Lee B

I remember when I was taking Accounting Classes in college waiting and waiting until the cost of a Texas Instrument handheld calculator finally dropped to to $125 so that I could finally afford to buy one:)

The 25% applies to Employer Matching Contributions

January is my busiest month due to 4th Quarter and Year End Payroll Reports, so I don't have any more time to spend on this area. The objective of my posts was to point out that this is an area which is more complicated than it first appears, which is why I keep referring to the client's Plan Document and to the client's Fiduciary who has expert advice available.

He has to have a formal plan even if it's just boilerplate. Why don't you do a conference call with your client and his Fiduciary.

First you need to refer to your Plan Document to see what your client's plan allows. Second the Fiduciary for your clients plan employees people who are experts in this area, who would be the most knowledgeable people to answer your questions. For example if the plan allows Employer Nonelective Contributions, the employee could contribute $ 0 and the employer could make a Nonelective Contribution of the max $61,000.

To further clarify, Employer Nonelective Contributions are voluntary, the Employer has no obligation to make these contributions. In the right circumstances with the cash available, they would be a good tax planning tool. With enough time to read, it's amazing what you can learn.

You are correct with respect to the limit on Employer Matching Contributions, however many plans also allow "Nonelective Employer Contributions" for which the 25% of compensation does not apply: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits "Overall limit on contributions Total annual contributions (annual additions) to all of your accounts in plans maintained by one employer (and any related employer) are limited. The limit applies to the total of: elective deferrals (but not catch-up contributions) employer matching contributions employer nonelective contributions allocations of forfeitures"

Again it depends on the plan document. I believe plans can be written so that the employer contribution can exceed 25 % of compensation as long as the combined employee/employer contributions doesn't exceed the designated max of $61,000 for 2022 or 100% of compensation whichever is lower.

Amusing discussion, since the IRS still hasn't implemented optical scanning and all paper filed 1099s have to be entered by an employee.

In 30 years I only have personal knowledge of the IRS visiting a client unannounced once, about ten years ago. My client kept making their federal payroll tax deposits very late. It was kind of surprising since they only had 3 or 4 part time employees. According to my client, the IRS Agent didn't actually do much except to ask some payroll related questions which as I remember they didn't answer truthfully. This was a client who I fired.

It is supposed to, however for years I just printed and mailed black & white laser printed copies with no problems. Now I efile thru a third party.

I tried to sign in the middle of January which I consider to be timely. Even the IRS uses text to send Pin numbers to you.

Why don't you look at the Plan Document or contact the Fiduciary?

Last year when I couldn't sign on, the SSA mailed me a temporary password which took over two weeks to arrive, which I didn't receive until the 31st of January. I waited until the 27th of January then mailed in all of my client's W - 2s. Why can't the SSA email you a temporary password like everyone else?

"When the Advocate’s report went to press in mid-December 2022, the IRS had reduced those backlogs to 1 million original individual returns, 1.5 million original business returns, and 1.5 million amended returns. By Dec. 23, the IRS had further reduced its unprocessed paper backlog of original individual returns to about 400,000 and original business returns to about 1 million." According to Nina Olson, the former Taxpayer Advocate, the overall situation isn't quite as positive because there are Millions more returns in Suspense waiting for a live person to resolve processing problems.

There are some variations on the standard 401 k that affects the answers. Solo 401 k, 401k safe harbor or ?

Most people who do it themselves never have Articles of Incorporation or a Buy Sell Agreement etc etc Then they don't treat their Corporation as a separate legal entity, which if they end up in a big lawsuit makes it much easier to pierce the Corporate Veil.

Why does it matter what date the SMLLC was formed?

It doesn't matter whether it's one QCD Distribution or six QCD Distribution. My 1099 R from Charles Schwab doesn't give any indication of how many or how much.

Several websites say that if you are an SMLLC you are halfway there.

Some days it sucks to be us

My reading says that since your client is already an LLC then they can file the 2553 to be an S Corporation. Tom, if they were a SP then they would have to become an LLC or incorporate first.

Ideally the fiduciary would report the total distribution in Box 1 and the taxable amount in Box 2a, net of the QCD. However there are so many potential variables which go into determining the taxable amount that fiduciaries leave Box 2a blank.

There is a Rev Proc you need to follow.

It hasn't shown up on my own 1099 or on the 1099s of several clients who also make QCDs. I make copies of the fiduciary QCD Documents including the checks, plus the charities usually indicate on their acknowledgement letter that it's a distribution from an IRA.