up on the mistake if the contribution is more than 25 percent of w-2 total wages(if any at all). And you should not go ahead with showing a deduc...
by mah001
Mon Apr 14, 2014 5:36 pm
 
Forum: Personal Finance (Not Investing)
Topic: Overcontribution to 401k, how to reflect that on my taxes
Replies: 14
Views: 571

Re: SEP instead of IRA?

As the Vanguard link states, you may choose to require that employees have worked for you in three of the 5 prior years (2008 thru 2012) for calendar year 2013 plan eligibility. Apparently not at Vanguard, you can choose to 'integrate' (aka permitted disparity) the plan contribution formula with Soc...
by mah001
Sun Apr 13, 2014 7:19 pm
 
Forum: Personal Finance (Not Investing)
Topic: SEP instead of IRA?
Replies: 28
Views: 935

Re: Can you Max out 2 457b plans during the same year?

Agree that the written plan should be consulted. Most of the above concerns are addressed by I.R. regulation section 1.457-4..........one person gets one deferral limit, the plan can allow deferral of sick/vacation pay, the last 3 years catchup is based on plan's stated age of retirement, not OP's a...
by mah001
Fri Apr 11, 2014 10:46 am
 
Forum: Personal Finance (Not Investing)
Topic: Can you Max out 2 457b plans during the same year?
Replies: 12
Views: 735

Re: Solo 401k Contribution Limit Confusion

The pub 560 is correct with $17,500 of employee deferrals and 1250 of employer ctbn. The wrinkle is the section 415(c) limit, which is the smaller of 100percent of compensation or $51,000. Pay, for purposes of a self employed person's 415 limit, is reduced by the amount of the employer ctbn itself. ...
by mah001
Wed Apr 09, 2014 5:09 pm
 
Forum: Investing - Theory, News & General
Topic: Solo 401k Contribution Limit Confusion
Replies: 4
Views: 330

Re: Tax Question: Overcontribution to SEP

The $3,000 as it stands is exempt from 4972 tax for 2013 as of employer's tax year end 12/31/13. But I can't find anything that gets out of the tax for the contributions still in the plan at that point. There are less likely exceptions for tax exempt employers and for a presumably rare reversion in ...
by mah001
Tue Apr 08, 2014 11:55 am
 
Forum: Personal Finance (Not Investing)
Topic: Tax Question: Overcontribution to SEP
Replies: 9
Views: 393

Re: Tax Question: Overcontribution to SEP

Note the 10 percent excise tax under section 4972 still applies to both OP and Buysider. Congress wanted to discourage prefunding. The tax applies to 'contributions in the plan at the end of the employer's tax year.' Do not call the overage an excess contribution, unless you want to be confused by t...
by mah001
Tue Apr 08, 2014 10:36 am
 
Forum: Personal Finance (Not Investing)
Topic: Tax Question: Overcontribution to SEP
Replies: 9
Views: 393

Re: Tax Question: Overcontribution to SEP

IRA ctbn does not go on sch. c, unless the self employed person has employees for whom she's contributing. It goes on the first page of the 1040 as an adjustment to income.
by mah001
Sun Apr 06, 2014 2:41 pm
 
Forum: Personal Finance (Not Investing)
Topic: Tax Question: Overcontribution to SEP
Replies: 9
Views: 393

Re: Can a company offer 401k and Profit Sharing Plan

It's easier to think of 401(k) as an optional feature contained within a qualified profit-sharing plan. See the first few sentences Of IRC subsection 401(k). So there's no need for merging. The employer could amend/restate its current PSP to add a 'qualified cash or deferred arrangement' aka 401k ak...
by mah001
Wed Apr 02, 2014 9:05 pm
 
Forum: Investing - Theory, News & General
Topic: Can a company offer 401k and Profit Sharing Plan
Replies: 8
Views: 611

Re: 475 plan plus 401k

Can do on both counts, double ctbn and rollover-- Re the rollover-- Assume: Current employer is also a govt or govt 'instrumentality' and the current plan is therefore an eligible governmental 457(b); (each element is necessary; i.e. 457(b), eligible, govt) The receiving TSP has opted to receive 457...
by mah001
Mon Mar 31, 2014 7:37 pm
 
Forum: Investing - Help with Personal Investments
Topic: 457 plan plus 401k [Can I max out these plans?]
Replies: 10
Views: 661

Re: New partner eligible for solo 401K?

