IRS Clarifies 401(k) Catch-Up Rules

New proposed Treasury Regulations expected to be published in today's Federal Register will clarify certain areas of confusion regarding the age 50 catch-up rules for 401(k) plans that were introduced as part of last year's tax act.

The new tax act provides that employees who are 50 or older are entitled to make catch-up contributions totaling $1,000, in addition to their regular maximum contributions, to a company-sponsored 401(k) plan. The annual catch-up contribution amount will increase until 2006 at which time the amount will be $5,000.

The proposed regulations will explain that employees who turn 50 before the end of a calendar year will be considered to be 50 as of January 1 of that calendar year, thus allowing them to make catch-up contributions as of the first of the year.

In addition, the proposed regulations explain that the catch-up contribution is an annual amount, not a per-plan amount. Employees who work for more than one employer during the year are limited to the maximum catch-up contribution amount for the entire year.

You may like these other stories...

Divorce is hard, and the IRS isn't going to make it any easier. The IRS generally says "no" to tax deductions that might ease the pain of divorce. In certain circumstances, however, you might be able to salvage...
IRS chief: New rule on the way for tax-exempt groupsIRS Commissioner John Koskinen told the USA Today on Monday that the agency will likely rewrite a proposed rule regulating the political activities of nonprofit groups to...
With tomorrow being Tax Day, you might see some procrastinators at your office filling out forms, printing out paperwork, or getting last-minute tax advice from their accountant so they can meet the IRS’s filing...

Upcoming CPE Webinars

Apr 17
In this exciting presentation Excel expert David H. Ringstrom, CPA shares tricks that you can use with pivot tables every day. Remember, either you work Excel, or it works you!
Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.