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Software To File 1040nr

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Software To File 1040nr

Software to file 1040nr IRAs and Other Retirement Plans Table of Contents 2002 ChangesSimplified Employee Pensions (SEPs) 403(b) Plans Later ChangeDeemed IRAs 2002 Changes Simplified Employee Pensions (SEPs) Contribution limit increased. Software to file 1040nr   For plan years beginning after December 31, 2001, the annual limit on the amount of employer contributions to a SEP increases to the lesser of the following amounts. Software to file 1040nr 25% of an eligible employee's compensation. Software to file 1040nr $40,000 (subject to cost-of-living adjustments after 2002). Software to file 1040nr Deduction limit. Software to file 1040nr   For years beginning after 2001, the following changes apply to the SEP deduction limit. Software to file 1040nr Elective deferrals (SARSEPs). Software to file 1040nr   Elective deferrals under a SARSEP are not subject to the deduction limit that applies to employer contributions. Software to file 1040nr Also, elective deferrals are not taken into account when figuring the amount you can deduct for employer contributions that are not elective deferrals. Software to file 1040nr Definition of compensation. Software to file 1040nr    Compensation for figuring the deduction for employer contributions includes elective deferrals under a SARSEP. Software to file 1040nr More information. Software to file 1040nr   For more information about SEPs, see Publication 560, Retirement Plans for Small Business. Software to file 1040nr 403(b) Plans Figuring catch-up contributions. Software to file 1040nr   When figuring allowable catch-up contributions, combine all contributions made by your employer on your behalf to the following plans. Software to file 1040nr Qualified retirement plans. Software to file 1040nr 403(b) plans. Software to file 1040nr Simplified employee pensions (SEP). Software to file 1040nr SIMPLE plans. Software to file 1040nr   The total amount of the catch-up contributions to all plans maintained by your employer cannot exceed the annual limit. Software to file 1040nr For 2002, the limit is $1,000. Software to file 1040nr Rollovers to and from 403(b) plans. Software to file 1040nr   If a distribution includes both pre-tax contributions and after-tax contributions, the portion of the distribution that is rolled over is treated as consisting first of pre-tax amounts (contributions and earnings that would be includible in income if no rollover occurred). Software to file 1040nr This means that if you roll over an amount that is at least as much as the pre-tax portion of the distribution, you do not have to include any of the distribution in income. Software to file 1040nr Years of service for church employees and ministers. Software to file 1040nr   If you are a minister or church employee, treat all of your years of service as an employee of a church or a convention or association of churches as years of service with one employer. Software to file 1040nr Prior law required church employees and ministers to figure years of service separately for each employer. Software to file 1040nr   As a minister or church employee, all contributions made to 403(b) plans on your behalf, as an employee of a church or a convention or association of churches, are considered made by one employer. Software to file 1040nr Foreign missionaries. Software to file 1040nr   If you are a foreign missionary, contributions to your 403(b) account will not be treated as exceeding the limit on annual additions if the contributions are not more than the greater of: $3,000, or Your includible compensation. Software to file 1040nr More information. Software to file 1040nr   For more information about 403(b) plans, see Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans). Software to file 1040nr Later Change Deemed IRAs For plan years beginning after 2002, a qualified employer plan can provide for voluntary employee contributions to a separate account or annuity that is deemed to be an IRA. Software to file 1040nr For this purpose, a qualified employer plan includes a deferred compensation plan (section 457(b) plan) maintained by a state, a political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state. Software to file 1040nr The term qualified employer plan also includes: A qualified pension, profit-sharing, or stock bonus plan (section 401(a) plan), A qualified employee annuity plan (section 403(a) plan), and A tax-sheltered annuity plan (section 403(b) plan). Software to file 1040nr More information about IRAs can be found in Publication 590, Individual Retirement Arrangements (IRAs). Software to file 1040nr Prev  Up  Next   Home   More Online Publications
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The Software To File 1040nr

Software to file 1040nr 4. Software to file 1040nr   Qualified Plans Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Kinds of PlansDefined Contribution Plan Defined Benefit Plan Qualification RulesEarly retirement. Software to file 1040nr Loan secured by benefits. Software to file 1040nr Waiver of survivor benefits. Software to file 1040nr Waiver of 30-day waiting period before annuity starting date. Software to file 1040nr Involuntary cash-out of benefits not more than dollar limit. Software to file 1040nr Exception for certain loans. Software to file 1040nr Exception for QDRO. Software to file 1040nr SIMPLE and safe harbor 401(k) plan exception. Software to file 1040nr Setting Up a Qualified PlanAdopting a Written Plan Investing Plan Assets Minimum Funding RequirementDue dates. Software to file 1040nr Installment percentage. Software to file 1040nr Extended period for making contributions. Software to file 1040nr ContributionsEmployer Contributions Employee Contributions When Contributions Are Considered Made Employer DeductionDeduction Limits Deduction Limit for Self-Employed Individuals Where To Deduct Contributions Carryover of Excess Contributions Excise Tax for Nondeductible (Excess) Contributions Elective Deferrals (401(k) Plans)Limit on Elective Deferrals Automatic Enrollment Treatment of Excess Deferrals Qualified Roth Contribution ProgramElective Deferrals Qualified Distributions Reporting Requirements DistributionsRequired Distributions Distributions From 401(k) Plans Tax Treatment of Distributions Tax on Early Distributions Tax on Excess Benefits Excise Tax on Reversion of Plan Assets Notification of Significant Benefit Accrual Reduction Prohibited TransactionsTax on Prohibited Transactions Reporting RequirementsOne-participant plan. Software to file 1040nr Caution: Form 5500-EZ not required. Software to file 1040nr Form 5500. Software to file 1040nr Electronic filing of Forms 5500 and 5500-SF. Software to file 1040nr Topics - This chapter discusses: Kinds of plans Qualification rules Setting up a qualified plan Minimum funding requirement Contributions Employer deduction Elective deferrals (401(k) plans) Qualified Roth contribution program Distributions Prohibited transactions Reporting requirements Useful Items - You may want to see: Publications 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) 3066 Have you had your Check-up this year? for Retirement Plans 3998 Choosing A Retirement Solution for Your Small Business 4222 401(k) Plans for Small Businesses 4530 Designated Roth Accounts under a 401(k), 403(b), or governmental 457(b) plans 4531 401(k) Plan Checklist 4674 Automatic Enrollment 401(k) Plans for Small Businesses 4806 Profit Sharing Plans for Small Businesses Forms (and Instructions) www. Software to file 1040nr dol. Software to file 1040nr gov/ebsa/pdf/2013-5500. Software to file 1040nr pdf www. Software to file 1040nr dol. Software to file 1040nr gov/ebsa/pdf/2013-5500-SF. Software to file 1040nr pdf W-2 Wage and Tax Statement Schedule K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. Software to file 1040nr 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Software to file 1040nr 1040 U. Software to file 1040nr S. Software to file 1040nr Individual Income Tax Return Schedule C (Form 1040) Profit or Loss From Business Schedule F (Form 1040) Profit or Loss From Farming 5300 Application for Determination for Employee Benefit Plan 5310 Application for Determination for Terminating Plan 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 5330 Return of Excise Taxes Related to Employee Benefit Plans 5500 Annual Return/Report of Employee Benefit Plan. Software to file 1040nr For copies of this form, go to: 5500-EZ Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan. Software to file 1040nr For copies of this form, go to: 8717 User Fee for Employee Plan Determination Letter Request 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs 8955-SSA Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits These qualified retirement plans set up by self-employed individuals are sometimes called Keogh or H. Software to file 1040nr R. Software to file 1040nr 10 plans. Software to file 1040nr A sole proprietor or a partnership can set up one of these plans. Software to file 1040nr A common-law employee or a partner cannot set up one of these plans. Software to file 1040nr The plans described here can also be set up and maintained by employers that are corporations. Software to file 1040nr All the rules discussed here apply to corporations except where specifically limited to the self-employed. Software to file 1040nr The plan must be for the exclusive benefit of employees or their beneficiaries. Software to file 1040nr These qualified plans can include coverage for a self-employed individual. Software to file 1040nr As an employer, you can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. Software to file 1040nr The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. Software to file 1040nr Kinds of Plans There are two basic kinds of qualified plans—defined contribution plans and defined benefit plans—and different rules apply to each. Software to file 1040nr You can have more than one qualified plan, but your contributions to all the plans must not total more than the overall limits discussed under Contributions and Employer Deduction, later. Software to file 1040nr Defined Contribution Plan A defined contribution plan provides an individual account for each participant in the plan. Software to file 1040nr It provides benefits