The IRS has issued an updated version of Publication 560, which small businesses use to report on their SEP, SIMPLE, and qualified retirement plans. The updated version is for use in preparing 2023 returns.
What’s New
The IRS has updated Publication 560 to reflect information that is issued each year. This includes the following.
Compensation limits. The IRS has updated Publication 560 to reflect compensation limits for 2023 and 2024. For 2023, the maximum compensation used for figuring contributions and benefits is $330,000; for 2024, it is $345,000.
Elective deferral limits. The limit on elective deferrals, other than catch-up contributions, is $22,500 for 2023 and $23,000 for 2024. These limits apply for participants in SARSEPs, 401(k) plans (excluding SIMPLE plans), 403(b) plans, and 457(b) plans.
Defined contribution limits. The limit on contributions, other than catch-up contributions, for a participant in a DC plan is $66,000 for 2023 and $69,000 for 2024.
Defined benefit limits. The limit on annual benefits for a participant in a DB plan is $265,000 for 2023 and $275,000 for 2024.
SIMPLE plan salary reduction contribution limits. The limit on salary reduction contributions, other than catch-up contributions, is $15,500 for 2023 and $16,000 for 2024.
Catch-up contribution limits. The catch-up contribution limit for DC plans other than SIMPLE plans is $7,500 for 2023 and 2024. The catch-up contribution limit for SIMPLE plans is $3,500 for 2023 and 2024.
Required minimum distributions (RMDs). Individuals who reached age 72 after Dec. 31, 2022, may delay receiving their RMDs until April 1 of the year following the year in which they turn age 73. This change in the age for making these beginning RMDs applies to both IRA owners and participants in a qualified retirement plan.
Plans established after the end of taxable year. For 2023 and later years, a sole proprietor with no employees can adopt a 401(k) plan after the end of the taxable year, provided the plan is adopted by the tax filing deadline (without regard to extensions).
Changes Under the SECURE 2.0 Act. The IRS made the following changes to implement SECURE 2.0:
Eligible employers with 1–50 employees are eligible for an increased small employer pension plan startup cost credit under Internal Revenue Code (IRC) Section 45E of 100% of qualified startup costs, subject to limitation. The credit for eligible employers with 51–100 employees remains at 50% of qualified startup costs, subject to limitation.
SECURE 2.0 added an additional startup cost credit under IRC Section 45E available to certain eligible employers, in an amount equal to an applicable percentage of the employer’s contributions (not including an elective deferral, as defined in IRC Section 402(g)(3)) to an eligible employer plan, subject to limitation.
SECURE 2.0 added a new military spouse participation credit under IRC Section 45AA available to eligible small employers who maintain defined contribution plans with specific features that benefit military spouses.
SECURE 2.0 permits certain nonelective contributions and matching contributions that are made after Dec. 29, 2022 to be designated as Roth contributions.
Updated Publication 560 is available here.
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