Employer options for employee contributions may save a plan's qualification
Article Abstract:
Contributions to qualified plans typically are made as pre-income contributions and treated as employer contributions under Section 401(k) salary reduction arrangements. However, they can be made under post-income tax post-FICA/FUCA arrangements that are either mandatory or voluntary. Tests on permissible contributions are extremely complex, and the failure to meet nondiscrimination rules can result in disqualification of a plan. A plan meets general nondiscrimination rules only when the actual contribution percentage (ACP) of highly compensated employees does not exceed the ACP of non-highly compensated employees by greater than 125% or less than 200% or the lower paid percent plus two percent. Companies considering matching incentive programs should consider a 401(k) plan before considering an after-tax employee contribution plan. In addition, plans containing 401(k) arrangement should consider the addition of after-tax employee contributions.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1990
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VITA tax assistance is a de minimis fringe
Article Abstract:
Ltr. Rul. 9442003 indicates that tax preparation services provided by employers under the volunteer income tax assistance (VITA) program of the IRS are de minimis fringe benefits and therefore excludable. Formatting and transmitting services offered by employers for electronic filing of tax returns are likewise deemed excludable, regardless of whether the service is directly provided by the employer or performed by an employer-paid third party. The IRS deemed these services as de minimis fringe because their costs are found to be minimal. De minimis fringe is defined as any property or service whose value is small enough that accounting for it is simply not possible. Payments made by employers to outside tax preparers for similar services are not excludable.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1995
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