Click here for print-friendly copy

 

 IRS CHECKING 401(K) COMPLIANCE

that failure to respond or to provide complete information will result in further action, which could include a full examination of the plan.

          Administration of 401(k) plans and the related compliance work require significant technical attention. If you, as a plan sponsor, receive a letter from IRS concerning a compliance check of your plan, we urge that you contact us (if we prepare your plan filings) or the plan administrator. Failure to complete the questionnaire timely and accurately could, as mentioned above, cause the plan to be examined by the Internal Revenue Service. A plan examination is time consuming and costly. The proper completion of the questionnaire could help to avoid such an examination.

          We will be glad to help or to advise you if you receive a plan compliance check letter from the IRS.

REQUIRED DISTRIBUTIONS FROM QUALIFIED PLANS AND IRAS - 2010

          As you will probably recall, most payments of required minimum distributions were temporarily suspended during 2009. The law, however, does not waive the 2010 required minimum distributions, which will be based on the December 31, 2009 account balances. That is, participants in qualified plans and owners of IRAs who are age 70½ or more must generally receive a required minimum distribution from the plan or IRA on or before December 31, 2010.

          The penalty for failure to take a required distribution  

is substantial (50 percent of the undistributed amount). If you have received minimum required distributions in the past, a distribution will probably be required for 2010. If you believe that you are required to take a required minimum distribution from a plan or IRA, the plan administrator or IRA custodian should be made aware and provide for an appropriate distribution.

          We will be happy to answer any questions you might have concerning required minimum distributions or distribution planning in general.

          It is probably worthwhile for us to periodically stop and think of the basics of prudent financial planning. We are all forced to think, at least when we file our tax returns, about whether or not we are properly planning our income tax situation. There is no such annual reminder of the need for reviewing other (and possibly more significant) aspects of our financial planning. We have listed below several general questions in the areas of savings and accumulation, insurance coverage, estate planning, community property planning, and business planning, which you might find helpful in a self-administered “annual checkup.” We will be happy to discuss any of these issues with you.

Savings and Accumulation

• Should I convert my IRA or 401(k) to Roth?

• Are my accumulations for retirement and financial security being done by the best method available as to income tax and estate tax consequences, and to my satisfaction as to risk, cost and expenses, and investment results?

• Am I providing funds to educate children or grandchildren, or to care for dependent parents in the most tax-advantaged manner?

Insurance

• Do I have enough (or too much) life insurance, and is it the most cost effective available?

• Is my life insurance properly owned considering my marital status and estate tax situation?

• Do I have adequate long-term disability insurance, and is it the most cost effective available?

• Do I have adequate and the most cost-effective major medical insurance?

• Is my personal liability coverage (i.e., homeowner’s, directors, automobile, umbrella, etc.) adequate?

Estate

• Is my (and my spouse’s) will current and appropriate?

• Is my potential estate and that of my spouse liquid enough to handle the estate tax without undue strain?

• Should I have a durable power of attorney to become effective upon physical or mental incapacity?
  

• Should I have a living will?

• Do I have a program of annual exclusion gifts, or is such a program appropriate?

• Should I have a family investment entity as a vehicle for annual giving, to maintain control, and to make valuation discounts available?

• Should I consider using the $1,000,000 unified credit for the federal gift tax now?

Community Property

• Should I consider the consequences and possible risk/benefits of becoming separate in property, i.e., terminating the community with my spouse?

• Should I consider the consequences and possible risk/benefits of converting any of my separate property into community property?

• `Is a “reservation of the fruits” (declaration of the income from separate property as separate) appropriate for me and/or my spouse?

Business Planning Questions

Employee Benefit Plans

• If my business (or a part-time business) has no retirement plan, would the adoption of one be appropriate?

• Are the retirement plans sponsored by my business appropriate as to type, amount of benefit provided, and cost effectiveness?

• If the cost of retirement plans is prohibitive and if I am not interested in contributing for myself, would a 401(k) arrangement be appropriate for my employees’ benefit?

• Should my business have a cafeteria plan for payroll tax savings with salary reduction for group insurance plans?

Systems

• Is my business cost-effectively utilizing information technology for business operations, bookkeeping, and financial statements?

• Should my business have an evaluation of its internal control system and/or the efficiency of its operational systems?

         We will be happy to help you in reviewing your personal and business planning.

| Home | Our Firm | Our Staff | Accounting Services | Physician Services |
| Resources | Contact Us | Intranet |

© Designed and Hosted by U.S. NetworX