Deductibility of Delinquent Contributions

[Stash026]

I have a new client that hadn't funded a required contribution for multiple years.  They funded those contributions, with added interest, in '21.  The question is, when are these contributions deductible on their taxes (they hadn't been taking the deduction, since the contribution had never been made).

1) Is it deductible in the year it was originally due?

2) Can they take the deduction in 2020 (it was funded in early '21, before the due date of ER contributions)?

3) Is it deductible in 2021, since that's the year it was made?

I'm not an accountant, so I'm not sure.

Thanks in advance!

[CuseFan]

Definitely not #1.

#2 or #3, or combination thereof as the deduction(s) will need to be within the applicable limits for the applicable years. 

4 hours ago, Stash026 said:

I'm not an accountant, so I'm not sure.

Nor am I, so I also suggest the client discusses with their accountant.

[Stash026]

56 minutes ago, CuseFan said:

Definitely not #1.

#2 or #3, or combination thereof as the deduction(s) will need to be within the applicable limits for the applicable years. 

Nor am I, so I also suggest the client discusses with their accountant.

Great, thank you!!! 

[C. B. Zeller]

Probably can't do #2 either, except with respect to any contributions that were actually for the 2020 plan year. The rule under 404(a)(6) is that the contributions can be deducted in the prior year if there were made "on behalf of" the prior year and before the tax filing deadline for that year.

Most likely need to deduct them all in 2021. If it exceeds the deduction limit for 2021, might need to carry forward the excess and deduct it in 2022.

[Luke Bailey]

I agree with C.B. Zeller. If you are outside the 404(a)(6) period, then you're just on the cash basis. 2021.