Distinguish the legal structure of the plan vs. its investment holding vehicle. The vehicle for a SEP plan is a custodial or trust IRA account. The Ira account is identical to an individual Ira account, once the contribution's been made. But while a partner might well get by with opening a sep ira a...
by mah001
Mon Mar 31, 2014 2:52 pm
 
Forum: Personal Finance (Not Investing)
Topic: New partner eligible for solo 401K?
Replies: 14
Views: 763

Re: New partner eligible for solo 401K?

IRC section 408(k)(2) requires SEP ctbns be made by employer. 404(h) and 402(h) also mention employer contributions. I wonder which law book the practice accountant is reading; where does it mention the employee making contributions?
by mah001
Thu Mar 27, 2014 10:57 pm
 
Forum: Personal Finance (Not Investing)
Topic: New partner eligible for solo 401K?
Replies: 14
Views: 763

Re: New partner eligible for solo 401K?

DW can't use a 401 plan or a 408 SEP Ira. Both types of plan must be sponsored by the employer ( the partnership) and contributions must be made by the employer. IT's unusual the new partner is shut out of the plan. I guess the partnership agreement provided a good trade off for giving up eligibilit...
by mah001
Thu Mar 27, 2014 7:05 pm
 
Forum: Personal Finance (Not Investing)
Topic: New partner eligible for solo 401K?
Replies: 14
Views: 763

Re: 457(b) vs 403(b) vs Roth IRA Question

Everyone's made good suggestions. I think you should obtain a copy of both the 403(b) & the 457(b) plans and look them over. Note that 457(b) plan will usually offer a special "catchup" ctbn rate of double the usual, if employee is in last 3 years prior to plan's stated retirement age....
by mah001
Wed Mar 26, 2014 11:24 am
 
Forum: Investing - Help with Personal Investments
Topic: 457(b) vs 403(b) vs Roth IRA Question
Replies: 6
Views: 392

Re: Help with 401k

Might it be a governmental agency or instrumentality with a 'pickup plan' under section 414(h)? I've not heard of one doing such a high percentage of pay. Recent rule changes mean the 80 percent of pay is subject to fica because employee has no option to opt out. the 20 percent isn't subject to fica...
by mah001
Mon Mar 24, 2014 10:00 pm
 
Forum: Investing - Help with Personal Investments
Topic: Help with 401k
Replies: 19
Views: 1039

Re: [Excess *Employer* Contribution - Solo 401(k)]

You're welcome. I guess the accountant was able to ignore, Rev proc 2013-12, sec 8, self correction, sec 9-self correction of significant defects, sec. 6.06(2)- correcting excess 415 by distribution, 6.09(3) on who can request 4972 relief, r.p. 2013-12 appendix A .04 on 415 problem, .08 on distribut...
by mah001
Sun Mar 23, 2014 10:47 am
 
Forum: Personal Finance (Not Investing)
Topic: [Excess *Employer* Contribution - Solo 401(k)]
Replies: 19
Views: 1024

Re: [Excess *Employer* Contribution - Solo 401(k)]

Now that you've pointed me to Pub 560, page 22, it does properly calculate your maximum annual additions but not the best mix of employer vs. employee contributions for a given situation. Just like for a w-2 employee, employee deferrals don't count against the 404 employer deduction limit. Employer ...
by mah001
Sat Mar 22, 2014 11:13 am
 
Forum: Personal Finance (Not Investing)
Topic: [Excess *Employer* Contribution - Solo 401(k)]
Replies: 19
Views: 1024

Re: [Excess *Employer* Contribution - Solo 401(k)]

Haven't yet found your sep worksheet but if it's for a SEP ira the numbers will be a bit different. Based on $19,514 of net income, half of se tax is 19,514 x .9235 x .0765 equals $1,379. 19514-1379 is 18135. This is annual additions limit, so remove $3,365 of elective deferral. 18,135 x .2 is secti...
by mah001
Fri Mar 21, 2014 8:51 am
 
Forum: Personal Finance (Not Investing)
Topic: [Excess *Employer* Contribution - Solo 401(k)]
Replies: 19
Views: 1024

