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- ROBS plan business owner took salary with no operating income
ROBS plan business owner took salary with no operating income
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trapprain
Level 2
10-06-2022
11:25 AM
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2021 W-2 filed for the owner who also paid all of his truck lease payments from his new dog breeding business, funded from his 401k, which never received any income and is now being terminated.
Any suggestions?
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4 Comments 4
George4Tacks
Level 15
10-06-2022
11:39 AM
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What do you see your involvement in this process to be?
Take the W-2 and file the 1040?
Inquire as to the type of entity the new dog breeding business was and file for that entity?
What is being terminated? The new business or the 401K?
Are you going to do all the required filings for the ROBS?
Are you going to suggest they go down the road and find someone more experienced?
I am from the Socratic School of Tax Preparation.
Answers are easy. Questions are hard!
PhoebeRoberts
Level 11
10-06-2022
12:05 PM
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"I am from the Socratic School of Tax Preparation."
Will the person who prepares these returns eventually be eyeing a cup of hemlock? 😆
qbteachmt
Level 15
10-06-2022
01:20 PM
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"Any suggestions?"
Where did you want to start?
What a shame.
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Don't yell at us; we're volunteers
Don't yell at us; we're volunteers
trapprain
Level 2
10-06-2022
01:54 PM
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The ROBS schemes require the use of a Corporate 1120 to report the business income and expenses. But because the only shareholder is the 401k of the owner ( providing all the initial funds), there are lots of prohibitions on how the owner can use those funds.- ex- salary should only come out of operating income.
The business is in the process of being terminated in 2022 because it did not turn out to be a profitable venture and the remaining funds will be put back into a conventional retirement plan for the owner.
The required 5500 filing was already done by the plan administrator. I have to file the 1120 and the 1040 for the owner for 2021.
Just hoping someone else with a more creative approach might have some suggestions regarding ways to minimize the damage. All I can think of is correcting the W-2 to zero but I have no experience trying to claw back SS and other taxes paid, so I imagine this is not feasible..
I know the DOL frowns on the incorrect use of the funds for salary, any idea of enforcement penalties etc?
