From TaxAlmanac, A Free Online Resource
From TaxAlmanac
Discussion Forum Index --> Accounting Questions --> Can I cancel SEP or start new SEP
Woodsinc (talk|edits) said:
| 22 April 2008
|
| I have a small s-corp(with two businesses under it) and had a SEP plan setup for six employees. All eligible employees had to be there for 3 years before our business would have to contribute to them under the plan. Since our business has turnover and none has stayed longer than two years we thought it would not be a problem and we could max out as much as possible to lower our taxes. Now we find out that the plan does not count 36 months as the three year criteria but just as long as a employee was there in 3 calendar years. We will have to contribute to one of our employees that is no longer with us. I want to cancel our SEP(or remove the employees from the SEP) and put up the employees under a new s-corp(with no SEP plan) and have me and my wife remain under the current s-corp with the current SEP with just us two employees. Is the possible? Should we be shareholders or employees under the new corp or should we just let a family member(who is one of the employees) run it. Its a break even business the employees would be under whereas our other business is very profitable.
Thanks
|
Actionbsns (talk|edits) said:
| 23 April 2008
|
| Woodsinc, I don't think you can do this to avoid contributing for your employees. That's why the parameters have been set the way they are and the law was drafted to protect employess from this very situation. Have you spoken with the person who set up your SEP? Seems to me that's the better person to answer these questions.
|
WAKAYO (talk|edits) said:
| 28 April 2008
|
| BELIEVE YOU CAN CANCEL IT, BUT WITH TAX CONSEQUENCES. BUT, NOT SURE WHY YOU ARE NOT INTERESTED IN KEEPING IT.
|
Woodsinc (talk|edits) said:
| 30 April 2008
|
| The only reason I set it up was to maximize our deductions AND no employee has stayed longer than 3 years. We were discussing with our CPA ways to get more deductions as we were only doing my wife and myself under another plan so we decided to set up a SEP to include 4 employees to get higher limits of deductions. I guess I wear to many hats in trying to run a small business and figure tax strategies. Now I'm in a situation where if we want to contribute the largest percentage to our SEP(out of the 100% total salary pie for everyone) then we must pay ourselves ALOT more, thus paying more in Fed/Soc/Med taxes along the way as well paying workers comp, franchise, and estimated taxes. Heck, we have to have money to run the business on as well pay personal bills. I guess I have a good/bad problem but just thinking of smarter/better ways to maximize savings.
|
To join in on this discussion, you must first
log in.
