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Missing 30 day window for contributions


bzorc
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Just read the post regarding partner deferrals to a SIMPLE IRA Plan. I have a different issue: Husband and wife S-Corp pay themselves their W-2 compensation at 12/30/2003, taking out their maximum SIMPLE IRA elective deferral. However, due to circumstances, the deferrals were not submitted to their IRA broker until 2/2/2004. The broker refused to take the deferrals as they were outside of the 30 day window for making the contribution, and they won't budge.

What is the client to do? I'm not that versed in SIMPLE's, so any help would be greatly appreciated.

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Request to speak with firm's compliance or operations department (best if in writing, fax is fastest); also cc: "Compliance Department." Show them Code Section IRC 404(h)--see below. Explain that if the contributions are not accepted and the employer unable to treat the plan as a SIMPLE-IRA it will hold the firm (and the trustee) liable for all damages (including loss of the tax-deferred investment opportunity), all legal and accounting fees, of the employer and affected participants, including any fees under the EPCRS or DOL Fiduciary correction program. It is not their business to inquire on this matter. Does your trustee require a breakdown of the type of contribution (elective, nonelective, matching)? Hope this helps.

404(h) Special rules for simplified employee pensions(1) In general--Employer contributions to a simplified employee pension shall be treated as if they are made to a plan subject to the requirements of this section. Employer contributions to a simplified employee pension are subject to the following limitations:(A) Contributions made for a year are deductible--(i) in the case of a simplified employee pension maintained on a calendar year basis, for the taxable year with or within which the calendar year ends, or(ii) in the case of a simplified employee pension which is maintained on the basis of the taxable year of the employer, for such taxable year.(B) Contributions shall be treated for purposes of this subsection as if they were made for a taxable year if such contributions are made on account of such taxable year and are made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof).(C) The amount deductible in a taxable year for a simplified employee pension shall not exceed 25 percent of the compensation paid to the employees during the calendar year ending with or within the taxable year (or during the taxable year in the case of a taxable year described in subparagraph (A)(ii)). The excess of the amount contributed over the amount deductible for a taxable year shall be deductible in the succeeding taxable years in order of time, subject to the 25 percent limit of the preceding sentence.(2) Effect on certain trusts--For any taxable year for which the employer has a deduction under paragraph (1), the otherwise applicable limitations in subsection (a)(3)(A) shall be reduced by the amount of the allowable deductions under paragraph (1) with respect to participants in the trust subject to subsection (a)(3)(A).(3) Coordination with subsection (a)(7)--For purposes of subsection (a)(7), a simplified employee pension shall be treated as if it were a separate stock bonus or profit-sharing trust.

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Bear in mind that the Broker should report the contribution (on Form 5498) as a 2004 contribution, since they are required to report the contribution in the year received, regardless of the year to which the contribution applies. Some are able to add trailers or make other distinctions that it is a ‘contribution received in 2004 for 2003’- but this will not change the tax reporting requirements........an issue that seems to be a sore point between custodians and customers, as customers usually want the custodians to report the contribution for the year received

Life and Death Planning for Retirement Benefits by Natalie B. Choate
https://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/

www.DeniseAppleby.com

 

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You could be right richardl- but I think they are just talking to one of the individuals who is not familiar on the topic (or the broker is talking to some one who is[not familiar], since the brokers usually consults with the IRA department on matters such as these).

Gary, perhaps another question for the next version of your book [Already noted, THX - gsl]

Life and Death Planning for Retirement Benefits by Natalie B. Choate
https://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/

www.DeniseAppleby.com

 

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