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Setting up a DB plan for 2020 but deducting in 2021


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Hi

A hypothetical question.

Company A wants a DB plan starting in 2020 but they have filed their tax return on time without any extension. However, they have lots of monies and want to generate a required contribution for 2020 and deduct for 2021 tax year together with 2021 deduction (assume there is enough room for both under 404(o).

What do you think?

Thanks

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If they did not extend their tax return for 2020 then it is too late to adopt a plan for 2020. IRC 401(b)(2) references the deadline of the employer's tax return, including extensions. If there was no extension for the tax return then there is no extension for the deadline to adopt a plan.

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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If they filed and used the extension for their tax return, then the extended due date applies for plan adoption.

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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