to a participant largely based on the amount contributed to that participant's account. Software to file 1040nr Benefits are also affected by any income, expenses, gains, losses, and forfeitures of other accounts that may be allocated to an account. Software to file 1040nr A defined contribution plan can be either a profit-sharing plan or a money purchase pension plan. Software to file 1040nr Profit-sharing plan. Software to file 1040nr   Although it is called a “profit-sharing plan,” you do not actually have to make a business profit for the year in order to make a contribution (except for yourself if you are self-employed as discussed under Self-employed Individual, later). Software to file 1040nr A profit-sharing plan can be set up to allow for discretionary employer contributions, meaning the amount contributed each year to the plan is not fixed. Software to file 1040nr An employer may even make no contribution to the plan for a given year. Software to file 1040nr   The plan must provide a definite formula for allocating the contribution among the participants and for distributing the accumulated funds to the employees after they reach a certain age, after a fixed number of years, or upon certain other occurrences. Software to file 1040nr   In general, you can be more flexible in making contributions to a profit-sharing plan than to a money purchase pension plan (discussed next) or a defined benefit plan (discussed later). Software to file 1040nr Money purchase pension plan. Software to file 1040nr   Contributions to a money purchase pension plan are fixed and are not based on your business profits. Software to file 1040nr For example, if the plan requires that contributions be 10% of the participants' compensation without regard to whether you have profits (or the self-employed person has earned income), the plan is a money purchase pension plan. Software to file 1040nr This applies even though the compensation of a self-employed individual as a participant is based on earned income derived from business profits. Software to file 1040nr Defined Benefit Plan A defined benefit plan is any plan that is not a defined contribution plan. Software to file 1040nr Contributions to a defined benefit plan are based on what is needed to provide definitely determinable benefits to plan participants. Software to file 1040nr Actuarial assumptions and computations are required to figure these contributions. Software to file 1040nr Generally, you will need continuing professional help to have a defined benefit plan. Software to file 1040nr Qualification Rules To qualify for the tax benefits available to qualified plans, a plan must meet certain requirements (qualification rules) of the tax law. Software to file 1040nr Generally, unless you write your own plan, the financial institution that provided your plan will take the continuing responsibility for meeting qualification rules that are later changed. Software to file 1040nr The following is a brief overview of important qualification rules that generally have not yet been discussed. Software to file 1040nr It is not intended to be all-inclusive. Software to file 1040nr See Setting Up a Qualified Plan , later. Software to file 1040nr Generally, the following qualification rules also apply to a SIMPLE 401(k) retirement plan. Software to file 1040nr A SIMPLE 401(k) plan is, however, not subject to the top-heavy plan rules and nondiscrimination rules if the plan satisfies the provisions discussed in chapter 3 under SIMPLE 401(k) Plan. Software to file 1040nr Plan assets must not be diverted. Software to file 1040nr   Your plan must make it impossible for its assets to be used for, or diverted to, purposes other than the benefit of employees and their beneficiaries. Software to file 1040nr As a general rule, the assets cannot be diverted to the employer. Software to file 1040nr Minimum coverage requirement must be met. Software to file 1040nr   To be a qualified plan, a defined benefit plan must benefit at least the lesser of the following. Software to file 1040nr 50 employees, or The greater of: 40% of all employees, or Two employees. Software to file 1040nr If there is only one employee, the plan must benefit that employee. Software to file 1040nr Contributions or benefits must not discriminate. Software to file 1040nr   Under the plan, contributions or benefits to be provided must not discriminate in favor of highly compensated employees. Software to file 1040nr Contributions and benefits must not be more than certain limits. Software to file 1040nr   Your plan must not provide for contributions or benefits that are more than certain limits. Software to file 1040nr The limits apply to the annual contributions and other additions to the account of a participant in a defined contribution plan and to the annual benefit payable to a participant in a defined benefit plan. Software to file 1040nr These limits are discussed later in this chapter under Contributions. Software to file 1040nr Minimum vesting standard must be met. Software to file 1040nr   Your plan must satisfy certain requirements regarding when benefits vest. Software to file 1040nr A benefit is vested (you have a fixed right to it) when it becomes nonforfeitable. Software to file 1040nr A benefit is nonforfeitable if it cannot be lost upon the happening, or failure to happen, of any event. Software to file 1040nr Special rules apply to forfeited benefit amounts. Software to file 1040nr In defined contribution plans, forfeitures can be allocated to the accounts of remaining participants in a nondiscriminatory way, or they can be used to reduce your contributions. Software to file 1040nr   Forfeitures under a defined benefit plan cannot be used to increase the benefits any employee would otherwise receive under the plan. Software to file 1040nr Forfeitures must be used instead to reduce employer contributions. Software to file 1040nr Participation. Software to file 1040nr   In general, an employee must be allowed to participate in your plan if he or she meets both the following requirements. Software to file 1040nr Has reached age 21. Software to file 1040nr Has at least 1 year of service (2 years if the plan is not a 401(k) plan and provides that after not more than 2 years of service the employee has a nonforfeitable right to all his or her accrued benefit). Software to file 1040nr A plan cannot exclude an employee because he or she has reached a specified age. Software to file 1040nr Leased employee. Software to file 1040nr   A leased employee, defined in chapter 1, who performs services for you (recipient of the services) is treated as your employee for certain plan qualification rules. Software to file 1040nr These rules include those in all the following areas. Software to file 1040nr Nondiscrimination in coverage, contributions, and benefits. Software to file 1040nr Minimum age and service requirements. Software to file 1040nr Vesting. Software to file 1040nr Limits on contributions and benefits. Software to file 1040nr Top-heavy plan requirements. Software to file 1040nr Contributions or benefits provided by the leasing organization for services performed for you are treated as provided by you. Software to file 1040nr Benefit payment must begin when required. Software to file 1040nr   Your plan must provide that, unless the participant chooses otherwise, the payment of benefits to the participant must begin within 60 days after the close of the latest of the following periods. Software to file 1040nr The plan year in which the participant reaches the earlier of age 65 or the normal retirement age specified in the plan. Software to file 1040nr The plan year in which the 10th anniversary of the year in which the participant began participating in the plan occurs. Software to file 1040nr The plan year in which the participant separates from service. Software to file 1040nr Early retirement. Software to file 1040nr   Your plan can provide for payment of retirement benefits before the normal retirement age. Software to file 1040nr If your plan offers an early retirement benefit, a participant who separates from service before satisfying the early retirement age requirement is entitled to that benefit if he or she meets both the following requirements. Software to file 1040nr Satisfies the service requirement for the early retirement benefit. Software to file 1040nr Separates from service with a nonforfeitable right to an accrued benefit. Software to file 1040nr The benefit, which may be actuarially reduced, is payable when the early retirement age requirement is met. Software to file 1040nr Required minimum distributions. Software to file 1040nr   Special rules require minimum annual distributions from qualified plans, generally beginning after age  70½. Software to file 1040nr See Required Distributions , under Distributions, later. Software to file 1040nr Survivor benefits. Software to file 1040nr   Defined benefit and money purchase pension plans must provide automatic survivor benefits in both the following forms. Software to file 1040nr A qualified joint and survivor annuity for a vested participant who does not die before the annuity starting date. Software to file 1040nr A qualified pre-retirement survivor annuity for a vested participant who dies before the annuity starting date and who has a surviving spouse. Software to file 1040nr   The automatic survivor benefit also applies to any participant under a profit-sharing plan unless all the following conditions are met. Software to file 1040nr The participant does not choose benefits in the form of a life annuity. Software to file 1040nr The plan pays the full vested account balance to the participant's surviving spouse (or other beneficiary if the surviving spouse consents or if there is no surviving spouse) if the participant dies. Software to file 1040nr The plan is not a direct or indirect transferee of a plan that must provide automatic survivor benefits. Software to file 1040nr Loan secured by benefits. Software to file 1040nr   If automatic survivor benefits are required for a spouse under a plan, he or she must consent to a loan that uses as security the accrued benefits in the plan. Software to file 1040nr Waiver of survivor benefits. Software to file 1040nr   Each plan participant may be permitted to waive the joint and survivor annuity or the pre-retirement survivor annuity (or both), but only