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I have a profit sharing trust with my employer instead of a

Customer Question
401K. I am looking...
I have a profit sharing trust with my employer instead of a 401K. I am looking to leave this employer to start my own business.
Can I avoid tax penalties if I invest my profit sharing trust fully into my newly formed business?
Submitted: 2 years ago.Category: Tax
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Answered in 4 minutes by:
12/4/2015
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 16,241
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello

401k and profit sharing plans are both forms of retirement plans. They allow employees to make pre-tax contributions to an account where contributions and earnings are not taxed until distributed.

While rolling over a distribution from a tax deferred account to another tax deferred account means no tax on the "distribution" investing in a business venture would not afford the same tax deferring treatment.

Unfortunately, using the money to start your new business would not avoid tax on the distribution for you.

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

If my answer addressed your question please rate below or above (let me know if you have difficulty as I believe the system changed), if you need more information reply below.

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

Please advise if you need more information or rating in a positive way is acceptable.

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

My goal is to provide you with excellent service.

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

Hello Jeff

Checking back to see if you posted a response.

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Robin D.
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