Re: [Excess *Employer* Contribution - Solo 401(k)]

Based on the limited facts we have for OP's question plus an assumption or two, 415 is the problem that needs our attention. Vanguard appears to offer a quick fix, tho they're a bit skimpy on dealing with the 'employer' excess. $17,818 'compensation' for self employed under 401(c) 17,500. employee e...
by mah001
Thu Mar 20, 2014 12:42 pm
 
Forum: Personal Finance (Not Investing)
Topic: [Excess *Employer* Contribution - Solo 401(k)]
Replies: 19
Views: 1024

Re: [Excess *Employer* Contribution - Solo 401(k)]

Am assuming self employment net income less half se tax is equal to $17,818. Elective deferrals were $17,500 and employer profit sharing is $4,000. Annual additions total $21,500, which is more than 100 percent of pay and therefore a violation of 415(c). 415(a)(1)(B) and 401(a)(16) each provide this...
by mah001
Thu Mar 20, 2014 10:40 am
 
Forum: Personal Finance (Not Investing)
Topic: [Excess *Employer* Contribution - Solo 401(k)]
Replies: 19
Views: 1024

Re: [Excess *Employer* Contribution - Solo 401(k)]

Couldn't find any sch c, step 22 that made sense so am assuming $17,818 is se net income less half the se tax. In that case your first link is relevant. The plan's qualified status is compromised because wife has an excess annual addition. So maybe you'll be removing $3,682 of employee deferral. Mak...
by mah001
Wed Mar 19, 2014 9:40 pm
 
Forum: Personal Finance (Not Investing)
Topic: [Excess *Employer* Contribution - Solo 401(k)]
Replies: 19
Views: 1024

Re: [Excess *Employer* Contribution - Solo 401(k)]

OP, your link is applicable to mistakes that can cause plan disqualification. Your situation appears to be different. An excess of the section 404 deduction limit does not disqualify the plan but often results in excise tax liability under section 4972 and the need to complete the appropriate sectio...
by mah001
Wed Mar 19, 2014 4:32 pm
 
Forum: Personal Finance (Not Investing)
Topic: [Excess *Employer* Contribution - Solo 401(k)]
Replies: 19
Views: 1024

Re: i401K Excess *Employer* Contribution

If any of the employer contribution was actually contributed in 2014, you can redesignate it as a 2014 contribution.
by mah001
Tue Mar 18, 2014 8:42 pm
 
Forum: Personal Finance (Not Investing)
Topic: i401K Excess *Employer* Contribution
Replies: 8
Views: 593

Re: i401K Excess *Employer* Contribution

Try researching 'nondeductible employer contribution under section 404. see the appropriate part of form 5330 for instructions for payment of the excise tax. in general, the nondeductible contribution can be removed only under limited circumstances and even then must be done by the end of the plan y...
by mah001
Tue Mar 18, 2014 6:36 pm
 
Forum: Personal Finance (Not Investing)
Topic: i401K Excess *Employer* Contribution
Replies: 8
Views: 593

Re: I received a Schedule K-1 for a security held in a Solo-

Investing in futures might generate UBIT via UDFI in an IRA, but not a 401(k). Check box 20 of the K-1.
by mah001
Tue Mar 18, 2014 10:16 am
 
Forum: Investing - Help with Personal Investments
Topic: I received a Schedule K-1 for a security held in a Solo-401k
Replies: 5
Views: 461

Re: I received a Schedule K-1 for a security held in a Solo-

If a 401(k) has unrelated business income that exceeds $1,000 for the plan year, you need to file a 990-T using the trust i.d. number and pay tax.
by mah001
Mon Mar 17, 2014 10:07 pm
 
Forum: Investing - Help with Personal Investments
Topic: I received a Schedule K-1 for a security held in a Solo-401k
Replies: 5
Views: 461

Re: Help me resolve this Discussion. No 401k contribution.