if the participant has the written consent of the spouse. Software to file 1040nr The plan also must allow the participant to withdraw the waiver. Software to file 1040nr The spouse's consent must be witnessed by a plan representative or notary public. Software to file 1040nr Waiver of 30-day waiting period before annuity starting date. Software to file 1040nr    A plan may permit a participant to waive (with spousal consent) the 30-day minimum waiting period after a written explanation of the terms and conditions of a joint and survivor annuity is provided to each participant. Software to file 1040nr   The waiver is allowed only if the distribution begins more than 7 days after the written explanation is provided. Software to file 1040nr Involuntary cash-out of benefits not more than dollar limit. Software to file 1040nr   A plan may provide for the immediate distribution of the participant's benefit under the plan if the present value of the benefit is not greater than $5,000. Software to file 1040nr   However, the distribution cannot be made after the annuity starting date unless the participant and the spouse or surviving spouse of a participant who died (if automatic survivor benefits are required for a spouse under the plan) consents in writing to the distribution. Software to file 1040nr If the present value is greater than $5,000, the plan must have the written consent of the participant and the spouse or surviving spouse (if automatic survivor benefits are required for a spouse under the plan) for any immediate distribution of the benefit. Software to file 1040nr   Benefits attributable to rollover contributions and earnings on them can be ignored in determining the present value of these benefits. Software to file 1040nr   A plan must provide for the automatic rollover of any cash-out distribution of more than $1,000 to an individual retirement account or annuity, unless the participant chooses otherwise. Software to file 1040nr A section 402(f) notice must be sent prior to an involuntary cash-out of an eligible rollover distribution. Software to file 1040nr See Section 402(f) Notice under Distributions, later, for more details. Software to file 1040nr Consolidation, merger, or transfer of assets or liabilities. Software to file 1040nr   Your plan must provide that, in the case of any merger or consolidation with, or transfer of assets or liabilities to, any other plan, each participant would (if the plan then terminated) receive a benefit equal to or more than the benefit he or she would have been entitled to just before the merger, etc. Software to file 1040nr (if the plan had then terminated). Software to file 1040nr Benefits must not be assigned or alienated. Software to file 1040nr   Your plan must provide that a participant's or beneficiary's benefits under the plan cannot be taken away by any legal or equitable proceeding except as provided below or pursuant to certain judgements or settlements against the participant for violations of plan rules. Software to file 1040nr Exception for certain loans. Software to file 1040nr   A loan from the plan (not from a third party) to a participant or beneficiary is not treated as an assignment or alienation if the loan is secured by the participant's accrued nonforfeitable benefit and is exempt from the tax on prohibited transactions under section 4975(d)(1) or would be exempt if the participant were a disqualified person. Software to file 1040nr A disqualified person is defined later in this chapter under Prohibited Transactions. Software to file 1040nr Exception for QDRO. Software to file 1040nr   Compliance with a QDRO (qualified domestic relations order) does not result in a prohibited assignment or alienation of benefits. Software to file 1040nr   Payments to an alternate payee under a QDRO before the participant attains age 59½ are not subject to the 10% additional tax that would otherwise apply under certain circumstances. Software to file 1040nr Benefits distributed to an alternate payee under a QDRO can be rolled over tax free to an individual retirement account or to an individual retirement annuity. Software to file 1040nr No benefit reduction for social security increases. Software to file 1040nr   Your plan must not permit a benefit reduction for a post-separation increase in the social security benefit level or wage base for any participant or beneficiary who is receiving benefits under your plan, or who is separated from service and has nonforfeitable rights to benefits. Software to file 1040nr This rule also applies to plans supplementing the benefits provided by other federal or state laws. Software to file 1040nr Elective deferrals must be limited. Software to file 1040nr   If your plan provides for elective deferrals, it must limit those deferrals to the amount in effect for that particular year. Software to file 1040nr See Limit on Elective Deferrals later in this chapter. Software to file 1040nr Top-heavy plan requirements. Software to file 1040nr   A top-heavy plan is one that mainly favors partners, sole proprietors, and other key employees. Software to file 1040nr   A plan is top-heavy for a plan year if, for the preceding plan year, the total value of accrued benefits or account balances of key employees is more than 60% of the total value of accrued benefits or account balances of all employees. Software to file 1040nr Additional requirements apply to a top-heavy plan primarily to provide minimum benefits or contributions for non-key employees covered by the plan. Software to file 1040nr   Most qualified plans, whether or not top-heavy, must contain provisions that meet the top-heavy requirements and will take effect in plan years in which the plans are top-heavy. Software to file 1040nr These qualification requirements for top-heavy plans are explained in section 416 and its regulations. Software to file 1040nr SIMPLE and safe harbor 401(k) plan exception. Software to file 1040nr   The top-heavy plan requirements do not apply to SIMPLE 401(k) plans, discussed earlier in chapter 3, or to safe harbor 401(k) plans that consist solely of safe harbor contributions, discussed later in this chapter. Software to file 1040nr QACAs (discussed later) also are not subject to top-heavy requirements. Software to file 1040nr Setting Up a Qualified Plan There are two basic steps in setting up a qualified plan. Software to file 1040nr First you adopt a written plan. Software to file 1040nr Then you invest the plan assets. Software to file 1040nr You, the employer, are responsible for setting up and maintaining the plan. Software to file 1040nr If you are self-employed, it is not necessary to have employees besides yourself to sponsor and set up a qualified plan. Software to file 1040nr If you have employees, see Participation, under Qualification Rules, earlier. Software to file 1040nr Set-up deadline. Software to file 1040nr   To take a deduction for contributions for a tax year, your plan must be set up (adopted) by the last day of that year (December 31 for calendar-year employers). Software to file 1040nr Credit for startup costs. Software to file 1040nr   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a qualified plan that first became effective in 2013. Software to file 1040nr For more information, see Credit for startup costs under Reminders, earlier. Software to file 1040nr Adopting a Written Plan You must adopt a written plan. Software to file 1040nr The plan can be an IRS-approved master or prototype plan offered by a sponsoring organization. Software to file 1040nr Or it can be an individually designed plan. Software to file 1040nr Written plan requirement. Software to file 1040nr   To qualify, the plan you set up must be in writing and must be communicated to your employees. Software to file 1040nr The plan's provisions must be stated in the plan. Software to file 1040nr It is not sufficient for the plan to merely refer to a requirement of the Internal Revenue Code. Software to file 1040nr Master or prototype plans. Software to file 1040nr   Most qualified plans follow a standard form of plan (a master or prototype plan) approved by the IRS. Software to file 1040nr Master and prototype plans are plans made available by plan providers for adoption by employers (including self-employed individuals). Software to file 1040nr Under a master plan, a single trust or custodial account is established, as part of the plan, for the joint use of all adopting employers. Software to file 1040nr Under a prototype plan, a separate trust or custodial account is established for each employer. Software to file 1040nr Plan providers. Software to file 1040nr   The following organizations generally can provide IRS-approved master or prototype plans. Software to file 1040nr Banks (including some savings and loan associations and federally insured credit unions). Software to file 1040nr Trade or professional organizations. Software to file 1040nr Insurance companies. Software to file 1040nr Mutual funds. Software to file 1040nr Individually designed plan. Software to file 1040nr   If you prefer, you can set up an individually designed plan to meet specific needs. Software to file 1040nr Although advance IRS approval is not required, you can apply for approval by paying a fee and requesting a determination letter. Software to file 1040nr You may need professional help for this. Software to file 1040nr See Rev. Software to file 1040nr Proc. Software to file 1040nr 2014-6, 2014-1 I. Software to file 1040nr R. Software to file 1040nr B. Software to file 1040nr 198, available at www. Software to file 1040nr irs. Software to file 1040nr gov/irb/2014-1_IRB/ar10. Software to file 1040nr html, as annually updated, that may help you decide whether to apply for approval. Software to file 1040nr Internal Revenue Bulletins are available on the IRS website at IRS. Software to file 1040nr gov They are also available at most IRS offices and at certain libraries. Software to file 1040nr User fee. Software to file 1040nr   The fee mentioned earlier for requesting a determination letter does not apply to employers who have 100 or fewer employees who received at least $5,000 of compensation from the employer for the preceding year. Software to file 1040nr At least one of them must be a non-highly compensated employee participating in the plan. Software to file 1040nr The fee does not apply to requests made by the later of the