SIMPLE IRA employee contributon - sole prop

[Santo Gold]

I wanted to confirm that I researched this correctly.  in 401k plans, self-employed individuals can make employee contributions up to the due date of their personal tax return, including extensions, which could mean a 2019 calendar year 401k contribution can be deposited as late as 10/15/20.

But if the same employee/employer has a SIMPLE IRA, the employee contribution deadline is 30 days after PYE?  From the IRS website is below.  So my conclusion is that different timing deadlines apply whether a SIMPLE or not?

Also, does the coronavirus relief change anything for SIMPLE IRA employee contributions?

Thank you

 

When must I deposit the salary reduction contributions?

You must deposit employees’ salary reduction contributions to their SIMPLE IRAs within 30 days after the end of the month in which the amounts would otherwise have been payable to the employees in cash, according to IRS rules (IRC section 408(p)(5)(A)(i)). For self-employed persons with no common-law employees, the latest date for depositing salary reduction contributions for a calendar year is 30 days after the end of the year, or January 30th.

The Department of Labor rule for deposit of the salary reduction contributions may be stricter. They do have a 7 business day safe harbor rule.

 

[Larry Starr]

On 4/30/2020 at 12:06 PM, Santo Gold said:

I wanted to confirm that I researched this correctly.  in 401k plans, self-employed individuals can make employee contributions up to the due date of their personal tax return, including extensions, which could mean a 2019 calendar year 401k contribution can be deposited as late as 10/15/20.

But if the same employee/employer has a SIMPLE IRA, the employee contribution deadline is 30 days after PYE?  From the IRS website is below.  So my conclusion is that different timing deadlines apply whether a SIMPLE or not?

Also, does the coronavirus relief change anything for SIMPLE IRA employee contributions?

Thank you

 

When must I deposit the salary reduction contributions?

You must deposit employees’ salary reduction contributions to their SIMPLE IRAs within 30 days after the end of the month in which the amounts would otherwise have been payable to the employees in cash, according to IRS rules (IRC section 408(p)(5)(A)(i)). For self-employed persons with no common-law employees, the latest date for depositing salary reduction contributions for a calendar year is 30 days after the end of the year, or January 30th.

The Department of Labor rule for deposit of the salary reduction contributions may be stricter. They do have a 7 business day safe harbor rule.

 

The sole prop has to 1) determine what his contribution will be prior to 12/31 and 2) make the contribution as soon as his profit has been determined.  If his accountant does his return on 1/15, he has to make the employee deferral part at that point; he does not have legally until the extended due date.  This is something that most everyone gets wrong.  Will the IRS challenge it? They have.

[Santo Gold]

Thank you Larry.  That helps to clarify this for me.