"Bob Greene" <bobg[at]cet.com> wrote:
- quote -

They could be a little POed that the option to roll the
money into another plan wasn't offered and now they owe tax
and early distribution penalty on the money.

- quote -

That may not hold. I don't have that kind of resource
material in my home office, but all that might matter is
that it was represented to them that there WAS a qualified
plan.

- quote -

situation.

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.

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j.green[at]worldnet.att.net (Christopher Green) wrote:

First of all, the program was never opened or ever funded.
Second, the employees ( two) agreed and accepted the return
of thier orginal investment ( that was used by the owner for
working capital) plus additional funds for use of money. The
employees are still working there and are happy to support
the business, although angry the pension was never started
up. If we used the idea that they never received the funds (
ie constructive receipt) two years ago, then issuing 1099's
for the upcoming year would be taxing those wages already
taxed for social security purposes. If we say they took a
distribution from the fund, what could the client issuue?
Surely wrong, since there was never any fund to start with.
If I correct the W-2's, the employees would owe back taxes
and penalties. It seems to me the porcess for receipt of
income in this year would set the taxes into effect. Am I
wrong in my thinking? It could be that they never received
full payment for salary and now the business paid them.
Thanks for all the replies...
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Dave Woods, EA" <d.woods[at]verizon.net> wrote:
- quote -

Employer funded nothing, supposably in this plan it was an
employee solely account. I guess the employees trusted the
employer and just found out that no funds where ever
deposited. Stupid? yes, now how to correct is the problem...

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"Dave Woods, EA" <d.woods[at]verizon.net> wrote:
- quote -

As David points out, neither option (revised W-2 or 1099) is
particularly appealing. However, if a qualified plan is
deemed never to have existed, then doing revised W-2 may be
the only option. If a qualified plan is deemed to have
existed then the return of the money is a distribution and a
1099-R is required. This also leads to the possibility that
the employees will have early distribution tax issues.

As Helen points out in the next post, fraud is a concern.
Even if this doesn't elevate to the level of fraud, there is
also concern about prohibited transaction penalties on the
part of the employer. Depending upon the timing of when the
plan started and how quickly the employer acts (there is a
two year time limit), if the employer want to correct the
problem and actually open the plan accounts, there is the
possibility the employer could correct this problem through
the "Self-Correction Program". I would recommend getting an
ERISA specialist (lawyer or pension specialist) involved.

--
Dean Gilger, EA CPA CMA
Playa del Rey, CA 90293

Postings here are general information only and not to be
relied upon as advice

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"Bob Greene" <bobg[at]cet.com> wrote:

- quote -

Two problems here, first is with the Dept of Labor. Its
their watch for pension issues and when the irate employee
finds them that will be an issue.

The second is on the IRS 5000, what was reported?

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- quote -

On a first read, work thru this guy's lawyer. He committed
fraud in my book and I would not work directly with him.
And if I would decide to help him, thru his lawyer, it would
most definitely be the last thing I would do to him.

Helen, EA in PA
Member of The Tax Gang
President, PA Society of Enrolled Agents
1040EZ and 1040A tax prep at www.1040.com/1040pro

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Here's my problem. Client offered a retirement plan to
employees two year ago. W-2's where properly issued at that
time. I was just informed by the employees that the funds
where never funded to the programs and the client never
opened the account. The client has decided to "refund the
money " . A suggestion was made since Social Security taxes
where already withheld to issue this payment back ( plus an
agreed upon additional amount) as a 1099 with witholding for
the employees involved. I am looking for ideas ...Should I
send in corrected W-2's for the years and have the employees
file amended returns or would the above idea hold water?

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