The crucial part is whether OP &/or spouse is an "active participant" for 2013. It's not super straightforward. It uses the plan year ending with or within OP's tax year (12/31/13). OP and spouse are not active participants if plan year also ends 12/31 and employer has not allocated an...
by mah001
Sun Mar 16, 2014 9:49 pm
 
Forum: Personal Finance (Not Investing)
Topic: Help me resolve this Discussion. No 401k contribution.
Replies: 5
Views: 509

Re: 401k and HCE Status

Sorry about that. Maybe the taxability issue is something that changed after 2008. See I.R. Reg 1.401(k)-2. I guess one must research everything about pensions before speaking. I do still stick with my response to OP Question no, 1.
by mah001
Tue Mar 11, 2014 7:39 pm
 
Forum: Investing - Theory, News & General
Topic: 401k and HCE Status
Replies: 7
Views: 319

Re: 401k and HCE Status

2--Sounds like the $3,000 is taxable in 2013. Earnings, if any, are taxable in 2014 and subject to 10 percent early distrib penalty unless there's an exception. 1099 for the 3000 will contain a code indicating 'taxable in 2013.'. Separate 1099 issued for the earnings. This assumes the 'plan year' en...
by mah001
Tue Mar 11, 2014 6:52 pm
 
Forum: Investing - Theory, News & General
Topic: 401k and HCE Status
Replies: 7
Views: 319

Re: Independent contract Income: SEP IRA? Individual 401k?

As far as switching back and forth between 401(k) and SEP, if either plan document (see Form 5305-SEP for example) indicates it's not ok, then technically it's not. It's not like the standard for a SIMPLE Ira, whose exclusive plan rule requires merely that only one plan be actively maintained ( i.e....
by mah001
Sat Mar 08, 2014 11:20 am
 
Forum: Investing - Help with Personal Investments
Topic: Independent contract Income: SEP IRA? Individual 401k?
Replies: 14
Views: 863

Re: Defined Contribution Plan vs Pension Plan

The vocabulary of retirement plans is full of terms having multiple meanings. 'Pension' is a prime example. The Labor Department's involvement with retirement plans is largely based on 1974 ERISA legislation. Under ERISA there are only 2 types of employee benefits. These are welfare benefits and pen...
by mah001
Fri Mar 07, 2014 10:11 pm
 
Forum: Investing - Theory, News & General
Topic: Defined Contribution Plan vs Pension Plan
Replies: 5
Views: 463

Re: Question about 403(b) early retirement distribution

The exception to the 'additional 10 percent income tax' does not apply if you leave service prior to age 50, even if you wait until age 55 to take a distribution. in other words, the penalty does apply in that case.
by mah001
Fri Mar 07, 2014 8:11 pm
 
Forum: Investing - Help with Personal Investments
Topic: Question about 403(b) early retirement distribution
Replies: 7
Views: 375

Re: 457b question

The employer can be an 'instrumentality' of the government. See I.R. Regulation sections 1.457-2(f) and 1.457-2(l).
by mah001
Fri Mar 07, 2014 6:15 pm
 
Forum: Investing - Help with Personal Investments
Topic: 457b question
Replies: 7
Views: 466

Re: Edward Jones predicament

Currently all funds are in a SEP-Ira account. Once the employer has put the funds in, the employee has complete control of when to move the funds out, just like for any traditional Ira.
by mah001
Mon Feb 24, 2014 7:02 pm
 
Forum: Investing - Help with Personal Investments
Topic: Edward Jones predicament
Replies: 5
Views: 1141

Re: Mandatory 20% tax withholding from 403(b)?

Withdrawals that could have been rolled but weren't ARE SUBJECT to the mandatory 20 per cent withholding. If we're now saying the funds can't be rolled, then there should not be mandatory 20 per cent. ARe the distributions a series of payments scheduled to last 10 or more years? If yes, they can't b...
by mah001
Wed Feb 19, 2014 8:33 pm
 
Forum: Personal Finance (Not Investing)
Topic: Mandatory 20% tax withholding from 403(b)?
Replies: 15
Views: 753

Re: How to calculate maximum solo 401(k) contribution?

OK, now I'm coming up with your answer and can't see how Turbotax obtained its number.
by mah001
Tue Feb 18, 2014 6:07 pm
 
Forum: Personal Finance (Not Investing)
Topic: How to calculate maximum solo 401(k) contribution?
Replies: 8
Views: 512

Re: How to calculate maximum solo 401(k) contribution?

