Working on a new S-Corp client, and learned they made excess SIMPLE employer contributions for the owner in 2019 & 2020.
The business matched 100% of the contribution, and is far greater than the 3% max employer contribution.
The financial planner says they need to take an excess distribution. I've done my research but still a little lost
1) The employer will receive the excess distribution, and the employee will receive a 1099-R with 0 taxable income.
2) We need to fill out form 5330 for the Excess distribution for each year. 2020 hasn't been filed yet, so I'm hoping we can fix that, and not file a form 5330? Each year we file form 5330 will incur a 10% penalty for the contributions
My question is, I feel they should recognize the income, that they deducted on their 2019 tax return. Should I just go back and amend 2019?