Problem $5-14$

Small Business and Self$-$Employed Retirement Plans $($LO $5\mathrm{.}4)$

Determine the outcome of each of the following contributions or distributions from a small$-$business qualified retirement plan:

a$.$ As an employee of Wumbo Company, Margo is enrolled in the SEP and in $2023,$ Wumbo provides a contribution of $5$ percent of Margo's salary or $$2,500.$ Describe the taxation of the contribution to Margo and Wumbo.

As a qualified plan, the contribution is $$ from Margo's income in the current year. The contribution plus earnings will be taxable $q,$ to Margo when distributed. Wumbo $$ a current year deduction.

b$.$ Patrick works at the Krab Shack as a manager. In $2023,$ the Krab Shack operates a SIMPLE IRA plan and Patrick contributes $$10,000(10$ percent of his $$100,000$ salary$).$ Krab Shack matches the first $3$ percent of the employee's annual wages. Describe the tax treatment of Patrick's contribution and the Krab Shack's match to the SIMPLE IRA. Explain whether Patrick has exceeded the maximum contribution allowed to the SIMPLE IRA versus a traditional or Roth IRA in $2023$ assuming he is age $45$ versus age $55.$

Patrick's contribution is $q,$ and the match is $q,$ from his $2023$ income. Both will be taxable

$q,$ to Patrick at distribution. The limits on a SIMPLE IRA are $q,$ than those for a traditional and Roth IRA. The $2023$ limit for a SIMPLE IRA is $ $$ C$.$ As an employee of Undersea Labs, in $2023$ Sandy, age $35,$ elects to defer $$6,500$ of her salary into the company's Roth $401$ k plan. Sandy's salary is $$160,000$ in $2023.$ Explain how the Roth $401$ k contribution limitations apply to Sandy.

A Roth $401$ k $$ both larger contributions and also $$ does nut apply the same income limitations for contributions as a typical individually owned Roth IRA.Problem $5-14$

Small Business and Self$-$Employed Retirement Plans $($LO $5\mathrm{.}4)$

Determine the outcome of each of the following contributions or distributions from a small$-$business qualified retirement plan:

a$.$ As an employee of Wumbo Company, Margo is enrolled in the SEP and in $2023,$ Wumbo provides a contribution of $5$ percent of Margo's salary or $$2,500.$ Describe the taxation of the contribution to Margo and Wumbo.

As a qualified plan, the contribution is $$ from Margo's income in the current year. The contribution plus earnings will be taxable $q,$ to Margo when distributed. Wumbo $$ a current year deduction.

b$.$ Patrick works at the Krab Shack as a manager. In $2023,$ the Krab Shack operates a SIMPLE IRA plan and Patrick contributes $$10,000(10$ percent of his $$100,000$ salary$).$ Krab Shack matches the first $3$ percent of the employee's annual wages. Describe the tax treatment of Patrick's contribution and the Krab Shack's match to the SIMPLE IRA. Explain whether Patrick has exceeded the maximum contribution allowed to the SIMPLE IRA versus a traditional or Roth IRA in $2023$ assuming he is age $45$ versus age $55.$

Patrick's contribution is $q,$ and the match is $q,$ from his $2023$ income. Both will be taxable

$q,$ to Patrick at distribution. The limits on a SIMPLE IRA are $q,$ than those for a traditional and Roth IRA. The $2023$ limit for a SIMPLE IRA is $ $$ C$.$ As an employee of Undersea Labs, in $2023$ Sandy, age $35,$ elects to defer $$6,500$ of her salary into the company's Roth $401$ k plan. Sandy's salary is $$160,000$ in $2023.$ Explain how the Roth $401$ k contribution limitations apply to Sandy.

A Roth $401$ k $$ both larger contributions and also $$ does nut apply the same income limitations for contributions as a typical individually owned Roth IRA.