Contributions & Distributions
Please find below information regarding Contributions and Distributions which may occur within your Profit Sharing Plan at some point in time.
When you started the ERSOP Process, the Plan we established for you is a Profit Sharing Plan. This Plan has the necessary language and amendments to allow you to rollover your retirement funds to invest in your business. It also has the ability for you to make Profit Sharing contributions for every tax year. We urge our clients to fully utilize this Plan, which would include rolling over the retirement funds to invest in the business and make Profit Sharing contributions from time to time. The IRS likes to see these Plans being fully utilized, and not just as a source of funding for the business. This means that when the business becomes stable and you start seeing profits, you should begin making Profit Sharing contributions.
As the name implies, this means some of the company’s profits will be shared with the eligible employees. It also means that if you don’t have any profits, then there is nothing to share and you don’t need to make a contribution. You and your accountant should determine the amount that gets ‘shared’ when you sit down to prepare the Corporate tax return. This amount is deductible on your Corporate tax return, so it can help to reduce the tax liability of your business.
If you are considering making contributions, it is important to please contact us first so that we may walk you through the correct steps on making a contribution to ensure you remain in compliance with the IRS.
For more information, please reach out to us at (714) 842-1212 or firstname.lastname@example.org.
Please be aware that if a participant with an account balance terminates or takes distribution/ is planning to take a distribution, it is important to inform us immediately by emailing email@example.com with the following data:
• The participant name, hours worked, and if applicable, the termination date and termination wages (if any)
• Copies of the filed Form 1099R(s) and signed Form 1096
• Copy of the relevant participant distribution form(s), filled out (found in your blue Profit Sharing Plan binder)
If you have not filed the Form 1099R(s) & 1096, ERSOP can produce them for a fee of $250 for the initial filing of the forms and $100 for subsequent filings. If you hire ERSOP to produce the forms, please sent the data to us as soon as available or no later than December 1st of the distribution year.
The IRS filing deadlines for the Form 1099R & 1096 are as follows:
1) Copy C for Recipient (participant) is due January 31st (of year after distribution year)
2) Copy A for IRS is due January 31st (of year after distribution year)