following dates. Software to file 1040nr The end of the 5th plan year the plan is in effect. Software to file 1040nr The end of any remedial amendment period for the plan that begins within the first 5 plan years. Software to file 1040nr The request cannot be made by the sponsor of a prototype or similar plan the sponsor intends to market to participating employers. Software to file 1040nr   For more information about whether the user fee applies, see Rev. Software to file 1040nr Proc. Software to file 1040nr 2014-8, 2014-1 I. Software to file 1040nr R. Software to file 1040nr B. Software to file 1040nr 242, available at www. Software to file 1040nr irs. Software to file 1040nr gov/irb/2014-1_IRB/ar12. Software to file 1040nr html, as may be annually updated; Notice 2003-49, 2003-32 I. Software to file 1040nr R. Software to file 1040nr B. Software to file 1040nr 294, available at www. Software to file 1040nr irs. Software to file 1040nr gov/irb/2003-32_IRB/ar13. Software to file 1040nr html; and Notice 2011-86, 2011-45 I. Software to file 1040nr R. Software to file 1040nr B. Software to file 1040nr 698, available at www. Software to file 1040nr irs. Software to file 1040nr gov/irb/2011-45_IRB/ar11. Software to file 1040nr html. Software to file 1040nr Investing Plan Assets In setting up a qualified plan, you arrange how the plan's funds will be used to build its assets. Software to file 1040nr You can establish a trust or custodial account to invest the funds. Software to file 1040nr You, the trust, or the custodial account can buy an annuity contract from an insurance company. Software to file 1040nr Life insurance can be included only if it is incidental to the retirement benefits. Software to file 1040nr You set up a trust by a legal instrument (written document). Software to file 1040nr You may need professional help to do this. Software to file 1040nr You can set up a custodial account with a bank, savings and loan association, credit union, or other person who can act as the plan trustee. Software to file 1040nr You do not need a trust or custodial account, although you can have one, to invest the plan's funds in annuity contracts or face-amount certificates. Software to file 1040nr If anyone other than a trustee holds them, however, the contracts or certificates must state they are not transferable. Software to file 1040nr Other plan requirements. Software to file 1040nr   For information on other important plan requirements, see Qualification Rules , earlier in this chapter. Software to file 1040nr Minimum Funding Requirement In general, if your plan is a money purchase pension plan or a defined benefit plan, you must actually pay enough into the plan to satisfy the minimum funding standard for each year. Software to file 1040nr Determining the amount needed to satisfy the minimum funding standard for a defined benefit plan is complicated, and you should seek professional help in order to meet these contribution requirements. Software to file 1040nr For information on this funding requirement, see section 412 and its regulations. Software to file 1040nr Quarterly installments of required contributions. Software to file 1040nr   If your plan is a defined benefit plan subject to the minimum funding requirements, you generally must make quarterly installment payments of the required contributions. Software to file 1040nr If you do not pay the full installments timely, you may have to pay interest on any underpayment for the period of the underpayment. Software to file 1040nr Due dates. Software to file 1040nr   The due dates for the installments are 15 days after the end of each quarter. Software to file 1040nr For a calendar-year plan, the installments are due April 15, July 15, October 15, and January 15 (of the following year). Software to file 1040nr Installment percentage. Software to file 1040nr   Each quarterly installment must be 25% of the required annual payment. Software to file 1040nr Extended period for making contributions. Software to file 1040nr   Additional contributions required to satisfy the minimum funding requirement for a plan year will be considered timely if made by 8½ months after the end of that year. Software to file 1040nr Contributions A qualified plan is generally funded by your contributions. Software to file 1040nr However, employees participating in the plan may be permitted to make contributions, and you may be permitted to make contributions on your own behalf. Software to file 1040nr See Employee Contributions and Elective Deferrals later. Software to file 1040nr Contributions deadline. Software to file 1040nr   You can make deductible contributions for a tax year up to the due date of your return (plus extensions) for that year. Software to file 1040nr Self-employed individual. Software to file 1040nr   You can make contributions on behalf of yourself only if you have net earnings (compensation) from self-employment in the trade or business for which the plan was set up. Software to file 1040nr Your net earnings must be from your personal services, not from your investments. Software to file 1040nr If you have a net loss from self-employment, you cannot make contributions for yourself for the year, even if you can contribute for common-law employees based on their compensation. Software to file 1040nr Employer Contributions There are certain limits on the contributions and other annual additions you can make each year for plan participants. Software to file 1040nr There are also limits on the amount you can deduct. Software to file 1040nr See Deduction Limits , later. Software to file 1040nr Limits on Contributions and Benefits Your plan must provide that contributions or benefits cannot exceed certain limits. Software to file 1040nr The limits differ depending on whether your plan is a defined contribution plan or a defined benefit plan. Software to file 1040nr Defined benefit plan. Software to file 1040nr   For 2013, the annual benefit for a participant under a defined benefit plan cannot exceed the lesser of the following amounts. Software to file 1040nr 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. Software to file 1040nr $205,000 ($210,000 for 2014). Software to file 1040nr Defined contribution plan. Software to file 1040nr   For 2013, a defined contribution plan's annual contributions and other additions (excluding earnings) to the account of a participant cannot exceed the lesser of the following amounts. Software to file 1040nr 100% of the participant's compensation. Software to file 1040nr $51,000 ($52,000 for 2014). Software to file 1040nr   Catch-up contributions (discussed later under Limit on Elective Deferrals) are not subject to the above limit. Software to file 1040nr Employee Contributions Participants may be permitted to make nondeductible contributions to a plan in addition to your contributions. Software to file 1040nr Even though these employee contributions are not deductible, the earnings on them are tax free until distributed in later years. Software to file 1040nr Also, these contributions must satisfy the actual contribution percentage (ACP) test of section 401(m)(2), a nondiscrimination test that applies to employee contributions and matching contributions. Software to file 1040nr See Regulations sections 1. Software to file 1040nr 401(k)-2 and 1. Software to file 1040nr 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). Software to file 1040nr When Contributions Are Considered Made You generally apply your plan contributions to the year in which you make them. Software to file 1040nr But you can apply them to the previous year if all the following requirements are met. Software to file 1040nr You make them by the due date of your tax return for the previous year (plus extensions). Software to file 1040nr The plan was established by the end of the previous year. Software to file 1040nr The plan treats the contributions as though it had received them on the last day of the previous year. Software to file 1040nr You do either of the following. Software to file 1040nr You specify in writing to the plan administrator or trustee that the contributions apply to the previous year. Software to file 1040nr You deduct the contributions on your tax return for the previous year. Software to file 1040nr A partnership shows contributions for partners on Form 1065. Software to file 1040nr Employer's promissory note. Software to file 1040nr   Your promissory note made out to the plan is not a payment that qualifies for the deduction. Software to file 1040nr Also, issuing this note is a prohibited transaction subject to tax. Software to file 1040nr See Prohibited Transactions , later. Software to file 1040nr Employer Deduction You can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. Software to file 1040nr The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. Software to file 1040nr Deduction Limits The deduction limit for your contributions to a qualified plan depends on the kind of plan you have. Software to file 1040nr Defined contribution plans. Software to file 1040nr   The deduction for contributions to a defined contribution plan (profit-sharing plan or money purchase pension plan) cannot be more than 25% of the compensation paid (or accrued) during the year to your eligible employees participating in the plan. Software to file 1040nr If you are self-employed, you must reduce this limit in figuring the deduction for contributions you make for your own account. Software to file 1040nr See Deduction Limit for Self-Employed Individuals , later. Software to file 1040nr   When figuring the deduction limit, the following rules apply. Software to file 1040nr Elective deferrals (discussed later) are not subject to the limit. Software to file 1040nr Compensation includes elective deferrals. Software to file 1040nr The maximum compensation that can be taken into account for each employee in 2013 is $255,000 ($260,000 for 2014). Software to file 1040nr Defined benefit plans. Software to file 1040nr   The deduction for contributions to a defined benefit plan is based on actuarial assumptions and computations. Software to file 1040nr Consequently, an actuary must figure your deduction limit. Software to file 1040nr    In figuring the deduction for contributions, you cannot take into account any contributions or benefits that are more than the limits discussed earlier under Limits on Contributions