[Seth]

I have a concern that I cant seem to find a definite answer in all my research and looking through the web. The general answer seems to be no, but i dont want to assume person x and person y are correct…

In short, can an employer fund and contribute to an employees IRA or ROTH IRA account?

I believe the answer is flat out no, but what if that has been the case for several years now?

And what about the situation where the boss has paid one employees Roth, and two employees IRAs, BUT there are several other employees who havent received a thing?

And…the employer is a CPA. (its a professional corp, whether that matters or not), and all the employees work for a non profit entity that the CPA pays salary through his business. I do the books for the non profit and do work for the cpa firm.

AND….I realized this when i was given a paper to reimburse the CPA firm for 12,000 (the amount for the roth and two IRA amounts) and consider it “camp director stipends” (the non profit runs camps). (THIS IS MESSED UP, RIGHT??)

Shouldnt Morgan Stanley know what is right or wrong? and should the boss, a CPA, know whether that’s all good or not?

What, if any, is the penalty? the way to fix it if its messed up?

Would you say this is tax evasion because the boss is writing a check(before taxes paid) to fund an INDIVIDUAL’s ret. account that is supposed to be funded with after tax dollars?

And isnt that not cool or even illegal to give a plan to some but not to others??

Obviously this a situation affecting myself and my wife (her ROTH). Any one have any thoughts or have experienced things similar in a small company.

I feel like Im in a horrible position and Im not sure what to do and/or what I can do. And this is NOT the first “situation” where Im pretty dang sure its highly questionable and bordering on illegal/fraudulent etc.

I dont know what im supposed to do! All while dealing with issues like this Im trying to focus on studying for these CPA exams!!

[Anonymous]

Is there a company sponsored retirement or profit sharing plan? Or is it compensation being submitted to a retirement account personally owned by the employee? Is there an employment contract that might shed more light on situation?

If it's the first, the plan documents would specify if it's allowed. If it's the second, the bigger question would be if you're including it as income to the employee. If it's the employee's personal retirement account, it's their problem to follow the rules correctly: The employer's responsibility would be to correctly classify the earnings.

Think of it this way….If an employee asks you to send their “Camp Director Stipend” to their grandma, there's no rule against you doing so if you had permission from the employee! If Grandma buys cocaine with the money, that's not your problem, right? The same might be true if you're sending it to their personal retirement accounts at their direction.

It definitely comes across as convoluted and you're right to wonder, but that doesn't necessarily mean there are shenanigans happening.

[Seth]

There is no sponsored retirement or profit sharing plan. The funds are being written by check from the CPA firm's account to morgan stanley (where the boss has all of his personal and business accounts).

There are no employment contracts. And the employees, im pretty confident, dont have any access or “control” of it since its in the boss's one big account.

Im also pretty sure, waiting to hear back from my coworker, that they may not even know that they have an IRA. Which is even a little stranger because one employee files MFS because of his med expenses, which doesnt allow him to take any deduction on it.

And the other “employee” who gets paid under the table, who i doubt would report that income, cant put money in an IRA because they have no REAL earned income.

I understand what youre saying about it being the employees permission, but I know these 3 didnt ask for itor specify anything. This was the CPA's call. and was his call not to do anything for the rest of us.I guess from everything I can find the constant is that its something the individual decides to do, no one elses decision.

[Anonymous]

there is a lot seriously wrong with this scenario. but bottom line is that i betthe employer is getting the deduction for INDIVIDUAL Retirement Account contributions. (those rightfully belong to the employee.)

another even more serious problem is that he is not including that in EE wages (thus avoiding payroll tax- both the ER and EE side of FICA) if you thought the IRS cares about income tax, you dont even know what kind of hot water one could get in for avoiding payroll tax. payroll tax is on the top list of IRS enforcement issues. to me this is basically payroll tax avoidance- this is serious, VERY serious. I would disengage from the client, voice your concerns. You cannot be part of this because YOU will be on the hook for losing your license as well. IRS' OPR(office of professional responsibility) is RUTHLESS when it comes to this.

It is not wrong to necessarily contribute to employees IRA's but you gotta include that in wages- pay taxes on those wages (get a deduction for the wages AND the taxes NOT for the IRA) Not to mention that the IRA's can be disallowed when all this implodes on him because like you said some people had no earned income to qualify for an IRA. There is hefty penalties on Form 5329 for that. about 6% for every year overfunded i believe.

btw this is not on Morgan Stanley, they as the custodian have no obligation to determines people retirement eligibility under ERISA .

[Anonymous]

not to mention there is all sorts of rules for different sized employers- regarding matching, employer contributing, safe harbors. i.e. if you want to contribute to the retirement of highly compensated workers, you must do a 3% safe harbor for all your smaller paid ones. he is avoiding these very important ERISA rules also. these are very very complicated and usually retirement consultants are hired to the calculations.

this is a huge mess! run Forest run!

[Seth]

Thanks you eesti, I was afraid but pretty certain it was as serious as it sounds. The big problem is I cant just run due to the fact that Im still studying for CPA exams and working for my father in law (the CPA) and with my wife (where we also run a non profit foundation). ***He's been running a CPA business without staff, all by himself, (successful though) for the better part of 30 years now.

Ive never trusted his judgement and hes been taking advantage of the non profit for years, and im sure even worse before I started doing the books. He never kept books other than a checkbook ledger… 🙁

To just leave is impossible because this is family…uch! But I know hes wrong and this one I think topples it all down because my wife's nice big ROTH im sure is screwed up because this has most likely been the case for years! And my wife doesnt want to hear it because I think she believes her father would never do anything wrong.

I thought tax season and corp deadline was tough when he fixes clients books to show profit or loss (which he stupidly tells me after I did the work that he needed to show profit because it was to be shown to the 1120 client's bank b/c of their loan!)

Since I know all these things and I dont know what to do, because I cant just up and run, Im in a terrible pickle and I think Im liable for something?!?

And Im trying to take my REG exam 4/29 (still have the other 3 after this) ALL on top of my wife and I just purchased a new house and her parents (the boss) is helping us with the down payment!!

I think I have less risk in my daily fantasy sports career 😉

[FIFOisbetterthanLIFO]

Holy $H!@ man you need to get out asap. Your father-in-law is basically working some tax evasion schemes. The ROTH IRA thing is a total scam. That's why you don't work with family…too afraid to step on toes. Also, never buy a house where you aren't making the mortgage payment – talk about a huge mess for a multitude of reasons.

Btw, fixing the books as you say isn't something that is necessarily wrong to do because generally they are temporary differences. There are a few different ways to minimize profit/loss by using or foregoing section 179, bonus depreciation, etc.

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