Instructions For Form 5330 - Return Of Exange Taxes Related To Employee Benefit Plans Page 5
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The nondeductible contributions are
Contributions to a SIMPLE 401(k) or
Part IV (Section 4975)
computed as of the end of the
a SIMPLE IRA that are considered
employer’s tax year. The current year
nondeductible because they are not
Tax on Prohibited Transactions
made in connection with the employer’s
nondeductible contributions are equal
Section 4975 imposes an excise tax on
trade or business.
to the amount contributed during the
a disqualified person that engages in a
employer’s tax year over the amount of
prohibited transaction with the plan.
contributions allowable as a deduction
The combined plan deduction limits
Plan. For purposes of prohibited
under section 404. In addition, prior
are first applied to contributions to the
transactions (section 4975), the term
year nondeductible contributions
defined benefit plan and then to the
“plan” means any of the following:
continue to be subject to this tax
defined contribution plan.
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A trust described in section 401(a)
annually until eliminated by either
that forms part of a plan.
distributions to the employer of the
Restorative payments to a defined
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A plan described in section 403(a),
amount of nondeductible contributions,
contribution plan are not considered
and that trust or plan is exempt from tax
or a carryforward deduction in years
nondeductible contributions if the
under section 501(a).
after the nondeductible contributions
payments are made to restore some or
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An individual retirement account
are made.
all of the plan’s losses due to an action
described in section 408(a).
(or a failure to act) that creates a
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Although pre-1987 nondeductible
An individual retirement annuity
reasonable risk of liability for breach of
contributions are not subject to this
described in section 408(b).
fiduciary duty. Amounts paid in excess
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excise tax, they are taken into account
An Archer MSA described in section
of the amount of the loss are not
to determine the extent to which
220(d).
considered restorative payments.
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post-1986 contributions are deductible.
A Coverdell education savings
See section 4972 and Publication 560,
account described in section 530.
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Part III (Section 4973(a)(3))
Retirement Plans for Small Business,
A Health Savings Account described
for details.
in section 223(d).
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Tax on Excess Contributions to
A trust described in section
Defined benefit plans exception.
501(c)(22).
Section 403(b)(7)(A) Custodial
Generally, contributions up to the
Accounts
current unfunded liability of a defined
If the IRS determined at any
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benefit plan are deductible, regardless
time that your plan was a “plan”
Line 15. Reduce total current year
of the number of participants in the
as defined above, it will always
contributions by any rollover
CAUTION
plan. In addition, when determining the
remain subject to the excise tax on
contributions described in sections
amount of nondeductible contributions
prohibited transactions (section 4975).
403(b)(8) or 408(d)(3)(A).
for any tax year, an employer may
This also applies to the tax on minimum
elect, for that tax year, not to include
funding deficiencies (section 4971).
Line 16. The amount you will enter on
any contributions to a defined benefit
line 16 is the amount excludable under
Disqualified person. A “disqualified
plan except to the extent they exceed
section 415(c) (limit on annual
person” is any person who is:
the full-funding limitation (as defined in
additions). Figure the amount to enter
1. A fiduciary.
section 412(c)(7), determined without
on line 16 using Table 2.
2. A person providing services to
regard to section 412(c)(7)(A)(i)(I)).
the plan.
When determining the amount of
3. An employer, any of whose
To determine the amount
nondeductible contributions, the
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employees are covered by the plan.
excludable for years prior to
deductible limits under section
4. An employee organization, any of
January 1, 2002, see
CAUTION
404(a)(7) must be applied first to
whose members are covered by the
Publication 571, Tax-Sheltered Annuity
contributions to defined contribution
plan.
(403(b)) Plans, for the specific year.
plans and then to contributions to
5. Any direct or indirect owner of
defined benefit plans. This election
50% or more of:
Table 2. Limit on Annual Additions
applies to terminated and ongoing
a. The combined voting power of all
plans. An employer making this election
classes of stock entitled to vote, or the
cannot also benefit from the exceptions
1. Enter your includible
total value of shares of all classes of
compensation for your most
for terminating plans and for certain
recent year of service* . . . . .
1.
stock of a corporation,
contributions to defined contribution
b. The capital interest or the profits
plans under section 4972(c)(6).
2. Maximum* . . . . . . . . . . . . .
2.$41,000
interest of a partnership,
Defined contribution plans
3. Enter the lesser of line 1 or
c. The beneficial interest of a trust
exception. Employer contributions to
line 2. This is your limit on
or unincorporated enterprise, which is
annual additions. Enter this
one or more defined contribution plans
an employer or an employee
amount on line 16, Part III . .
3.
that are nondeductible because they
organization described in 3, or 4 above.
exceed the combined plan deduction
*For more information, see Publication 571 for the
A limited liability company should be
year the excess contribution is being calculated.
limits of section 404(a)(7), are not
treated as a corporation, or a
subject to the 10% excise tax to the
partnership, depending on how the
extent the contributions do not exceed
organization is treated for federal tax
the greater of:
The limitation on line 2 ($41,000
purposes.
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6% of compensation (within the
for 2004) of Table 2, under
6. A member of the family of any
meaning of section 404(a) and as
section 415(c)(1)(A), is subject
individual described in 1, 2, 3, or 5.
CAUTION
adjusted under section 404(a)(12)) paid
to changes in the cost-of-living as
Member of a family is the spouse,
or accrued (during the taxable year in
described in section 415(d). Currently,
ancestor, lineal descendant, and any
which the contributions were made) to
the dollar limit for a calendar year as
spouse of a lineal descendant.
beneficiaries under plans, or
adjusted annually for cost-of-living
7. A corporation, partnership, or
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The sum of the amount of
increases is published during the fourth
trust or estate of which (or in which)
contributions described in sections
quarter of the prior calendar year in the
any direct or indirect owner holds 50%
401(m)(4)(A) and 402(g)(3)(A), or
Internal Revenue Bulletin.
or more of the interest described in 5a,
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