missed p/s contribution deadline

[wsp]

Assuming a client missed the 9/15 deadline for making the profit sharing contributions so the deduction for 2003 is gone. We can still make the contribution today and it would be deductible for 2004 but considered a 2003 contribtion correct? Can we continue doing that for a few years until the deduction for the missed contribution has been recouped? IE making a portion of the contribution prior to September 15 to reach the 404 max and the rest after september 15; continuing to do this until she has "regained" her lost deduction?

[Blinky the 3-eyed Fish]

It can be an annual addition in 2003 if the contribution is made within 30 days of the tax return deadline, 10/15/04 in this case. I am not sure what you want to continue doing. I am assuming your fiscal and plan years are the same here for simplicity. So the rule then is that any contribution made after the plan year but before the tax return due date (including extensions if the return is extended) can be considered for the prior or current plan year.

So for 2004 you will make a contribution for that year before 9/15/05 (assuming again the taxes are extended). You will then total the 2003 contribution and the 2004 contribution and deduct up to 25% of compensation in the 2004 fiscal year. If the total of both years' contributions exceeded this limit, then continue the process in future years.

[Brenda Wren]

Blinky, what is the source of your information regarding the 10/15 deadline for the annual addition? I don't recall ever reading or knowing about that rule.

[Blinky the 3-eyed Fish]

1.415-6(b)(7)(ii)

[Guest Key Lime Pie]

Switching the topic here to a money purchase plan. Plan sponsor wrote and mailed their 2009 contribution check on 9/15, but they didn't mail it to the investment company, but instead to their consultant, who received it a few days later and brought it to the investment company for deposit. Can that check be considered timely? If not, it would affect how the 5500 is completed and a 5330 would be required.

[Bird]

Is the business owner also the trustee? If so, signing the check and "delivering" it to him or herself on 9/15 meets the deadline. Keep notes about the money going to the consultant first, in case the date of deposit is challenged as being too long after 9/15.

[Belgarath]

I wish I had a dollar for every time something like this happens. Usually the check is not written to the Trustee - it is written to "XYZ fund" with some sort of instruction to deposit it to the plan.

I've seen plans audited where this precise situation took place, and the IRS never questioned it. Not to say that they couldn't! I suspect that the longer the gap between the tax deadline and the actual deposit, the greater the chances of it being disallowed. At the very least, as Bird says, they should keep good notes/records.

[mbozek]

Switching the topic here to a money purchase plan. Plan sponsor wrote and mailed their 2009 contribution check on 9/15, but they didn't mail it to the investment company, but instead to their consultant, who received it a few days later and brought it to the investment company for deposit. Can that check be considered timely? If not, it would affect how the 5500 is completed and a 5330 would be required.

If the consultant is an agent for the investment advisor then the contribution was made on time. If not I dont think the IRS will know or care. What I would lke to know is to whom did the plan sponsor send last years contribution?

[Guest Key Lime Pie]

Bird: no, business owner is not also trustee

mbozek: consultant is not an agent. plan sponsor sent last yr's check to consultant as well, with check written out to consultant. it was late to begin with, so they were instructed to write a new check correctly and a 5330 was filed. this year, they were clearly advised how to write check and where to send it. Check was written correctly, but as indicated, it was not mailed correctly.

would you suggest then, as long as we keep this documented, and keep envelope with postmark, we can proceed with treating deposit as timely this year, even though transaction itself was one week later?