and Benefits, earlier. Software to file 1040nr Table 4–1. Software to file 1040nr Carryover of Excess Contributions Illustrated—Profit-Sharing Plan (000's omitted) Year Participants' compensation Participants' share of required contribution (10% of annual profit) Deductible  limit for current year (25% of compensation) Contribution Excess contribution carryover used1 Total  deduction including carryovers Excess contribution carryover available at end of year 2010 $1,000 $100 $250 $100 $ 0 $100 $ 0 2011 400 165 100 165 0 100 65 2012 500 100 125 100 25 125 40 2013 600 100 150 100 40 140 0  1There were no carryovers from years before 2010. Software to file 1040nr Deduction Limit for Self-Employed Individuals If you make contributions for yourself, you need to make a special computation to figure your maximum deduction for these contributions. Software to file 1040nr Compensation is your net earnings from self-employment, defined in chapter 1. Software to file 1040nr This definition takes into account both the following items. Software to file 1040nr The deduction for the deductible part of your self-employment tax. Software to file 1040nr The deduction for contributions on your behalf to the plan. Software to file 1040nr The deduction for your own contributions and your net earnings depend on each other. Software to file 1040nr For this reason, you determine the deduction for your own contributions indirectly by reducing the contribution rate called for in your plan. Software to file 1040nr To do this, use either the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed in chapter 5. Software to file 1040nr Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. Software to file 1040nr Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Software to file 1040nr For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040); partnerships deduct them on Form 1065; and corporations deduct them on Form 1120, or Form 1120S. Software to file 1040nr Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Software to file 1040nr (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you get from the partnership. Software to file 1040nr ) Carryover of Excess Contributions If you contribute more to the plans than you can deduct for the year, you can carry over and deduct the difference in later years, combined with your contributions for those years. Software to file 1040nr Your combined deduction in a later year is limited to 25% of the participating employees' compensation for that year. Software to file 1040nr For purposes of this limit, a SEP is treated as a profit-sharing (defined contribution) plan. Software to file 1040nr However, this percentage limit must be reduced to figure your maximum deduction for contributions you make for yourself. Software to file 1040nr See Deduction Limit for Self-Employed Individuals, earlier. Software to file 1040nr The amount you carry over and deduct may be subject to the excise tax discussed next. Software to file 1040nr Table 4-1, earlier, illustrates the carryover of excess contributions to a profit-sharing plan. Software to file 1040nr Excise Tax for Nondeductible (Excess) Contributions If you contribute more than your deduction limit to a retirement plan, you have made nondeductible contributions and you may be liable for an excise tax. Software to file 1040nr In general, a 10% excise tax applies to nondeductible contributions made to qualified pension and profit-sharing plans and to SEPs. Software to file 1040nr Special rule for self-employed individuals. Software to file 1040nr   The 10% excise tax does not apply to any contribution made to meet the minimum funding requirements in a money purchase pension plan or a defined benefit plan. Software to file 1040nr Even if that contribution is more than your earned income from the trade or business for which the plan is set up, the difference is not subject to this excise tax. Software to file 1040nr See Minimum Funding Requirement , earlier. Software to file 1040nr Reporting the tax. Software to file 1040nr   You must report the tax on your nondeductible contributions on Form 5330. Software to file 1040nr Form 5330 includes a computation of the tax. Software to file 1040nr See the separate instructions for completing the form. Software to file 1040nr Elective Deferrals (401(k) Plans) Your qualified plan can include a cash or deferred arrangement under which participants can choose to have you contribute part of their before-tax compensation to the plan rather than receive the compensation in cash. Software to file 1040nr A plan with this type of arrangement is popularly known as a “401(k) plan. Software to file 1040nr ” (As a self-employed individual participating in the plan, you can contribute part of your before-tax net earnings from the business. Software to file 1040nr ) This contribution is called an “elective deferral” because participants choose (elect) to defer receipt of the money. Software to file 1040nr In general, a qualified plan can include a cash or deferred arrangement only if the qualified plan is one of the following plans. Software to file 1040nr A profit-sharing plan. Software to file 1040nr A money purchase pension plan in existence on June 27, 1974, that included a salary reduction arrangement on that date. Software to file 1040nr Partnership. Software to file 1040nr   A partnership can have a 401(k) plan. Software to file 1040nr Restriction on conditions of participation. Software to file 1040nr   The plan cannot require, as a condition of participation, that an employee complete more than 1 year of service. Software to file 1040nr Matching contributions. Software to file 1040nr   If your plan permits, you can make matching contributions for an employee who makes an elective deferral to your 401(k) plan. Software to file 1040nr For example, the plan might provide that you will contribute 50 cents for each dollar your participating employees choose to defer under your 401(k) plan. Software to file 1040nr Matching contributions are generally subject to the ACP test discussed earlier under Employee Contributions. Software to file 1040nr Nonelective contributions. Software to file 1040nr   You can also make contributions (other than matching contributions) for your participating employees without giving them the choice to take cash instead. Software to file 1040nr These are called nonelective contributions. Software to file 1040nr Employee compensation limit. Software to file 1040nr   No more than $255,000 of the employee's compensation can be taken into account when figuring contributions other than elective deferrals in 2013. Software to file 1040nr This limit is $260,000 in 2014. Software to file 1040nr SIMPLE 401(k) plan. Software to file 1040nr   If you had 100 or fewer employees who earned $5,000 or more in compensation during the preceding year, you may be able to set up a SIMPLE 401(k) plan. Software to file 1040nr A SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy plan requirements discussed earlier under Qualification Rules. Software to file 1040nr For details about SIMPLE 401(k) plans, see SIMPLE 401(k) Plan in chapter 3. Software to file 1040nr Distributions. Software to file 1040nr   Certain rules apply to distributions from 401(k) plans. Software to file 1040nr See Distributions From 401(k) Plans , later. Software to file 1040nr Limit on Elective Deferrals There is a limit on the amount an employee can defer each year under these plans. Software to file 1040nr This limit applies without regard to community property laws. Software to file 1040nr Your plan must provide that your employees cannot defer more than the limit that applies for a particular year. Software to file 1040nr For 2013 and 2014, the basic limit on elective deferrals is $17,500. Software to file 1040nr This limit applies to all salary reduction contributions and elective deferrals. Software to file 1040nr If, in conjunction with other plans, the deferral limit is exceeded, the difference is included in the employee's gross income. Software to file 1040nr Catch-up contributions. Software to file 1040nr   A 401(k) plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Software to file 1040nr The catch-up contribution limit for 2013 and 2014 is $5,500. Software to file 1040nr Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the $17,500 limit, the actual deferral percentage (ADP) test limit of section 401(k)(3), or the plan limit (if any). Software to file 1040nr However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Software to file 1040nr The catch-up contribution limit. Software to file 1040nr The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Software to file 1040nr Treatment of contributions. Software to file 1040nr   Your contributions to your own 401(k) plan are generally deductible by you for the year they are contributed to the plan. Software to file 1040nr Matching or nonelective contributions made to the plan are also deductible by you in the year of contribution. Software to file 1040nr Your employees' elective deferrals other than designated Roth contributions are tax free until distributed from the plan. Software to file 1040nr Elective deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. Software to file 1040nr Forfeiture. Software to file 1040nr   Employees have a nonforfeitable right at all times to their accrued benefit attributable to elective deferrals. Software to file 1040nr Reporting on Form W-2. Software to file 1040nr   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. Software to file 1040nr You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Software to file 1040nr You must also include them in box 12. Software to file 1040nr Mark the “Retirement plan” checkbox in box 13. Software to file 1040nr For more information, see the Form W-2 instructions. Software to file 1040nr Automatic Enrollment Your 401(k) plan can have an automatic enrollment feature. Software to file 1040nr Under this feature, you can automatically reduce an employee's pay by a fixed percentage and contribute that amount to the 401(k) plan on his or her behalf unless the employee affirmatively chooses not to have his or her pay reduced or chooses to have it reduced by a different percentage. Software to file 1040nr These contributions are elective deferrals. Software to file 1040nr An automatic enrollment feature will encourage employees' saving for retirement and will