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A client has informed me that their 2006 match contributions were not deposited timely. The match for the employees (plus earnings) was finally deposited in April, 2008, while the match for the owner and his wife still have not been deposited. It is my understanding that all deferrals are deposited every pay period.

Questions:

1. What is the penalty for late deposit of match contributions to a SIMPLE IRA?

2. Does the 2006 corporate tax return need to be amended to remove the deduction for the employer match?

3. Can match contributions for prior years be deducted on the 2008 corporate tax return?

4. Does the client still have a SIMPLE IRA plan?

Thanks!

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Penalties aside, the contribution must be made and may not be deducted since it was not funded by the tax filing deadline (including extensions). The 2006 return should be amended, and the deduction may be taken in the year actually funded. I would argue that the client still has a SIMPLE IRA plan since this type of plan qualifies each year based on the requirements that must be met for such year (i.e. notice)

I would fix and move on without making a mountain out of it. IRS auditors typically target what they categorize as 'flagrant' violations. When there is a mistake followed by an obvious effort in good faith to fix it, some auditors will look the other way if they can relate to the logic applied in fixing it.

In the QP world, which SIMPLE IRAs escape, plans must qualify in both form and operation while abiding by the entire host of 401(a) rules. SIMPLE IRAs and SEPs, while tax advantaged, are IRAs in nature (after the deposits are made). I would use this mindset to move on.

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  • 7 months later...
Guest Cingo

My question is this: No employer contributions have been made during the entire year of 2008. They only contributed $375 of $1800 employee contributions in May '08. I received a check on March 19, 2009 for $1025 for the difference of their contribution for 2008. However, there is still a balance of employee contribution of $500 which they attribute my $500 'small severence' check they gave me on my last day. (I realize employers have x-amount of days past their estblished tax filing date including any extensions to make employer contributions however, employee contributions are to be made within 30 days of deduction of salary.)

The real problem lies with the fact that my employers are under the impression that the SIMPLE-IRA account set up by them is a 'profit-sharing' program AND since they experienced a 'loss' for 2008, they are under no legal obligation to contribute to my SIMPLE-IRA account.

I have contacted representatives of PaxWorld who have told me an 'adoption agreement' was never received from my employer. This form states intent of contributions, salary reduction, and timing of salary reduction election, etc. PaxWorld however set up the account and deposited funds into my account since establishment of Oct. '06 without this form of intent. I feel I don't have any merit to claim this 'missed contribution' because this form was never submitted by my employer.

How do I recover these contributions owed and are there penalities for 'missed deferral oportunity' as written in the IRS Q&A? Do I contact my former employers CPA or take them to small claims court?

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