Tax Tip from the week of October 27, 2008

A checklist for your SIMPLE plan

As you prepare to give your employees the required annual disclosure notices for your business's SIMPLE plan, it's also a good time to make sure the plan is compliant with tax requirements.

Here's a checklist.

• Deposits. Are you depositing employee contributions in a timely manner?
  
  As a general rule, you have up to thirty days after the end of the month in which you withhold the money from your employees' pay to deposit the funds with your plan's trustee.
  
  Matching or nonelective contributions should be deposited by the due date for filing your income tax return, including extensions.
  
  
• Employees. Do additional employees qualify to participate in your SIMPLE plan this year?
  
  You're required to allow salary reduction contributions by employees to whom you expect to pay at least $5,000 in compensation during the year and who received at least $5,000 in compensation in any two preceding years.
  
  
• Limits. Have you notified your employees of the maximum allowable contribution amounts?
  
  For 2008, employee contributions are limited to $10,500. Those age 50 and over can contribute another $2,500, for a total of $13,000.
  
  
• Recordkeeping. Are you keeping track of participating employees and the amounts being withheld?
  
  You'll need that information to properly complete your employees' W-2 forms.

Please call us to discuss additional rules for SIMPLE plans. We can help you correct problems and maintain your plan's tax benefits.