I'm getting $31,131.56 as the 'zero AGI amount" using a factor of .7388;

$31,131.76 x .9235 (reduction for 1/2 SE tax) X .8 (reduction for 'employer' contribution) = $23,000.
by mah001
Tue Feb 18, 2014 3:13 pm
 
Forum: Personal Finance (Not Investing)
Topic: How to calculate maximum solo 401(k) contribution?
Replies: 8
Views: 512

Re: Two schedule Cs, net loss. FICA and solo 401k help pleas

Looks like self employment tax will be zero, so deduction limit is a straight 20 percent of net self employment income from the profitable business for the 'employer.' If employee elective deferal agreement was in effect by 12/31/13, 'employee' under age 50 can contribute per section 402(g), smaller...
by mah001
Sun Feb 16, 2014 9:06 pm
 
Forum: Personal Finance (Not Investing)
Topic: Two schedule Cs, net loss. FICA and solo 401k help please.
Replies: 14
Views: 520

Re: Two schedule Cs, net loss. FICA and solo 401k help pleas

2. My 2005 ERISA Outline Book cites IRC 401(d) and I.R. Reg. 1.401-10(b)(2) as support for the definitive example in the IRS Audit Guidelines found in Announcement 94-101; you can use the positive income only. You have to assure yourself nothing has superseded this.
by mah001
Sun Feb 16, 2014 9:01 pm
 
Forum: Personal Finance (Not Investing)
Topic: Two schedule Cs, net loss. FICA and solo 401k help please.
Replies: 14
Views: 520

Re: Eligibility Requirements for solo 401k

Regarding thepommel's question about maintaining the plan without an ongoing business activity, check the fine print of your plan. Other than that, my last take on IRS's take is they're ok with it, as long as you keep up with ongoing requirements (basically update the plan document as required from ...
by mah001
Thu Feb 13, 2014 8:42 pm
 
Forum: Investing - Help with Personal Investments
Topic: Eligibility Requirements for solo 401k
Replies: 6
Views: 501

Re: SEP-IRA maxed out- can I open 401k?

Look into nonqualified plans, which also defer income. AKA Deferred Compensation Arrangements. New regulations were issued about 10 years ago under IRC sec. 409A.
by mah001
Thu Feb 13, 2014 10:20 am
 
Forum: Personal Finance (Not Investing)
Topic: SEP-IRA maxed out- can I open 401k?
Replies: 13
Views: 757

Re: 403b to 403b transfer question

Check the 2004 or so final regulations under I.R. Reg. section 1.403(b)-1, in question and answer format. There should be some updated guidance on 90-24 transfers and distributions in general. With 403(b)s, the employer is not necessarily continuously connected with the employee's contract.
by mah001
Wed Feb 12, 2014 8:55 pm
 
Forum: Personal Finance (Not Investing)
Topic: 403b to 403b transfer question
Replies: 6
Views: 330

Re: 401k over-contribution is confusing my payroll departmen

Jmndu is correct with 2 exceptions. Most plans do not allow after tax non-Roth contributions, as these must be tested for nondiscrimination. Also, unlike the Cubs, next year is sometimes unavailable. An excess deferral must be distributed by the end of the subsequent plan year or not at all until as...
by mah001
Tue Feb 11, 2014 3:01 pm
 
Forum: Personal Finance (Not Investing)
Topic: 401k over-contribution is confusing my payroll department
Replies: 19
Views: 2076

Re: SEP, IRA planning assistance

You can withdraw your wife's IRA, and as you say "deal with the earnings." As for the SEP, employee elective deferrals aren't permitted unless the plan began before 1/1/97, which it didn't. So you're allowed only the 'employer' contribution, net income from self employment minus half the s...
by mah001
Mon Feb 10, 2014 4:28 pm
 
Forum: Investing - Help with Personal Investments
Topic: SEP, IRA planning assistance
Replies: 7
Views: 342

Re: SEP-IRA maxed out- can I open 401k?

Assumptions: The two employers are unrelated under section 414. There's no affiliated or controlled group. The current SEP is not a SARSEP. That is, the $51k is entirely from the employer, with no employee contributions. You could have your own solo-k or defined benefit plan (assuming contractor inc...
by mah001
Fri Feb 07, 2014 10:45 am
 
Forum: Personal Finance (Not Investing)
Topic: SEP-IRA maxed out- can I open 401k?
Replies: 13
Views: 757
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