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David MacLennan

Are 401k elective deferrals deducted as employer contributions on spon

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I'm a DB guy and don't work on 401k plans, but need to know the following:

Where on a tax return does an employer deduct 401k elective deferrals? Are they treated as compensation, and deducted as such? Or, since they are technically employer contributions arising out of a participant's voluntary salary reduction, are they deducted as employer contributions on a tax return? Assume a corporate tax entity.

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Perhaps I've answered my own question. I looked at Form 1120 instruction on the IRS website, and it appears IRS does not want 401k elective deferrals deducted as compensation.

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The 1120 instructions say it is an employer contribution, however, I had one agent in an audit say only the match or profit sharing is an employer deduction and the deferrals should be deducted on line one under compensation. I would go with the written instructions - it is all an employer contribution.

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