Qualified retirement plan catch-up contribution

[cpg]

TP made a 61,000 contribution to a profit-sharing plan retirement plan, along with a catch-up contribution. If I enter 67,500 the software defaults to 61,000 on Sch 1. Where do I enter the 6500 catch-up contribution?

[sjrcpa]

There is no catch up profit sharing contribution.

[cpg]

Pub 560 doesn't mention this. Do you have a reference?

TP income is from a partnership, not W-2, if that makes a difference.

[sjrcpa]

Catch up contributions are for 401(k) and 403(b) deferrals and IRAs and SIMPLE deferrals.

[sjrcpa]

I think you reading the Pub incorrectly. Nowhere does it say you can make a catch-up contribution to a profit sharing plan.

[cpg]

Here's 560 on catch-up contributions:

Catch-up contribution limits for 2022 and 2023. A plan can permit participants who are age 50 or over at the end of the calendar year to make catch-up contributions in addition to elective deferrals and SIMPLE plan salary reduction contributions. The catch-up contribution limitation for defined contribution plans other than SIMPLE plans is $6,500 for 2022 and increases to $7,500 for 2023. The catch-up contribution limitation for SIMPLE plans is $3,000 for 2022 and increases to $3,500 for 2023.

A profit-sharing plan is a defined contribution qualified plan. You'd think if catch-up contributions didn't apply it would be called out here.

In addition, every single non-authoritative source on the subject says catch-up contributions can be made to profit-sharing plans. I struggle to believe they're *all* wrong. I can't find an authoritative source that supports your claim. If you have one, please share.

[sjrcpa]

If I find time to research this I will throw some Code Sections at you.. I do know I am correct.

FYI- a 401(k) Plan is a Profit Sharing Plan that allows for elective salary deferrals (this is the IRC 401(k) part). And IRS Publications are not authoritative.

I did a search in the Pub for "catch-up" and every place I found it was referring to salary reduction/deferrals. 

P.S. Your quote from the Pub says "A plan can permit participants who are age 50 or over at the end of the calendar year to make catch-up contributions"   Profit sharing contributions are Employer contributions. Participants make elective deferrals/salary reduction contributions.

[cpg]

It would be great if you had a source, or something else that validates your position other than 'I know I'm right.'

I'm following your logic but it contradicts everything else I've read about profit-sharing plans. And I'd think that if you were correct the TP would have been advised differently by his partnership's accounting firm. I will take your opinion into consideration as I research this issue further.

[George4Tacks]

Are you getting this number from the K-1 line 13, code R?

[allyphoe]

(Computers are hard)

[allyphoe]

(Computers are hard)

[TaxGuyBill]

If you look at Publication 4806 and other IRS information that specifically is for "profit sharing plans", they state the limits but nowhere does it state an increased limit for age.

https://www.irs.gov/pub/irs-pdf/p4806.pdf#page=6

https://www.irs.gov/newsroom/profit-sharing-plans-for-small-employers

https://www.irs.gov/retirement-plans/choosing-a-retirement-plan-profit-sharing-plan

As Susan said, the basic profit-sharing plan is only employer contributions.  There is an add-on feature to have the employee also make contributions (I think that usually makes it a 401k plan).  As your citation pointed out, the participant (employee) can make a catch up contribution.

So back up - does this plan allow participants to contribute, and did the participant actually contribute?

[PhoebeRoberts · Accepted solution]

Assuming this is a 401(k) or other plan allowing employee deferrals, not a SEP or other all-employer plan, your input should look similar to this:

Note the "NOTE Enter employer contributions (if any) above" in the 401(k) input section, which cues you to enter the employer portion at the top and the employee deferral on the elective deferral portion.

Schedule 1 worksheet will look like this:

[PhoebeRoberts]

If we're going to go down that road, we might as well back up to "is this actually a plan adopted by the partnership," because that question is also hanging out there, and it's entirely believable to me that the partnership's accounting firm could have erroneously told a partner they could make $67,500 of total contributions in the absence of a partnership-adopted plan.

Assuming the $67,500 of contributions are permissible, Lacerte (and therefore ProConnect) supports that much in deduction.

[PhoebeRoberts]

Lack of threading sucks. Also, I suck at computering today. @TaxGuyBill the above comment was in response to you.

[sjrcpa]

I was wondering whether it was Partnership plan, too.

[qbteachmt]

"TP income is from a partnership, not W-2, if that makes a difference."

Of course that makes a difference. Instead of everyone needing to make assumptions, why not give the details? Which entity type, what is the plan type? Where did the K-1 come from?

[cpg]

@George4Tacks Yes

[cpg]

As I stated early on in this increasingly fractured and hostile thread, this is in fact in reference to a partnership and the 67,500 is on line 13 of a K-1.

So it seems like the answer might be, there are no catch-up contributions for profit-sharing plans *except in certain circumstances.*

[cpg]

@PhoebeRoberts Okay, so if this is actually a plan adopted by the partnership, is the additional 6500 a legit contribution? 67,500 was on the K-1.

[cpg]

@sjrcpa I said it was a partnership in one of my earlier responses to you.

[cpg]

@PhoebeRoberts thank you for actually answering the question. Your solution worked perfectly, of course; I was almost there but had missed the elective deferrals component. Looks like I have some reading to do on profit-sharing plans.

[qbteachmt]

"increasingly fractured and hostile thread"

It's only text. I read it as increasingly confused, not enough specifics in the beginning, a lot of attempts to help by making some assumptions, and increasingly frustrated.

But hey; you do you.

[cpg]

@qbteachmt Think to yourself -- was your comment really necessary? Or is it actually a perfect example of the phenomenon I was remarking on? 🤔

[sjrcpa]

@cpg  You never said it was a 401(k) Plan. Since Phoebe's answer was the Solution, it must be.

If the K-1 had 67,500 on the one line with no explanation/breakdown of deferral, catch up and profit sharing I'd call that sloppy K-1 presentation. I always break it down.

I got that you said it was a partnership. Someone else made that comment.

P.S. This wasn't hostile. The answers you get here, from other users who volunteer to help people, are only going to good if you provide accurate, complete information.

[qbteachmt]

"was your comment really necessary?"

If it helps you understand there is perspective, and it's up to you to provide enough details up front to help your peer users that volunteer to try to be helpful, then obviously, I felt it was necessary to attempt to address both points.

I am the one that asked for more details. You stated Partnership, but there might have been important details for that partnership that would contribute to the understanding.

If you don't like answering follow up questions, you need to provide more details up front. No one on the internet can review what you have in front of you.