Randall

31 minutes ago, cbslee said:

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.

Thanks for your comments.  I understand the busy time.  I did find Pub 4222 which seems to support your comment about if employee elected zero contribution, then employer could still contribute $61,000.  The wording in Pub 4222 says employer decides the percentage of compensation to contribute, which could be 100%.  Client is talking to Fiduciary and will have the plan documented.  His question to me was if he has already contributed too much and if he needed to withdraw the excess.  Thanks again for your help. 

20 minutes ago, cbslee said:

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.

I'm not sure he has a formal plan.  I asked him to contact the Fiduciary.  But I still can't find the Tax references to the limits in the way you're stating.

I'm still a little confused on the difference between EmployER matching and EmployER nonelective contributions.  cbslee, are you saying if the employer plan desginates the employer will match the employee's elective deferral amount, then the employer can also contribute up to 25% of the employee's salary in addition to the matching amount?  So in my case, the employee has elected to defer $20,500 (2022 dollar limit).  If the plan allows for matching, the employer can then match the $20,500.  This would total $41,000.  Then the emloyer can make a nonelective contribution up to 25% of his salary (Salary of $62,750 at 25% or $15,687.  This would total $56,687, still within the total limit of $61,000 for 2022.  I'm still not finding a reference for this distinction in your links.

45 minutes ago, cbslee said:

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

I'll check.  But if anyone else has some thoughts on this, let me know.

1 hour ago, cbslee said:

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

 

I'm not seeing any difference in my situation.  A solo plan is simply a 401k plan that has only one participant (or spouse) and is self-employed.  I don't think an S Corp shareholder is considered a self-employed person.  A safe harbor plan is one that has employer contributions fully vested and doesn't have to deal with nondiscrimination rules.  I'm still left with my original question.

An S Corp, one shareholder, one employee, himself.  My understanding of the 401 limits is a dollar limit for the employee contribution of $20,500 as long as there is W2 compensation to that limit.  His W2 is $62,750.  My understanding is that the employer contribution is limited to 25% of the compensation ($62,750 at 25% = $15,687).  My reading says this limit is the allowable deduction.  But does this mean the employer can contribute more, just can't take the excess as a deduction?  The max dollar amount for the employer is $40,500.  Does this mean the employer can contribute $40,500 but can only take a deduction of $15,687?  If so, the S Corp profit will increase by $24,813 and shareholder will pay tax on the additional $24,813 as pass thru income.  Further, client has employee contribution going into a Roth.  He wants to convert the employer contribution to a Roth each year.  If I understand this correctly, I want to advise him to keep the employer contribution to the 25% limit.  Otherwise, I think he'll pay double tax on the $24,813.  As pass thru income (higher S Corp profit) and again when the conversion from regular to Roth account.

Will these tax changes be effective for 2023?  Hopefully none to affect 2022. 

If the Estate Return 1041 is not required, do you file anyway and mark 'Final' just to close out the Tax ID number?  I usually recommend it but I know others don't bother with the filing.

My experience on the tax side is many have trusts set up but don't understand what they are, how they work or the tax implications.  Grantor, revocable, irrevocable, living?

I only have back to 2018.

22 hours ago, Abby Normal said:

It's not like this isn't a societal thing. I've seen many offices with passwords on sticky notes attached to computers, and poor passwords are very popular. Longer passwords are better, and they can simply be a phrase or random words, with some substitutions of symbols and numbers (Allalongthew@tcht0wer).

A princess kept a view.

Can we renew PTIN yet or do we have to wait until Nov 1?

Congratulations.  My ten year plan has 3 more years left.  That's not definite but I'll play it by ear.

Thanks for the replies.

A general article indicated that the regs gave real estate agents the non-SSTB category.  When I looked at 199A and the regs, I didn't see anything specifically listing RE agents one way or the other. 

RE Agent is not specifically listed as a SSTB.  But principal asset is their personal skill.  I can't find anything specifically discussing a RE agent.  Anyone have anything specific on this?

Thanks for the reference.  This appears to say the the phase out levels still apply if contributing to a 529 plan.  My previous source left this a little vague.

Apparently, you can exclude bond interest if you contribute to a 529 plan.  From what I read, you have to contribute the redemption proceeds (principal and interest).  Is that so or just the interest portion?  Also, is this excluded (if contributed to a 529) even if modified adjusted gross income exceeds the regular exlusion amount?

1 hour ago, mcb39 said:

I thought that you couldn't do 179 or bonus depreciation on vehicles.  That thought is stuck in my brain somewhere.

I think you can but there are dollar limitations, much lower than for other assets.

Further clarification from the client.  Previously, the software was sold as a perpetual use software.  Now it is sold as a one year license that must be renewed every year.

Thanks for all the comments.

What about the matching of sales and costs?  The cost was paid in 2021.  Cash basis.  But the revenue was received in 2022.  Cash basis.  If costs are recorded, shouldn't sales be using the accrual basis as to match in the same year?

Client sells software.  Not a physical item but I think it should be treated as inventory.  He paid his cost ($250k) in 2021 but didn't receive his payment from customers until January, 2022.  S Corp is on cash basis.  But I understand that this should be treated on accrual basis and sales and purchases should be consistent.  Client has inquired about this.  My references are IRC 446 and 471 plus the regs 1.446-1 and 1.471-1.  Just looking for reassurance here and any other references.

Am I missing something?  ATX Fixed Asset input.  New vehicle.  S Corp.  Max allowed in first year is $18,200 whether Sec179 or Bonus Depr.  When I treat it as 1st year bonus depreciation, an amount for next year depreciation shows up.  But when I show it as Sec 179, a recovery basis amount shows up but no next year depreciation amount shows up.  The next year amount shows up for state (Ky) either way.  I was wanting to use Sec 179 in order to give a larger deduction for state.  Fed is the same either way but I'm wondering about the next year depreciation and carrying forward to next year.

I called last spring for a client.  IRS Rep cancelled the scheduled ES payments, gave me confirmation numbers.  A different confirm number for each scheduled payment.  Did not ask for POA.  Amending the return will not work because the 1040-ES info is not submitted with the amended return since the amended ES amount is zero.