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Discussion:Panic!! Retirement plan options
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Discussion Forum Index --> Tax Questions --> Panic!! Retirement plan options
Natalie (talk|edits) said:
| 7 April 2006
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| I have a new client (husband and wife) that had a schedule C in 2003. During 2003 they changed from sole proprietorship to LLC with three family members. LLC files a partnership return. Under Schedule C, self-employed retirement plan was set up and deductions taken. My question is, now that they have an LLC, does that change the requirements for retirement plan, i.e., is a new plan required under the LLC? No employees in LLC.
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JR1 (talk|edits) said:
| 7 April 2006
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| Brain cells beginning to die off for this week Natalie, but you've got a bigger problem...for don't you need to include the other partners in this now? I don't think you can just leave as is, interested in seeing others' comments on this. If it's a SEP, then wouldn't it have to cover all the parnters? Or none? If a SIMPLE, for sure has to.
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Natalie (talk|edits) said:
| 8 April 2006
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| I hadn't thought about that yet. Client had asked me to amend 2004 returns for a mistake made in prior year. Now I'm not so sure we want to do that. I haven't heard back from the client yet regarding the type of plan.
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Natalie (talk|edits) said:
| 9 April 2006
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| The plan is a SEP and apparently it is the same plan that was used under the sole proprietorship. I don't know much about this area, so I guess I'm going to need to do a little more research. At least we still have time to set up a plan for 2005!
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JR1 (talk|edits) said:
| 9 April 2006
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| You can still do a SEP for 05, you just need to include everyone in it....
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Natalie (talk|edits) said:
| 11 April 2006
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| Client's SEP is original one set up under the sole prop. Rather than set up a new plan, can we simply update it with the LLC's ID number and name? The plan excludes employees who have not performed services for the employer for at least three years. Assuming we can use the same plan, that would mean that no contributions would be required for the other members for 2004 or 2005. Since sole proproprietor is continuing services, her 2004 contribution that was already made is okay. As I understand it, there would be no tax consequences for 2004. The only thing that should have been done that wasn't is that the LLC should have paid for the contributions and reported them on the K-1 for reporting on the 1040, correct? Contribution for wife should be okay for 2005 as well. Comments?
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Natalie (talk|edits) said:
| 15 April 2006
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| Okay, now I have the SEP agreement and it states the contribution max. % is 15%. Plan opened in 1997. Current % allowed by IRS is 25%. Does anyone know if older plans automatically increased contribution limits with the change allowed by the IRS? Or was a formal plan document amendment required? Client would like to amend 2004 returns, but if we do that, we'll have excess contributions for 2004. (Even without amendment there is an excess contribution because prior preparer did not properly calc. SE income.) HELP!
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JR1 (talk|edits) said:
| 15 April 2006
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| Yes Natalie, they all moved to 25%. Sorry, couldn't get back last night, just peeked in a moment before heading for bed...
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Natalie (talk|edits) said:
| 15 April 2006
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| Thank you! My client confirmed that with the account holder this morning as well. Whew!! Now I can wrap up the 2004 amended return and not worry about having to carry over excess contributions to 2005. (I think that's an option with SEPs.)
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