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Aczinor writes:

<<The President would still prefer not to work into an IRA. He does not want to just put it in a paycheck as it may never get into an investment. He likes the idea of a regular mutual or dip/drip of the employees choosing. He is willing to pay the taxes.

So should I move to the Drip board? I need to suggest to him how to set it up that both the company and the employee may contribute.>>

If he is unwilling to establish a SEP for his employees but is willing to establish a fully taxable investment account (be that a DRiP or otherwise), then whatever he deposits in those accounts on behalf of the employees will be taxable to the employees as compensation. Otherwise, he won't be able to deduct the contribution as a business expense. And if he doesn't deduct it, then he's making a personal gift to each employee.

If he pays the taxes due on either the contribution or on the investment earnings, that payment will also be treated as taxable to the employees or as a personal gift depending on how he elects to handle the expense.

IMHO it would be much simpler for him to establish a SEP or to simply forget about the concept altogether.

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