SCorp Pension question..

[ed_accountant]

Hi,

A potential client just call me to request a quote on an Scorp and LLC return.

He explains that the LLC business does IT consulting and has outside employees and the Scorp sells some type of IT product with only shareholder employee. He explains that his previous accountant set this as so that owner wages are on the SCorp to maximize a pension contribution and on the LLC there is no pension plan. He states that the businesses are very different but both are under the same ownership. In summary, employees have no pension or 401k in LLC and owner has pension on Scorp.

I told this potential client that this wrong. I would like to confirm that this is against pension rules..

Comments.. please Thanks

[Maura]

I am not a pension expert. But based on your brief description this setup sounds like a controlled group for purposes of pension plans. Is the LLC a disregarded entity?

"A parent/subsidiary controlled group takes into account ownership of one entity (corporations, partnerships, and sole proprietorships) by another. "

[Lion EA]

Don't know for sure and still working on extensions, but think those are considered one group for pension non-discrimination purposes. If you're considering taking him on as a client, definitely research the rules on this situation. Why is he leaving his last preparer?

[ed_accountant]

Don't know for sure and still working on extensions, but think those are considered one group for pension non-discrimination purposes. If you're considering taking him on as a client, definitely research the rules on this situation. Why is he leaving his last preparer?

He says his accountant is too busy and he is not happy with his services... Thanks

[jainen]

>>He says his accountant is too busy<<

Hey, being busy is how accountants earn their living. "Too busy" can only mean this client wants services outside billable hours. And it's also worth noting that he blames his accountant for cheating the employees in violation of IRS rules.

So what was your question, Ed? Oh that's right--you didn't ask one.

[ed_accountant]

>>He says his accountant is too busy<<

Hey, being busy is how accountants earn their living. "Too busy" can only mean this client wants services outside billable hours. And it's also worth noting that he blames his accountant for cheating the employees in violation of IRS rules.

So what was your question, Ed? Oh that's right--you didn't ask one.

Thanks,

I just wanted to confirm that the previous accountant's strategy was wrong and in violation of IRS rules..

Thank you everyone who responded

[Gail in Virginia]

Being too busy might also be the previous accountants way of firing this client for putting words in his/her mouth.

[JohnH]

It could also be that the previous accountant didn't endorse the setup or perhaps just recently learned about it. As a result, he found that he was too busy to sign a return under these circumstances, rather than too busy to prepare it. Whatever the case, this one has "PASS" written all over it.

[Maura]

Should look to see if a QSLOB was filed and accepted.

[jainen]

>>I just wanted to confirm that the previous accountant's strategy was wrong and in violation of IRS rules.<<

First you should confirm that it was in fact the accountant's strategy. I can't quite explain it, but at least to me there is something about this scenario that suggests otherwise.

[kcjenkins]

Jainen makes a very good point. How often have you told a client something they did not want to hear, in response to their telling you what they want to do, only to later hear that they talked someone else into doing it 'their way'? I know I have. I've had a potential client tell me "his lawyer" or "his former CPA" told him he could do XXXXXXX, when I knew very well it could not be done that way. Sometimes I've followed up on that, and every time I ever did, the other professional told me right quick that the idea was not his, it was the client's, and he advised against it. Which, no doubt, led to the shopping for a new person to do his work.

[jainen]

>>Which, no doubt, led to the shopping for a new person to do his work<<

That's what it sounds like to me. This was no oversight or miscommunication or an accountant who can't read. The client knew perfectly well what the problem was, and went to all the trouble to form a separate corporation. Even an incompetent CPA would have been less obvious, simply avoiding full-time employees or something. The client didn't tell his accountant what he did until September 15, when the extension ran out and it was time to fund the plan. The accountant told him to go jump in a lake. I must admit that I am too busy for a client like that too.