help your plan pass nondiscrimination testing (if applicable). Software to file 1040nr For more information, see Publication 4674, Automatic Enrollment 401(k) Plans for Small Businesses. Software to file 1040nr Eligible automatic contribution arrangement. Software to file 1040nr   Under an eligible automatic contribution arrangement (EACA), a participant is treated as having elected to have the employer make contributions in an amount equal to a uniform percentage of compensation. Software to file 1040nr This automatic election will remain in place until the participant specifically elects not to have such deferral percentage made (or elects a different percentage). Software to file 1040nr There is no required deferral percentage. Software to file 1040nr Withdrawals. Software to file 1040nr   Under an EACA, you may allow participants to withdraw their automatic contributions to the plan if certain conditions are met. Software to file 1040nr The participant must elect the withdrawal no later than 90 days after the date of the first elective contributions under the EACA. Software to file 1040nr The participant must withdraw the entire amount of EACA default contributions, including any earnings thereon. Software to file 1040nr   If the plan allows withdrawals under the EACA, the amount of the withdrawal other than the amount of any designated Roth contributions must be included in the employee's gross income for the tax year in which the distribution is made. Software to file 1040nr The additional 10% tax on early distributions will not apply to the distribution. Software to file 1040nr Notice requirement. Software to file 1040nr   Under an EACA, employees must be given written notice of the terms of the EACA within a reasonable period of time before each plan year. Software to file 1040nr The notice must be written in a manner calculated to be understood by the average employee and be sufficiently accurate and comprehensive in order to apprise the employee of his or her rights and obligations under the EACA. Software to file 1040nr The notice must include an explanation of the employee's right to elect not to have elective contributions made on his or her behalf, or to elect a different percentage, and the employee must be given a reasonable period of time after receipt of the notice before the first elective contribution is made. Software to file 1040nr The notice also must explain how contributions will be invested in the absence of an investment election by the employee. Software to file 1040nr Qualified automatic contribution arrangement. Software to file 1040nr    A qualified automatic contribution arrangement (QACA) is a type of safe harbor plan. Software to file 1040nr It contains an automatic enrollment feature, and mandatory employer contributions are required. Software to file 1040nr If your plan includes a QACA, it will not be subject to the ADP test (discussed later) nor the top-heavy requirements (discussed earlier). Software to file 1040nr Additionally, your plan will not be subject to the actual contribution percentage (ACP) test if certain additional requirements are met. Software to file 1040nr Under a QACA, each employee who is eligible to participate in the plan will be treated as having elected to make elective deferral contributions equal to a certain default percentage of compensation. Software to file 1040nr In order to not have default elective deferrals made, an employee must make an affirmative election specifying a deferral percentage (including zero, if desired). Software to file 1040nr If an employee does not make an affirmative election, the default deferral percentage must meet the following conditions. Software to file 1040nr It must be applied uniformly. Software to file 1040nr It must not exceed 10%. Software to file 1040nr It must be at least 3% in the first plan year it applies to an employee and through the end of the following year. Software to file 1040nr It must increase to at least 4% in the following plan year. Software to file 1040nr It must increase to at least 5% in the following plan year. Software to file 1040nr It must increase to at least 6% in subsequent plan years. Software to file 1040nr Matching or nonelective contributions. Software to file 1040nr   Under the terms of the QACA, you must make either matching or nonelective contributions according to the following terms. Software to file 1040nr Matching contributions. Software to file 1040nr You must make matching contributions on behalf of each non-highly compensated employee in the following amounts. Software to file 1040nr An amount equal to 100% of elective deferrals, up to 1% of compensation. Software to file 1040nr An amount equal to 50% of elective deferrals, from 1% up to 6% of compensation. Software to file 1040nr Other formulas may be used as long as they are at least as favorable to non-highly compensated employees. Software to file 1040nr The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. Software to file 1040nr Nonelective contributions. Software to file 1040nr You must make nonelective contributions on behalf of every non-highly compensated employee eligible to participate in the plan, regardless of whether they elected to participate, in an amount equal to at least 3% of their compensation. Software to file 1040nr Vesting requirements. Software to file 1040nr   All accrued benefits attributed to matching or nonelective contributions under the QACA must be 100% vested for all employees who complete 2 years of service. Software to file 1040nr These contributions are subject to special withdrawal restrictions, discussed later. Software to file 1040nr Notice requirements. Software to file 1040nr   Each employee eligible to participate in the QACA must receive written notice of their rights and obligations under the QACA, within a reasonable period before each plan year. Software to file 1040nr The notice must be written in a manner calculated to be understood by the average employee, and it must be accurate and comprehensive. Software to file 1040nr The notice must explain their right to elect not to have elective contributions made on their behalf, or to have contributions made at a different percentage than the default percentage. Software to file 1040nr Additionally, the notice must explain how contributions will be invested in the absence of any investment election by the employee. Software to file 1040nr The employee must have a reasonable period of time after receiving the notice to make such contribution and investment elections prior to the first contributions under the QACA. Software to file 1040nr Treatment of Excess Deferrals If the total of an employee's deferrals is more than the limit for 2013, the employee can have the difference (called an excess deferral) paid out of any of the plans that permit these distributions. Software to file 1040nr He or she must notify the plan by April 15, 2014 (or an earlier date specified in the plan), of the amount to be paid from each plan. Software to file 1040nr The plan must then pay the employee that amount, plus earnings on the amount through the end of 2013, by April 15, 2014. Software to file 1040nr Excess withdrawn by April 15. Software to file 1040nr   If the employee takes out the excess deferral by April 15, 2014, it is not reported again by including it in the employee's gross income for 2014. Software to file 1040nr However, any income earned in 2013 on the excess deferral taken out is taxable in the tax year in which it is taken out. Software to file 1040nr The distribution is not subject to the additional 10% tax on early distributions. Software to file 1040nr   If the employee takes out part of the excess deferral and the income on it, the distribution is treated as made proportionately from the excess deferral and the income. Software to file 1040nr   Even if the employee takes out the excess deferral by April 15, the amount will be considered for purposes of nondiscrimination testing requirements of the plan, unless the distributed amount is for a non-highly compensated employee who participates in only one employer's 401(k) plan or plans. Software to file 1040nr Excess not withdrawn by April 15. Software to file 1040nr   If the employee does not take out the excess deferral by April 15, 2014, the excess, though taxable in 2013, is not included in the employee's cost basis in figuring the taxable amount of any eventual distributions under the plan. Software to file 1040nr In effect, an excess deferral left in the plan is taxed twice, once when contributed and again when distributed. Software to file 1040nr Also, if the employee's excess deferral is allowed to stay in the plan and the employee participates in no other employer's plan, the plan can be disqualified. Software to file 1040nr Reporting corrective distributions on Form 1099-R. Software to file 1040nr   Report corrective distributions of excess deferrals (including any earnings) on Form 1099-R. Software to file 1040nr For specific information about reporting corrective distributions, see the Instructions for Forms 1099-R and 5498. Software to file 1040nr Tax on excess contributions of highly compensated employees. Software to file 1040nr   The law provides tests to detect discrimination in a plan. Software to file 1040nr If tests, such as the actual deferral percentage test (ADP test) (see section 401(k)(3)) and the actual contribution percentage test (ACP test) (see section 401(m)(2)), show that contributions for highly compensated employees are more than the test limits for these contributions, the employer may have to pay a 10% excise tax. Software to file 1040nr Report the tax on Form 5330. Software to file 1040nr The ADP test does not apply to a safe harbor 401(k) plan (discussed next) nor to a QACA. Software to file 1040nr Also, the ACP test does not apply to these plans if certain additional requirements are met. Software to file 1040nr   The tax for the year is 10% of the excess contributions for the plan year ending in your tax year. Software to file 1040nr Excess contributions are elective deferrals, employee contributions, or employer matching or nonelective contributions that are more than the amount permitted under the ADP test or the ACP test. Software to file 1040nr   See Regulations sections 1. Software to file 1040nr 401(k)-2 and 1. Software to file 1040nr 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). Software