Form 8881

[Ephesians3-14]

I have a client who set up a cash balance plan in 2023. He operates a sole proprietorship. No other employees.

Is he eligible for the small employer pension plan tax credit?

[dkh]

I found some IRS links when I Googled    what is the tax treatment of a cash balance plan

[Ephesians3-14]

Thanks - I did that already. Already watched a few videos and reviewed the IRS site for discussion about the credit. Not very useful.

Was wondering though if the specific set of circumstances mentioned above might allow my client to claim the Form 8881 credit. Doesn't look like it, but wanted to confirm with someone smarter than me. 

[IRonMaN]

I'm definitely not smarter than you, but I also don't think you can do it.

[Ephesians3-14]

I think he's not eligible because he doesn't have at least one non-highly compensated employee.

Can he deduct on Schedule C the cost he paid to have the cash balance plan designed by a third party administrator?

[IRonMaN]

You have the same take on the credit as I do.  As far as deductibility goes, I don't know why he couldn't deduct the costs on schedule C.

[Ephesians3-14]

My thought as well - should be deductible on Sched C.

Thanks for the feedback.

[IRonMaN]

You betcha!