In article <gm03ji$5h7$1[at]blue.rahul.net> ,
Steve Pope <spope33[at]speedymail.org> wrote:
- quote -


Interesting.


--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

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Arthur Kamlet <-To[at]panix.com> wrote:

- quote -

Let's say TP has a Schedule C with 20K in profit one year,
and a Schedule C with 20K in loss the following year.
The TP (if over age 50) can put the entire profit of
20K from the first year into an individual 401(k) plan --
but on an accumulated basis the business never made any
profit.

I think under this scenario, it would be a disadvantage
for the TP for carry back the loss, because it would zero
out line 12 of the prior year 1040 and (this is the part I'm unsure
of) require a corrective distribution from the plan.

As I said I'm unsure of the ramifications of this but
it seems like a possible win to not have the profit and
loss fall into the same tax year.

Steve

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On Jan 30, 11:06 am, kam...[at]panix.com (Arthur Kamlet) wrote:

- quote -

If you amend a prior year return with the NOL and the profit is
reduced for that year, then you have to withdraw some of the 401K
money. Does the 10% penalty on earnings then apply?

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On Jan 30, 10:57 am, aloy.par...[at]gmail.com wrote:

- quote -

Assuming that 15k + 20% was less than 49k or so, be aware that you can
set up a SEP-IRA and sock away 49k a year.

http://personal.fidelity.com/product...ira.shtml.cvsr

If you have a 401K at your other company, I imagine that the combined
amount deposited into that 401K and your SEP-IRA cannot exceed 49k,
but I could be wrong on this.

And if you have employees you have to offer them the same benefits,
otherwise your plan is discrimination. There are safe harbor rules
for IRA.

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In article <glvlka$1gv$1[at]blue.rahul.net> ,
Steve Pope <spope33[at]speedymail.org> wrote:
- quote -



I'm not following. The SE retirement plan contribution would not
exceed the net earnings from self employment. In a losing year no
contribution.

- quote -

Could you be more explicit?
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

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Arthur Kamlet <-To[at]panix.com> wrote:

- quote -

This is interesting. Are you then saying a Sched. C filer
could pump up their retirement plan by arranging to report
excessive profit in one year and then a loss the next (since
the NOL flows to 1040 and not Sched C)?

In such a scheme, TP could conceivably defer more than their
actual cumulative business profit.

Wouldn't be the first loophole in the code, but it seems
pretty glaring if it's there.

Steve

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<aloy.parker[at]gmail.com> wrote:

- quote -

My non-professional impression of this is:

It seems to me if you carry the loss back you will have to make a
corrective distribution from your 401(k). You probably want to avoid
this -- note that it isn't going to save you much tax -- and instead
should elect to carry the loss forward. You should try to generate some
self-employement income in the current year or the near future.
You may want to talk to a retirement plan specialist.

Steve

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <729bcfbd-f697-45c0-a6b8-31d143580842[at]g1g2000pra.googlegroups.com> ,
<aloy.parker[at]gmail.com> wrote:
- quote -

Check out Net Operating Loss.


However if your wages from your job are more than your business loss,
you will not have an NOL and would deduct the schedule C loss currently.

- quote -


If you have a true NOL, you carry back two years (unless electing
not to carry back) and then forward. But if your wages exceed your
Sch C loss there is no NOL.
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

I have/had consulting business for more than 5 years (along with
working as an "employee" for another firm). Tax-wise there's always
been a profit (SE income), but much/most of it was actually put into a
SE-401K (my reguarly employer doesn't have a retirement plan). In fact
the maximum contribution was placed in the 401K SE every year. Because
my regular wage income was over the SS limit (no 12.4% ss tax),
except for the medicare (2.9%), a total ~15K +20% profit was
contributed every year (nice deal).

However in 2008 I will have a loss. In fact I will have no new revenue
on a cash-basis this year (no 1099 income). This loss is due to the
fact that I was paid in advance in Dec 2007 for consulting to be
performed in 2008; with the taxes on these funds therefore paid on my
2007 return.
The estimated amount of the loss is relatively small, but significant
(~ $5K).

Is part of the 2008 business loss deductable against other 2008
income?
I also understand that you can (or may be required) to carry forward
part/all of the loss to be deducted against future business profits. I
also understand that it may be possible to carry back the loss against
prior years to get a a more immediate benefit.

My two questions are:
1) What is the quick summary of how a loss is handled (I checked the
relevent IRS pub and it seems very complicated) in terms of what it
can be deducted against.

2) How does the loss and how it is handled (especially it is applied
to past years), effect past 401K contributions? For example if it
possible to get a credit for the loss based on past year's profits
does this method effect the allowable 401K contribution for that past
year the loss is applied against requiring some adjustment/withdrawal
of/from the 401K ?

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >