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20 Cards in this Set
- Front
- Back
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A qualified plan must be established by the end of the employer’s tax year for the employer’s contribution for that plan year to be deductible. |
TRUE |
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Compensation for deduction purposes is determined based on the employer's tax year. |
TRUE |
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Elective contributions are applied towards the employer’s defined contribution plan deduction limit under IRC §404(a)(3). |
NO Elective contributions are deducted separately from other employer contributions when determining if the deduction limit has been exceeded. |
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The deduction limit for overlapping plans is 25 percent of eligible compensation. |
NO The deduction limit for overlapping plans may exceed 25 percent of compensation, depending on the minimum funding requirement for the defined benefit plan. The maximum deduction under IRC §404(a)(7) is the greater of 25 percent of compensation or the amount needed to meet minimum funding standards for the defined benefit plan plus a contribution of 6 percent of compensation to the defined contribution plan. |
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Employer contributions in excess of the deduction limit may be carried forward and deducted in subsequent years. |
TRUE |
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Compensation used for deduction purposes is net of elective contributions. |
NO Elective contributions are included in compensation for deduction purposes |
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Forfeitures allocated in a profit sharing plan do not reduce an employer’s deduction limit. |
TRUE |
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Compensation for deduction purposes includes taxable fringe benefits. |
TRUE |
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The employer owes a 10 percent excise tax on any nondeductible contributions made to a defined contribution plan, unless an exception applies. |
TRUE |
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The deadline (with extension) for making a deductible contribution to a corporation’s calendar year profit sharing plan is October 15th provided that the corporation’s fiscal year is also the calendar year. |
NO The deadline is September 15th. type Tax Filing Extension form deadline Corp 1120 march 15 sept 15 LLC as corp 1120 march 15 sept 15 Partnership 1065 april 15 sept 15 LLC as partn 1065 april 15 sept 15 Sole proprietor 1040 april 15 october 15 |
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Based on the following information, determine the maximum deductible employer non elective contribution for 2014: The plan is a calendar year 401(k) profit sharing plan The effective date of the plan is January 1, 2014. The plan has a non-integrated allocation formula for the employer non elective contribution. This is the only plan the employer sponsors. The compensation limit for 2014 is $260,000. The participants’ elective contributions for the year total $27,000. Employer matching contributions for the year total $13,500. The participants listed are all eligible to receive an allocation of employer non elective contributions. Eligible participants 2014 compensation A $210,000 B $45,000 C $30,000 A. $30,750 B. $40,500 C. $44,250 D. $57,750 E. $71,250 |
D max deduction is 25% of eligible compensation or in this case (210,000 + 45,000 + 30,000) x 25% = $71,250 employer matching contribution 13,500 is no included in determining if the deduction limit has been exceeded. ( elective contribution are deducted separately from employer contributions) $71,250-$13,500 = $57,750 or D |
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All of the following statements regarding deduction rules are TRUE, EXCEPT: A. Contributions made in excess of the deduction limit will result in plan disqualification. B. When the plan year and the employer’s tax year are different, the maximumdeduction limit is based on compensation paid in the employer’s tax year. C. An employer may make a deductible contribution to a profit sharing plan in the form of property instead of cash. D. Compensation used for deduction purposes includes salary reduction contributions to a cafeteria plan. E. Employers that maintain a profit sharing plan and a money purchase plan do not have a higher deduction limit than those employers who maintain only one of these types of plans. |
A Contributions in excess of the deduction limit are subject to an excise tax, but will not necessarily result in plan disqualification. |
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All of the following statements regarding deduction rules are TRUE, EXCEPT: A. An employer that maintains a money purchase plan with a minimum funding requirement of 40 percent of eligible compensation is still limited to 25 percent of eligible compensation for deduction purposes. B. A contribution that exceeds the IRC §415 limit is not deductible. C. An employer that contributes 20 percent of eligible compensation in year one,may carry over the unused 5 percent and increase its deduction limit to 30 percent in year two. D. The excise tax on nondeductible contributions made by December 31, 2013, must be paid by July 31, 2014. E. A governmental employer is not subject to an excise tax on non deductible contributions. |
C The deduction limit is a one-year proposition. Unused amounts in one year may not be carried to future years. Employer contributions in excess of the deduction limit may be carried forward and deducted in subsequent years. |
