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Fiscal Year partnership and Simple IRA


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I became a new partner July 1, 2008. The partnership has a fiscal year of June 30th. The current partners deposit their max Simple IRA deferrals by July 15. The partners treat these as calendar year 2008 simple IRA deferrals. However IRS PUB 560 page 11 states "When To Deduct Contributions - You can deduct SIMPLE IRA contributions in the tax year within which the calendar year for which contributions were made ends. You can deduct contributions for a particular tax year if they are made for that tax year and are made by the due date (including extensions) of your federal income tax return for that year.

Example 1. Your tax year is the fiscal year ending June 30. Contributions under a SIMPLE IRA plan for calendar year 2007 (including contributions made in 2007 before July 1, 2007) are deductible in the tax year ending June 30, 2008."

One of my questions is should the July 15 contributions for the 6/30/08 fiscal year be treated as made for the Simple IRA 12/31/07 calendar year or 12/31/08? The reason I ask is because I want to make Simple IRA deferrals out of my guaranteed payments from 7/1/08 through 12/31/08 and deduct them on my 2009 Form 1040 againt the 6/30/09 K-1 I receive. However the current partners tell me I can't do this because I would need to deduct that period on my 2008 Form 1040. I wont be able to deduct on the 2008 1040, since I have not been allocated any earned income yet from the P-ship. Basically I want to make my deferrals monthly instead of doing a lump sum each year. Based on the IRS Pub shouldn't I be able to deduct my deferrals for the period 7/1/08 through 12/31/08 against my 6/30/09 K-1?

Any help would be appreciated.

Thanks

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One of my questions is should the July 15 contributions for the 6/30/08 fiscal year be treated as made for the Simple IRA 12/31/07 calendar year or 12/31/08?

SIMPLE IRA contributions are made for plan years (which must be the calendar year), not for fiscal years. That being said, the deduction is delayed for fiscal year taxpayers. Assuming the the July 1, 2008, contribution is for the 2008 plan year, the amount is reported and the deduction is claimed on the 2009 tax returns (the taxable year in which the plan year ends).

Hope this helps.

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  • 4 weeks later...

Gary - Thanks for the reply.

I am still a little confused. Here is the current situation--I'm a new partner (as of 7/1/08) in a 6/30 fiscal year partnership and I receive a monthly guaranteed payment. From my GP I am contributing $875 to my simple IRA. So for the period 7/1/08 through 12/31/08 I will have contributed $5250 to my simple IRA. I deduct the $5250 on my 12/31/09 individual income tax return against the pship K-1 I receive for 6/30/09--correct? Now for CY 2009 I will contribute the max to my simple IRA on a monthly basis. I will deduct the amount I put in from 1/1/09 through 12/31/09 on my 12/31/10 individual income tax return against the pship K-1 I receive for 6/30/10--correct?

Thanks

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