Question: Joe Williams is an employee of a corporation that sponsors a 401(k)-retirement plan. The employer has announced in 2024 that it is amending its plan to accommodate the provisions made in the SECURE 2.0 Act (Div. T. of Pub. L. No. 117-328 §110). Specifically, it will treat qualified student loan payments made by employees as 401(k) contributions for the purpose of receiving company matching contributions to the 401(k) plan.

Regarding Joe’s personal taxes, and assuming all other requirements being met, will the student loan payments that qualify him for company 401(k) matching also qualify Joe for the Retirement Savings Contribution Credit (aka the saver’s credit under §25B) when filing his personal return?

Answer: No. PL 117-328 §110(c)(13)(B)(ii) states: “Student Loan payments not treated as plan contributions…”. The saver’s credit is available for personal contributions (before tax or after tax) to an IRA or ROTH IRA, employer-sponsored retirement plans employee contributions (such as 401(k), 403(b), and SIMPLE plans), or an Achieving a Better Life Experience (ABLE) account made by the participant as direct contributions or employee deferrals, but not employer contributions or matching contributions made by the employer. Student loan payments given the special treatment under SECURE 2.0 as noted above are specifically NOT treated as plan contributions and therefore do not qualify Joe for the saver’s credit. IRC Sec 25B(d).

Some homeowners’ associations (HOAs) must report information on their beneficial ownership to the Financial Crimes Enforcement Network (FinCEN), according to recent updates to the FAQs page on the agency’s website. FinCEN updated the FAQs on April 18 to add answers to questions regarding which HOAs must file beneficial ownership information (BOI) reports and identifying an association’s beneficial owner.

Under the 2021 Corporate Transparency Act (CTA), certain entities must file BOI reports with FinCEN. Nearly all domestic entities created or registered in 2024 that are subject to the reporting requirements must file a BOI report within 90 calendar days of receiving notice of their creation or registration. Other reporting companies created or registered before Jan 1, 2024, must file by Jan. 1, 2025.

In March, a federal court found the CTA exceeded Congress’s power and barred enforcement of any part of the act against the plaintiffs in the case, a small business owner from Ohio and members of the National Small Business Association (NSBA). The decision was appealed by the government and FinCEN is still requiring entities not involved in the litigation to file reports.

Which HOAs must file reports?

Not all HOAs are incorporated, and those created without filing a document with the secretary of state are not domestic reporting companies. Those HOAs that are incorporated or formed by filing documents with the secretary of state’s office may still qualify for an exemption as a nonprofit or social welfare organization.

While most §501(c)(3) organizations are not required to file BOI reports, the majority of HOAs don’t qualify as §501(c)(3) organizations under IRS rules. However, some HOAs are designated as §501(c)(4) social welfare organizations, which are also exempt from reporting requirements. Any HOA not designated as §501(c)(3) or §501(c)(4) organization must report their BOI to FinCEN.

Who is an HOA’s beneficial owner?

For most reporting companies, the beneficial owner is any individual who directly or indirectly exercises substantial control over the entity or owners, or controls at least 25% of its ownership interests. While it is uncommon for a single individual to own at least 25% of an HOA, FinCEN expects that at least one individual will exercise substantial control over the association. Individuals meeting one or more of the following criteria are considered to exercise substantial control:

• Senior officers
• Has authority to appoint or remove certain officers or a majority of the HOA’s directors
• Is an important decision-maker
• Has any other form of substantial control over the HOA

To learn more about the CTA and filing BOI reports with FinCEN, you can watch our on-demand webinar, which explains step-by-step how to file the reports. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our free 30-day trial. 

Question: Erek made contributions to his Roth IRA in 2020, 2021 and 2022. He later found out his modified AGI was over the limit, so he was not eligible to make the contributions. He withdrew all of them in 2023. How should he report this? Does he need to go back and amend to pay the §4963 6% excise tax?

Answer: For a closed year, like 2020, if Erek had no other changes on his original tax return, he could file Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, independently and pay the 6% penalty by using the prior year’s version of the form. No amended return is needed. For 2021 and 2022, which are open years, he could either amend each year to include the prior year’s Form 5329 along with the Form 1040-X, Amended U.S. Individual Income Tax Return, or file it independently to pay the penalty.

To fix it, if Erek withdraws the excess contribution before the income tax return due date, including extensions, he must withdraw the excess contribution plus earnings. Earnings are required to be included in gross income. However, no 6% excise tax applies. Note that earnings from the excess contribution are included in income in the year in which the contribution was made, not in the year when the earnings were withdrawn. However, if he takes out the excess after the due date, he is not required to withdraw the earnings and the 6% excise tax would apply on the excess contribution, excluding the earnings. The penalty will be imposed for each year the excess contribution remains in the IRA until it is removed from the account.

Due to the enactment of the SECURE 2.0 Act of 2022, Erek is exempt from paying the 10% early distribution penalty on the related earnings. However, he is still required to report the earnings as income for the year he makes the distribution or, if withdrawal occurs before the due date, he will report the earnings in the year the excess contribution was made.