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What forms are needed in a C Corp tax return when filing a corporation with a client who made rollover of business startup?
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Should just be the form 1120 and related State form. If the taxpayer used a service such as Benetrends or Guidant they will provide documents that are useful in completion of the tax returns.
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It may also be a listed transaction requiring that disclosure form.
The more I know the more I don’t know.
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By disclosure do you mean the Schedule G?
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Yea thats an area I am not sure on. Does the 401(k) have ownership in the Corporation? Or will it be the taxpayer showing the ownership and spouse? Or is each different and I need to look at the bylaws?
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The 401(k) Plan is an owner. I won't touch these. they smack of Prohibited Transaction to me.
Listed transaction = Form 8886
The more I know the more I don’t know.
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Form 8886, is this form on the Taxpayers 1040? I don't see this form on the Corporation.
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It is used for corporations, too.
The more I know the more I don’t know.
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I would not use the Form 8886.
Yes, the retirement plan ownes the corporation
Follow the link below to the IRS website where the ROBS Business Start-Ups Compliance Project provides an overview.
https://www.irs.gov/retirement-plans/rollovers-as-business-start-ups-compliance-project
The link below is an IRS Memorandum Guideline regarding rollovers as business start-ups
https://www.irs.gov/pub/irs-tege/robs_guidelines.pdf
Like SJRCPA many accountants will not work with ROBS clients because there is a good deal of risk involved. If the client is not working with a company such as Benetrends or Guidant I would definitely stay away. That said there is still no guarantee there will be no issues with the IRS. The key is advoidance of prohibited transactions, meticulous recordkeeping, no S Corp entities only C corps, must be a 401(k) rollover, no IRA's, etc. Do your research and make sure the client is willing to do what is required - administering the plan going forward can be expensive.
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Benetrends or Guidant ok good to know. Thanks for your help. Great information.
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What sentence can I add to my engagement letter in regards to the ROBS transaction?
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And it’s just not true that only those who pay for Guidant administration can do this correctly. It does require meticulous records, avoidance of prohibited transactions (which is simple to accomplish), a C Corp, a 401K, etc. but there are many attorneys who can set these up for their clients and many business owners who have the acumen to do this correctly without paying thousands a year in admin fees. It all depends on how they are using the 401k. The benefit of ongoing plan admin is only really seen with companies that have employees who continue making regular contributions to their 401k plans, etc.
Small entrepreneurs shouldn’t be bullied into thinking they can’t fund their businesses with their own hard-earned 401k plans unless they can spend thousands a year for an administration company to do nothing but file an annual 5500 for them.
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A Client starts a "C" corporation, then starts a 401k plan then rolls over his 401k plan into the "C" corporation 401K plan and then issue stock to the 401K. the C corporation then invests in a partnership. the only income in the corporation in income earned as a partner in the partnership. Can the owner of the 401k take a salary from the corporation? I thought salary was prohibited in a ROBS?
