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This is the reason you charge exorbitant fees to this client. You helping him fix the mess he made without consulting you first, makes your knowledge and experience worth at least double. Hold you head high, smile and write the bill!!!

I have several clients with in-home nannies (and yes, despite no specific provisions, one CAN do nanny payroll in Medlin even with employer paying all employment taxes). I email the pdf of the "paycheck" and they print out and give to the nanny with a handwritten net check. Yes, the check numbers are not the same. Whop-de-do.

Yes; double whammy. I've run into this with two sets of clients: ( a ) high-earners who switch jobs mid-year-ish -- in general, they've come close to max on the 401k _before_ the switch, and so the new company set-aside puts them over the limit (as no one in HR ever thinks to ask/warn), and ( b ) those who contribute to 401k's at the office but have a small company on the side - and try to set aside even more for their retirement (no issue there!) and the nice folks at the bank where they have the business checking account tout their "safe harbor 401k" for small businesses - again, without asking any questions. Neither of those clients ever call me _first_ so I just get to tell them the bad news and walk them through undoing as much of the damage as possible. Sigh.

Thank you, Catherine, for taking some of the bruises on this! Hadn't had this come up before, and the penalties are big so wanted to do lots of reading before I talk to the client. He will get a double whammy by being taxed again when he takes it out in retirement, right?

Yes, he can take the excess (including growth!) for 2014 out any time between now and 4/15/15. Yes, there _will_ be a 2013 penalty as he didn't get the funds out before 4/15/14. I've had to explain this to a couple of clients over the years, some of whom made the 4/15 withdrawal deadline and some of whom did not. So I got to bang my head against the legalese until it made sense (ouch! - still smarts, lol). Glad I could save you a tiny bit of that effort!

Sent to my daughter, who has two piggies and will get a total kick out of this. Thank you!

He can leave the excess in the accounts and NOT put in any more until he reaches the point where he won't be over-contributing for 2014 (2015, whatever - you said "far exceeded" but no numbers). Penalty on 2013 only IF he's under the contribution limit for 2014. Penalty for 2014 too (but on less overcontribution) if he's over the limit for 2014 and it spills into 2015. Make any more sense now?

There would be no gift tax on the $50 between the selling price and the assessed value. Is the Government buying the property?

NT From my Son the Used Car Dealer: The IRS suspected a used car dealer wasn't paying proper wages to his mechanic and sent an agent to investigate him. IRS Auditor: "I need a list of your employees and how much you pay them". Used Car Dealer: "Well, there's Clarence, my mechanic, he's been with me for 3 years. I pay him $1,000 a week plus free room and board. Then there's the mentally challenged guy. He works about 18 hours every day and does about 90% of the work around here. He makes about $20 per week, pays his own room and board, and I buy him a bottle of Bacardi rum and a dozen BudLights every Saturday night so he can cope with life. He also gets to sleep with my girlfriend occasionally". IRS Auditor: "That's the guy I want to talk to - the mentally challenged one". Used Car Dealer: "That would be me. What would you like to know"? ____________________________________________________________