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Employer Contribution Due Date


Stash026

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Does anyone know where in the regs (or if it does) state that contributions need to be funded prior to the filing of the tax return?

(i.e. this year someone filed their tax return in April, but didn't pay their employer contribution until early May since the filing deadline was extended to 5/17).  The accountant is asking me if this scenario is acceptable.

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10 hours ago, Stash026 said:

where in the regs

IRC 404(a)(6)

Quote

For purposes of paragraphs (1), (2), and (3), a taxpayer shall be deemed to have made a payment on the last day of the preceding taxable year if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof).

 

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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I think MIke Preston and C.B. Zeller are probably correct, but one could interpret 404(a)(6) as simply allowing you to treat an amount paid in the current year as "for" the prior year (sort of a combination of cash and accrual tax accounting, even for cash basis taxpayers), and not as permitting you to state on your tax return that you had contributed an amount that you had not, yet. In other words, you might want to wait to file the return until you'd made the contribution. In practice, I think a lot of partnerships do this, i.e., wait until the deadline to make the contribution, even though they give their partners K-1's much earlier and the partners file whenever they are ready, which may be before the contribution is made.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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Hi Luke - this issue comes up on occasion. Revenue Ruling 66-144 permits the full extension period to make the contribution, even if the tax return has already been filed. Way back then, it only applied to accrual basis taxpayers because back then, 404(a)(6) only applied to accrual basis taxpayers. But then ERISA changed 404(a)(6) to include this for cash basis taxpayers.

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I actually had a client that extended their return, filed shortly after the original due date claiming the sizeable DBP deduction which generated a sizeable tax refund received before the extension expired and which they then used to fund the required DB contribution.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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On 5/17/2021 at 12:48 PM, Belgarath said:

Hi Luke - this issue comes up on occasion. Revenue Ruling 66-144 permits the full extension period to make the contribution, even if the tax return has already been filed. Way back then, it only applied to accrual basis taxpayers because back then, 404(a)(6) only applied to accrual basis taxpayers. But then ERISA changed 404(a)(6) to include this for cash basis taxpayers.

Belgarath, thanks. Very good to know (and another tiny strand in the beautiful tapestry of ERISA and the Code).

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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A support for Belgarath’s top-notch explanation is:

Rev. Rul. 84-18, 1984-1 C.B. 88 [1984-6 Internal Revenue Bulletin 5].  See also News Release IR-84-6 (Jan. 13, 1984).

The IRS held an individual may deduct an IRA contribution made after the tax return was filed but by the return’s due date.

In the “law and analysis” for that ruling, the IRS observed:  “Although the holding of Rev. Rul. 66-144 is limited to an accrual basis taxpayer, section 1013(c)(2) of [ERISA] extended the grace period of [Internal Revenue Code] section 404(a)(6) to cash basis taxpayers.”

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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