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The guy from I.R.S. who told me to go check the proper publication signed his name and also his title: Employee Plan Specialist. I will write him again and use quotes from the publication.

If it makes you feel better write your heart out. Just make sure that you don't get carried away and say anything that could be vaguely interpreted as a threat.

IMO a more effective letter would be to the Commisioner of Internal Revenue, Washington, DC 20224. It's not only water that flows downhill.

I also went back and checked the I.R.S. rules which refer to what Phil was talking about. Yes, it does state that it is incumbent upon the district's plan administrator to know what is allowable as an employee deduction and contribution to a tax shelter.

Your zeal to be mad at the IRS seems to be blocking the realization that it's more than just knowing, it's deciding. The law allows plans a lot of leeway.

It would also seem that the company accepting the tax shelter money should also know the law. I will check with them for precedents - I am sure that there have been others in the same boat who have come before.

Ultimately though, wouldn't it be the employee who would get popped with the penalties if the I.R.S. discovered an error? As the old song goes, It's No One Else But You they have in mind when they warn: "Excess contributions can result in income tax, additional taxes and penalties".

I'd be interested in a cite for that quote if it's not the ubiquitous "they" that often turn up in discussions of tax law. The worst that can happen to the employee is that he pays the tax he should have paid in the first place plus, in some cases, interest. There are no penalties.

The entire plan can be disqualified if they mess up.

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