The IRS Nationwide Tax Forum wrapped up in August with more than 10,000 tax professionals attending the virtual sessions. IRS Employee Plans presented the seminar, Retirement Plans: Avoid These Pitfalls When Managing Your Small Employer Plan.
Checklists: Part of our presentation focused on a series of plan checklists that may help small business owners keep their plans in compliance.
Chat Questions: We received several questions in the chat feature in the booth and during the presentation. Following are answers to some of the most common questions.
1) The plan sponsor is responsible for all things having to do with the plan, from determining when employees enter the plan, to distributions, to filing the Form 5500 series returns.
If you purchase or set up a plan with a financial institution or hire an advisor to help with your plan, make sure you understand exactly what they’re going to do for you. In the end, the plan sponsor is responsible for administering the plan.
2) SEP, SIMPLE, and SARSEP IRA-based plans do not file a Form 5500 series return.
3) A one-participant 401(k) plan can allow for both pre-tax salary deferrals and after-tax Roth salary deferrals, but the plan document must include language for both.
4) Contributions made to a Roth IRA are not affected by amounts contributed to a Roth 401(k) plan.
- Contributions you make to a Roth IRA are limited based on your filing status and income. Roth 401(k) deferrals do not affect amounts you can contribute to a Roth IRA. Limits for 2022:
- $6,000
- Plus $1,000 age 50 catch-up
- Amounts an individual contributes in a Roth 401(k) plan are limited by IRC 402(g). Roth IRA contributions do not affect amounts you can defer in a Roth 401(k) plan. Limits for 2022:
- $20,500
- Plus $6,500 age 50 catch-up
5) In a SEP IRA plan, all eligible employees (including the owner) must receive the same percentage of any contribution made to the SEP.
6) Deductions for contributions to your traditional IRA may be limited if you or your spouse is covered by a workplace retirement plan. Contributions to your IRA don’t affect (and are not affected by) contributions in a workplace retirement plan.
Retirement Plans Video Series: These short videos provide an overview of the key features of many types of plans adopted by small employers.
What you Should Know About Retirement Plans:
What you Should Know About IRA-Based Plans:
Choosing a Retirement Plan:
- Retirement Plans for Small Employers and Self-Employed
- Retirement Plans for Small Employers and Self-Employed (SP)
For more information regarding retirement plans please go to https://www.irs.gov/retirement-plans