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Re: Profit sharing- overpaid

Hi Linda,

I agree with the advice you got from you investment advisor. With IRAs and Roth IRAs, you need to be more careful about making sure that your contributions are credited to the correct tax year.

When you're self-employed and have a retirement plan set up for your business, it's up to you to keep track of which year to apply the contributions you make. Remember, each year, you have until the due date of your tax return, including extensions, to fund your self-employed retirement accounts.

Zip Code: 01801

Re: Profit sharing- overpaid

Linda,

There's more to it than your financial consultant suggested. You have to prove a mistake of fact in the contribution. If you have employees who did not receive the maximum benefit accruals allowed under the plan, it is nearly impossible to recover the overage. It must be applied to their benefit.

Also, it depends on when the money was put in. For example, say you made $20,000 of contributions for 2007 during the year and $25,000 in January or February of 2008, but instead of $45,000 for 2007, you may due to limits only have $32,000. The IRS rules say that $25,000 should be counted as a contribution for 2008 unless at the time you made that contribution you noted on the check (or in a formal resolution) that it was to be for the already-ended 2007 year.

So depending on when you made the contributions, you may not have an overage.

You should have your situation vetted out by an ERISA expert and take the necessary steps to correct the situation under ERISA.

Zip Code: 83402