to file 1040nr    If the plan fails the ADP or ACP testing, and the failure is not corrected by the end of the next plan year, the plan can be disqualified. Software to file 1040nr Safe harbor 401(k) plan. Software to file 1040nr If you meet the requirements for a safe harbor 401(k) plan, you do not have to satisfy the ADP test, nor the ACP test, if certain additional requirements are met. Software to file 1040nr For your plan to be a safe harbor plan, you must meet the following conditions. Software to file 1040nr Matching or nonelective contributions. Software to file 1040nr You must make matching or nonelective contributions according to one of the following formulas. Software to file 1040nr Matching contributions. Software to file 1040nr You must make matching contributions according to the following rules. Software to file 1040nr You must contribute an amount equal to 100% of each non-highly compensated employee's elective deferrals, up to 3% of compensation. Software to file 1040nr You must contribute an amount equal to 50% of each non-highly compensated employee's elective deferrals, from 3% up to 5% of compensation. Software to file 1040nr The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. Software to file 1040nr Nonelective contributions. Software to file 1040nr You must make nonelective contributions, without regard to whether the employee made elective deferrals, on behalf of all non-highly compensated employees eligible to participate in the plan, equal to at least 3% of the employee's compensation. Software to file 1040nr These mandatory matching and nonelective contributions must be immediately 100% vested and are subject to special withdrawal restrictions. Software to file 1040nr Notice requirement. Software to file 1040nr You must give eligible employees written notice of their rights and obligations with regard to contributions under the plan, within a reasonable period before the plan year. Software to file 1040nr The other requirements for a 401(k) plan, including withdrawal and vesting rules, must also be met for your plan to qualify as a safe harbor 401(k) plan. Software to file 1040nr Qualified Roth Contribution Program Under this program an eligible employee can designate all or a portion of his or her elective deferrals as after-tax Roth contributions. Software to file 1040nr Elective deferrals designated as Roth contributions must be maintained in a separate Roth account. Software to file 1040nr However, unlike other elective deferrals, designated Roth contributions are not excluded from employees' gross income, but qualified distributions from a Roth account are excluded from employees' gross income. Software to file 1040nr Elective Deferrals Under a qualified Roth contribution program, the amount of elective deferrals that an employee may designate as a Roth contribution is limited to the maximum amount of elective deferrals excludable from gross income for the year (for 2013 and 2014, $17,500 if under age 50 and $23,000 if age 50 or over) less the total amount of the employee's elective deferrals not designated as Roth contributions. Software to file 1040nr Designated Roth deferrals are treated the same as pre-tax elective deferrals for most purposes, including: The annual individual elective deferral limit (total of all designated Roth contributions and traditional, pre-tax elective deferrals) of $17,500 for 2013 and 2014, with an additional $5,500 if age 50 or over for 2013 and 2014, Determining the maximum employee and employer annual contributions of the lesser of 100% of compensation or $51,000 for 2013 ($52,000 for 2014), Nondiscrimination testing, Required distributions, and Elective deferrals not taken into account for purposes of deduction limits. Software to file 1040nr Qualified Distributions A qualified distribution is a distribution that is made after the employee's nonexclusion period and: On or after the employee attains age   59½, On account of the employee's being disabled, or On or after the employee's death. Software to file 1040nr An employee's nonexclusion period for a plan is the 5-tax-year period beginning with the earlier of the following tax years. Software to file 1040nr The first tax year in which the employee made a contribution to his or her Roth account in the plan, or If a rollover contribution was made to the employee's designated Roth account from a designated Roth account previously established for the employee under another plan, then the first tax year the employee made a designated Roth contribution to the previously established account. Software to file 1040nr Rollover. Software to file 1040nr   Beginning September 28, 2010, a rollover from another account can be made to a designated Roth account in the same plan. Software to file 1040nr For additional information on these in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. Software to file 1040nr R. Software to file 1040nr B. Software to file 1040nr 872, available at www. Software to file 1040nr irs. Software to file 1040nr gov/irb/2010-51_IRB/ar11. Software to file 1040nr html, and Notice 2013-74. Software to file 1040nr A distribution from a designated Roth account can only be rolled over to another designated Roth account or a Roth IRA. Software to file 1040nr Rollover amounts do not apply toward the annual deferral limit. Software to file 1040nr Reporting Requirements You must report a contribution to a Roth account on Form W-2 and a distribution from a Roth account on Form 1099-R. Software to file 1040nr See the Form W-2 and 1099-R instructions for detailed information. Software to file 1040nr Distributions Amounts paid to plan participants from a qualified plan are called distributions. Software to file 1040nr Distributions may be nonperiodic, such as lump-sum distributions, or periodic, such as annuity payments. Software to file 1040nr Also, certain loans may be treated as distributions. Software to file 1040nr See Loans Treated as Distributions in Publication 575. Software to file 1040nr Required Distributions A qualified plan must provide that each participant will either: Receive his or her entire interest (benefits) in the plan by the required beginning date (defined later), or Begin receiving regular periodic distributions by the required beginning date in annual amounts calculated to distribute the participant's entire interest (benefits) over his or her life expectancy or over the joint life expectancy of the participant and the designated beneficiary (or over a shorter period). Software to file 1040nr These distribution rules apply individually to each qualified plan. Software to file 1040nr You cannot satisfy the requirement for one plan by taking a distribution from another. Software to file 1040nr The plan must provide that these rules override any inconsistent distribution options previously offered. Software to file 1040nr Minimum distribution. Software to file 1040nr   If the account balance of a qualified plan participant is to be distributed (other than as an annuity), the plan administrator must figure the minimum amount required to be distributed each distribution calendar year. Software to file 1040nr This minimum is figured by dividing the account balance by the applicable life expectancy. Software to file 1040nr The plan administrator can use the life expectancy tables in Appendix C of Publication 590 for this purpose. Software to file 1040nr For more information on figuring the minimum distribution, see Tax on Excess Accumulation in Publication 575. Software to file 1040nr Required beginning date. Software to file 1040nr   Generally, each participant must receive his or her entire benefits in the plan or begin to receive periodic distributions of benefits from the plan by the required beginning date. Software to file 1040nr   A participant must begin to receive distributions from his or her qualified retirement plan by April 1 of the first year after the later of the following years. Software to file 1040nr Calendar year in which he or she reaches age 70½. Software to file 1040nr Calendar year in which he or she retires from employment with the employer maintaining the plan. Software to file 1040nr However, the plan may require the participant to begin receiving distributions by April 1 of the year after the participant reaches age 70½ even if the participant has not retired. Software to file 1040nr   If the participant is a 5% owner of the employer maintaining the plan, the participant must begin receiving distributions by April 1 of the first year after the calendar year in which the participant reached age 70½. Software to file 1040nr For more information, see Tax on Excess Accumulation in Publication 575. Software to file 1040nr Distributions after the starting year. Software to file 1040nr   The distribution required to be made by April 1 is treated as a distribution for the starting year. Software to file 1040nr (The starting year is the year in which the participant meets (1) or (2) above, whichever applies. Software to file 1040nr ) After the starting year, the participant must receive the required distribution for each year by December 31 of that year. Software to file 1040nr If no distribution is made in the starting year, required distributions for 2 years must be made in the next year (one by April 1 and one by December 31). Software to file 1040nr Distributions after participant's death. Software to file 1040nr   See Publication 575 for the special rules covering distributions made after the death of a participant. Software to file 1040nr Distributions From 401(k) Plans Generally, distributions cannot be made until one of the following occurs. Software to file 1040nr The employee retires, dies, becomes disabled, or otherwise severs employment. Software to file 1040nr The plan ends and no other defined contribution plan is established or continued. Software to file 1040nr In the case of a 401(k) plan that is part of a profit-sharing plan, the employee reaches age 59½ or suffers financial hardship. Software to file 1040nr For the rules on hardship distributions, including the limits on them, see Regulations section 1. Software to file 1040nr 401(k)-1(d). Software to file 1040nr The employee becomes eligible for a qualified reservist distribution (defined next). Software to file 1040nr Certain distributions listed above may be subject to the tax on early distributions discussed