Simple IRA, Again

[geekgirldany]

Information NATP sent me:

The amount of any excludable contributions to a SIMPLE IRA is treated as an amount allowable or allowed as an IRA deduction for purposes of:
... the distribution of excess contributions before the due date (including extensions) for filing the return for the year for which the contributions were made (under Code Sec. 408(d)(4) , see ¶ H-12247 ),
... the distribution of excess contributions after this due date (under Code Sec. 408(d)(5) , see ¶ H-12248 ), and
... the Code Sec. 4973 6% excise tax on excess contributions (see ¶ H-12246 ). 13

=======
1512.6??Observation:?? SIMPLE IRA plans are required to limit elective deferrals (excluding catch-up contributions) to $10,500 for 2007. Contributions exceeding the elective deferral limit are included in the employee’s income. To avoid the 6% excess IRA contribution excise tax, such amounts (plus allocable earnings) must be withdrawn by the due date (including extensions) of the employee’s tax return. If this is done, the earnings (but not the excess) are taxable (and potentially subject to the early distribution penalty tax) in the year the contribution was made. If the excess is not withdrawn by the due date of the employee’s return, the excess will not be taxed when withdrawn but will be subject to the 6% excess IRA contribution excise tax for each year until withdrawn.

[Bees Knees]

Information NATP sent me:

The amount of any excludable contributions to a SIMPLE IRA is treated as an amount allowable or allowed as an IRA deduction for purposes of: ... the Code Sec. 4973 6% excise tax on excess contributions (see ¶ H-12246 ).

NATP research got it wrong.

Section 4973 says:

Sec. 4973. Tax on excess contributions to certain tax-favored
accounts and annuities


(a) Tax imposed

In the case of--
(1) an individual retirement account (within the meaning of
section 408(a)),
(2) an Archer MSA (within the meaning of section 220(d)),
(3) an individual retirement annuity (within the meaning of
section 408(b)), a custodial account treated as an annuity contract
under section 403(b)(7)(A) (relating to custodial accounts for
regulated investment company stock),
(4) a Coverdell education savings account (as defined in section
530), or
(5) a health savings account (within the meaning of section
223(d)),

there is imposed for each taxable year a tax in an amount equal to 6
percent of the amount of the excess contributions to such individual's
accounts or annuities (determined as of the close of the taxable year).
The amount of such tax for any taxable year shall not exceed 6 percent
of the value of the account or annuity (determined as of the close of
the taxable year). In the case of an endowment contract described in
section 408(b), the tax imposed by this section does not apply to any
amount allocable to life, health, accident, or other insurance under
such contract. The tax imposed by this subsection shall be paid by such
individual.

SIMPLE IRAs are described in Section 408(p). Its not any of the above.

[geekgirldany]

Yes you are right they got it wrong. I am going to send them these code sections and point out how wrong they are. This information they sent me appears to have come out of a certain tax publishers book. Concerns me that they got this so wrong.

Thanks so much again Bees. I would have made a big mistake.

Thank goodness for this board

[skhyatt]

Hmmm, was considering joining the NATP. Perhaps I should reconsider? Any feedback on the NATP?

[Bees Knees]

Hmmm, was considering joining the NATP. Perhaps I should reconsider? Any feedback on the NATP?

NATP is an excellent organization. I belong, and just recently attended their 1040 workshop. Their seminar books are very good, and the articles in their magazines are well written.

NATP is an organization made up of practicing practitioners. That is why their seminars and magazines focus in on topics that matter to us. Not all publishers use practicing professionals to write their publications.

Everyone makes a mistake. I’ve made my share. This is just an example of why you always need to get a second opinion if you are not sure.

[gailtaxed]

NATP is an excellent organization. I belong, and just recently attended their 1040 workshop. Their seminar books are very good, and the articles in their magazines are well written.

NATP is an organization made up of practicing practitioners. That is why their seminars and magazines focus in on topics that matter to us. Not all publishers use practicing professionals to write their publications.

Everyone makes a mistake. I’ve made my share. This is just an example of why you always need to get a second opinion if you are not sure.

I also belong to NATP, and I have used their research service occasionally (membership includes one free question each year) with normally excellent results. HOWEVER, I quite agree that everyone makes mistakes once in a while. I am responsible for anything I put on a tax return, regardless of what sources I use to obtain my information. That is one reason I am coming to rely more and more on these boards when I need assistance - I get more than one opinion, often with a cite, and can then focus my research and make my own decision. In discussion groups like this, people go back and forth and there is opportunity for me to correct any misunderstandings about the situation. No matter how carefully I think that I am describing the circumstances, often the person reading the description does not get quite the same facts from the situation as I did, or gets a different emphasis. Boards like these allow me to refine the question as we go along if it appears that I am on a different wave-length.

[skhyatt]

Thanks for the feedback. I certainly agree that everyone makes mistakes. I think I made one myself just a couple of years ago. But seriously, I'm one that does the research, then do it again, then still post a question, just to be as sure as I possibly can be. It's great to have this board to get those 2nd opinions. Especially I think when your a one person operation.

[Joe Btfsplk]

H D Vest

Josh I have been thinking about this recently. I have received a few things from HDVest and hope to check out more on their program next year. After I pass my enrolled agents exam I will look into adding investments to services. I have several customers that are in need of retirement planning.

The problem with selling thru HDVest is that your clients pay high commissions designed more to benefit Vest and the selling agent. Anyone who buys such products thru HD Vest rather than through a discount broker or a no-load mutual fund is obviously not very knowlegable about investing and should buy a Vanguard S&P 500 or total market fund and maybe a bond fund.

[geekgirldany]

NATP is a great organization. I agree that everyone makes mistakes. I have used their research services often. Sometimes I feel I may be making to many posts to the board and I will ask them instead. This is the first time that, I know of, they have been so off on an answer. But the information she sent me was referenced from a big publisher... I think we all know. It appeared to be from one of their reference type big books. What concerns me more is that this publishers information was so wrong.

Joe, on HD Vest that doesn't surprise me. I don't know very much about investing. Maybe there is another way I can go about learning investments and not go through HD Vest.