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Based on the following information, determine the amount of the non deductible contribution for 2014: The plan is a calendar year profit sharing plan. The plan sponsor is a calendar year tax filer. The aggregate compensation for deduction purposes is $800,000. On October 1, 2014, the plan sponsor deposits $275,000 for the 2014 contribution. A. $0 B. $75,000 C. $120,000 D. $155,000 E. $200,000 |
B The deductible limit is 25 percent of eligible compensation or, in this case 800,000 x .25 =$200,000. The plan sponsor deposited $275,000, which cannot be included and needs to subtracted so the amount deposited that is notdeductible is (275,000 - 200,000) = $75,000 or B |
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Which of the following statements regarding overlapping plans is/are TRUE? I. An overlapping plan occurs when an employer maintains at least one defined contribution plan and at least one defined benefit plan, and at least one employee participates in both plans. II. The overlapping plan deduction limit is never less than the minimumfunding requirement applicable to the defined benefit plan. III. For post-PPA years, the 25 percent limit does not apply if a definedcontribution plan contribution does not exceed 6 percent of compensation. A. I only B. II only C. I and III only D. II and III only E. I, II and III |
E All three statements regarding overlapping plans are true. |
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All of the following statements regarding tax return and corresponding contribution deadlines are TRUE, EXCEPT: A. The filing deadline for a calendar year partnership is March 15 if an extension has not been filed. B. The filing deadline for a calendar year sole proprietorship is April 15 if an extension has not been filed. C. The filing deadline for a calendar year sole proprietorship is October 15 if an extension has been filed. D. The filing deadline for a calendar year LLC taxed as a corporation is March 15 ifan extension has not been filed. E. The filing deadline for calendar year LLC taxed as a corporation is September 15 if an extension has been filed. |
A The filing deadline for a calendar year partnership is April 15, if an extension has not been filed. if there is an extension, it would be Sept 15. |
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Which of the following statements regarding nondeductible contributions is/areTRUE? I. The plan is liable for any applicable excise tax on nondeductiblecontributions. II. Nondeductible contributions may be carried forward and deducted insucceeding taxable years. III. The excise tax is applicable in subsequent years if the nondeductiblecontribution has not been deducted in the subsequent year. A. I only B. II only C. I and III only D. II and III only E. I, II and III |
D The employer is liable for any applicable excise tax on nondeductible contributions. |
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Based on the following information, determine the maximum deductible employer non elective contribution that may be made to the following 401(k) plan: total comp of all eligible ptp $1,000,00 total of ptp elective contributions $50,000 total ER matching contributions $25,000 A. $0 B. $175,000 C. $200,000 D. $225,000 E. $250,000 |
D deduction limit is 25% of total eligible compensation or 1,000,000 x .25 = $250,000 since 25,000 has already been used by employer. you deduct that from the $250,000 or (250,000-25,000)= 225,000 or D |
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Which of the following statements regarding nondeductible contributions is/are TRUE? I. Nondeductible contributions must be withdrawn from the plan no later than90 days from the date made to avoid an excise tax. II. The excise tax is due by the last day of the seventh month following thetaxable year of the nondeductible contribution. III. Obtaining an extension for filing Form 5500 automatically extends the datefor payment of the excise tax on nondeductible contributions. A. I only B. II only 3 C. I and III only D. II and III only E. I, II and III |
B Nondeductible contributions may not be withdrawn from the plan solely because they exceed the deduction limit. Obtaining an extension for filing Form 5500 does not extend the date for payment of the excise tax on nondeductible contributions. Excise taxes due on nondeductible contributions are paid by filing Form 5330, not by filing Form 5500. Form 5558 may be filed to extend the deadline for Form 5330, but the extension is not automatic. Rather, it is subject to approval by the IRS. |
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All of the following statements regarding overlapping plan deduction rules under IRC §404(a) (7) are TRUE, EXCEPT: A. Overlapping plan deduction limits generally apply when an employer sponsors a defined contribution plan and a defined benefit plan. B. Elective contributions are not taken into account when determining if the overlapping plan deduction limits have been satisfied. C. Matching contributions are considered when determining if the overlapping plan deduction limits have been satisfied. D. The overall deduction will not exceed the overlapping plan limit if it is less than the minimum funding requirement for the defined benefit plan. E. The overlapping plan deduction limit will never exceed 25 percent of compensation. |
E The overlapping plan deduction limit may exceed 25 percent of compensation under certain circumstances. The deductible limit for both of the overlapping plans combined is limited to the greater of: 25 percent of compensation, plus up to 6 percent of compensation to the defined contribution plan (in other words 31 percent, if 6 percent is contributed to the defined contribution plan); or The amount necessary to meet defined benefit plan’s minimum funding requirement for year, plus a contribution of 6 percent of compensation to the defined contribution plan. |