later. Software to file 1040nr Qualified reservist distributions. Software to file 1040nr   A qualified reservist distribution is a distribution from an IRA or an elective deferral account made after September 11, 2001, to a military reservist or a member of the National Guard who has been called to active duty for at least 180 days or for an indefinite period. Software to file 1040nr All or part of a qualified reservist distribution can be recontributed to an IRA. Software to file 1040nr The additional 10% tax on early distributions does not apply to a qualified reservist distribution. Software to file 1040nr Tax Treatment of Distributions Distributions from a qualified plan minus a prorated part of any cost basis are subject to income tax in the year they are distributed. Software to file 1040nr Since most recipients have no cost basis, a distribution is generally fully taxable. Software to file 1040nr An exception is a distribution that is properly rolled over as discussed under Rollover, next. Software to file 1040nr The tax treatment of distributions depends on whether they are made periodically over several years or life (periodic distributions) or are nonperiodic distributions. Software to file 1040nr See Taxation of Periodic Payments and Taxation of Nonperiodic Payments in Publication 575 for a detailed description of how distributions are taxed, including the 10-year tax option or capital gain treatment of a lump-sum distribution. Software to file 1040nr Note. Software to file 1040nr A recipient of a distribution from a designated Roth account will have a cost basis since designated Roth contributions are made on an after-tax basis. Software to file 1040nr Also, a distribution from a designated Roth account is entirely tax-free if certain conditions are met. Software to file 1040nr See Qualified distributions under Qualified Roth Contribution Program, earlier. Software to file 1040nr Rollover. Software to file 1040nr   The recipient of an eligible rollover distribution from a qualified plan can defer the tax on it by rolling it over into a traditional IRA or another eligible retirement plan. Software to file 1040nr However, it may be subject to withholding as discussed under Withholding requirement, later. Software to file 1040nr A rollover can also be made to a Roth IRA, in which case, any previously untaxed amounts are includible in gross income unless the rollover is from a designated Roth account. Software to file 1040nr Eligible rollover distribution. Software to file 1040nr   This is a distribution of all or any part of an employee's balance in a qualified retirement plan that is not any of the following. Software to file 1040nr A required minimum distribution. Software to file 1040nr See Required Distributions , earlier. Software to file 1040nr Any of a series of substantially equal payments made at least once a year over any of the following periods. Software to file 1040nr The employee's life or life expectancy. Software to file 1040nr The joint lives or life expectancies of the employee and beneficiary. Software to file 1040nr A period of 10 years or longer. Software to file 1040nr A hardship distribution. Software to file 1040nr The portion of a distribution that represents the return of an employee's nondeductible contributions to the plan. Software to file 1040nr See Employee Contributions , earlier, and Rollover of nontaxable amounts, next. Software to file 1040nr Loans treated as distributions. Software to file 1040nr Dividends on employer securities. Software to file 1040nr The cost of any life insurance coverage provided under a qualified retirement plan. Software to file 1040nr Similar items designated by the IRS in published guidance. Software to file 1040nr See, for example, the Instructions for Forms 1099-R and 5498. Software to file 1040nr Rollover of nontaxable amounts. Software to file 1040nr   You may be able to roll over the nontaxable part of a distribution to another qualified retirement plan or a section 403(b) plan, or to an IRA. Software to file 1040nr If the rollover is to a qualified retirement plan or a section 403(b) plan that separately accounts for the taxable and nontaxable parts of the rollover, the transfer must be made through a direct (trustee-to-trustee) rollover. Software to file 1040nr If the rollover is to an IRA, the transfer can be made by any rollover method. Software to file 1040nr Note. Software to file 1040nr A distribution from a designated Roth account can be rolled over to another designated Roth account or to a Roth IRA. Software to file 1040nr If the rollover is to a Roth IRA, it can be rolled over by any rollover method, but if the rollover is to another designated Roth account, it must be rolled over directly (trustee-to-trustee). Software to file 1040nr More information. Software to file 1040nr   For more information about rollovers, see Rollovers in Pubs. Software to file 1040nr 575 and 590. Software to file 1040nr Withholding requirement. Software to file 1040nr   If, during a year, a qualified plan pays to a participant one or more eligible rollover distributions (defined earlier) that are reasonably expected to total $200 or more, the payor must withhold 20% of the taxable portion of each distribution for federal income tax. Software to file 1040nr Exceptions. Software to file 1040nr   If, instead of having the distribution paid to him or her, the participant chooses to have the plan pay it directly to an IRA or another eligible retirement plan (a direct rollover), no withholding is required. Software to file 1040nr   If the distribution is not an eligible rollover distribution, defined earlier, the 20% withholding requirement does not apply. Software to file 1040nr Other withholding rules apply to distributions that are not eligible rollover distributions, such as long-term periodic distributions and required distributions (periodic or nonperiodic). Software to file 1040nr However, the participant can choose not to have tax withheld from these distributions. Software to file 1040nr If the participant does not make this choice, the following withholding rules apply. Software to file 1040nr For periodic distributions, withholding is based on their treatment as wages. Software to file 1040nr For nonperiodic distributions, 10% of the taxable part is withheld. Software to file 1040nr Estimated tax payments. Software to file 1040nr   If no income tax is withheld or not enough tax is withheld, the recipient of a distribution may have to make estimated tax payments. Software to file 1040nr For more information, see Withholding Tax and Estimated Tax in Publication 575. Software to file 1040nr Section 402(f) Notice. Software to file 1040nr   If a distribution is an eligible rollover distribution, as defined earlier, you must provide a written notice to the recipient that explains the following rules regarding such distributions. Software to file 1040nr That the distribution may be directly transferred to an eligible retirement plan and information about which distributions are eligible for this direct transfer. Software to file 1040nr That tax will be withheld from the distribution if it is not directly transferred to an eligible retirement plan. Software to file 1040nr That the distribution will not be subject to tax if transferred to an eligible retirement plan within 60 days after the date the recipient receives the distribution. Software to file 1040nr Certain other rules that may be applicable. Software to file 1040nr   Notice 2009-68, 2009-39 I. Software to file 1040nr R. Software to file 1040nr B. Software to file 1040nr 423, available at www. Software to file 1040nr irs. Software to file 1040nr gov/irb/2009-39_IRB/ar14. Software to file 1040nr html, contains two updated safe harbor section 402(f) notices that plan administrators may provide recipients of eligible rollover distributions. Software to file 1040nr If the plan allows in-plan Roth rollovers, the 402(f) notice must be amended to reflect this. Software to file 1040nr Notice 2010-84 contains guidance on how to modify a 402(f) notice for in-plan Roth rollovers. Software to file 1040nr Timing of notice. Software to file 1040nr   The notice generally must be provided no less than 30 days and no more than 180 days before the date of a distribution. Software to file 1040nr Method of notice. Software to file 1040nr   The written notice must be provided individually to each distributee of an eligible rollover distribution. Software to file 1040nr Posting of the notice is not sufficient. Software to file 1040nr However, the written requirement may be satisfied through the use of electronic media if certain additional conditions are met. Software to file 1040nr See Regulations section 1. Software to file 1040nr 401(a)-21. Software to file 1040nr Tax on failure to give notice. Software to file 1040nr   Failure to give a 402(f) notice will result in a tax of $100 for each failure, with a total not exceeding $50,000 per calendar year. Software to file 1040nr The tax will not be imposed if it is shown that such failure is due to reasonable cause and not to willful neglect. Software to file 1040nr Tax on Early Distributions If a distribution is made to an employee under the plan before he or she reaches age 59½, the employee may have to pay a 10% additional tax on the distribution. Software to file 1040nr This tax applies to the amount received that the employee must include in income. Software to file 1040nr Exceptions. Software to file 1040nr   The 10% tax will not apply if distributions before age 59½ are made in any of the following circumstances. Software to file 1040nr Made to a beneficiary (or to the estate of the employee) on or after the death of the employee. Software to file 1040nr Made due to the employee having a qualifying disability. Software to file 1040nr Made as part of a series of substantially equal periodic payments beginning after separation from service and made at least annually for the life or life expectancy of the employee or the joint lives or life expectancies of the employee and his or her designated beneficiary. Software to file 1040nr (The payments under this exception, except in the case of death or disability, must continue for at least 5 years or until the employee reaches age 59½, whichever is the longer period. Software to file 1040nr ) Made to an employee after separation from service if the separation occurred during o