Updated IRS Publication 560 - Retirement Plan Information For Small Businesses

The retirement plan rules are constantly changing. They can be complex. Often, taxpayers are looking for good, free sources of information. While internet searches can be helpful, caution should be used, because there is no guarantee that the information you have found is timely or accurate.

So where can you get accurate information on retirement plans? One source is the publications from IRS. Many CPAs, attorneys, and financial planners who don't specialize in retirement plans will also use IRS publications to help them get up-to-speed on the basic retirement plan rules.

If you own a small business, you might be looking for information about employer retirement plans. IRS Publication 560, Retirement Plans for Small Businesses (SEP, SIMPLE, and Qualified Plans) for use in preparing 2012 tax returns, has been updated and posted on the IRS website (www.irs.gov).

Publication 560 is a great source of basic information on employer retirement plans such as a simplified employee pension (SEP), savings incentive match plan for employees of small employers (SIMPLE) and qualified retirement plans.

The "What's New" section of the publication highlights the increased contribution limits for various employer plans for 2012 and 2013 as a result of cost-of-living adjustments (inflation). For example, for 2012, the maximum SEP contribution limit is 25% of up to $250,000 of compensation, limited to a maximum annual contribution of $50,000. The limit is 25% of up to $255,000 of compensation, capped at an annual contribution of $51,000, in 2013.

This section also describes the new options for in-plan Roth rollovers in a company retirement plan (not including SEP and SIMPLE plans) under the American Taxpayer Relief Act of 2012 (ATRA).

However, you should be careful. While IRS publications are a good source of general information, they can never be used as a substitute for the information contained in the law, IRS regulations, or a competent, educated financial advisor.

Remember: mistakes can be costly!

Private Letter Ruling 201302047

A taxpayer we will call "Larry" received a distribution of shares of stock from his IRA maintained with Company A with the intenion of rolling them back into the IRA within 60 days.

On this date, he temporarily transferred the shares of stock to his individual brokerage account so he could satisfy having 10% liquidity of the purchase price of the home he was buying in a non-retirement fund account.

Within the 60-day rollover period, Larry closed the mortgage loan and could have transferred the stock back to his IRA. However, he believed that he had already instructed Company A to return the stock to his IRA, so he didn't contact a representative within the allotted window.

Larry checked his account on a future date, 17 days after the 60-day rollover period, and discovered that the stock had not been transferred back into the IRA. The Company maintained that it did not execute the transfer, because it was waiting for further instructions from Larry.

Larry submitted a private letter ruling request so he could move the shares of stock back into his IRA without penalty.

IRS ruled in his favor and waived the 60-day rollover requirement with respect to the distribution of stock from the IRA. He was granted a 60-day period from the issuance of the ruling letter to contribute the stock back into his IRA.

Lesson to Learn:
Follow up, follow up, follow up, especially when it comes to the 60-day rollover requirement. Also, remember that you must roll over the same property you receive EXCEPT in the scenario when the property received from an employer plan can be sold, and the proceeds roll over in its place.