SIMPLE & Self-employed contribution

[Guest Steve Palmer]

Hello,

What is the deadline for a sole-proprietor to fund the {SIMPLE IRA} deferral and match contributions? Do they have until the extended due date? It may be several months after year end, past April 15, before we know what the Schedule C income will be in order to determine the proper amount for each part of the contribution.

Is the math as follows?

Sch C profit x .9235 = deferral amount (limited to $7,000 for 2002)

Sch C profit x .9235 x 3% = match

Is the deduction for both the deferral and the match taken on page 1 of the 1040?

Thank you.

[txdd]

Your math for maximum deferral amount (technically, salary reduction contributions) and match is correct with the added stipulation that the 3% match cannot exceed the deferral amount.

Unfortunately for you, the deadline for deferral contributions is 30 days after the end of the month when the earnings occur. For self-employed income, all of the year's income can be considered earned in December since the net profit is uncertain until the end of year. That means that the deadline for 2002 deferral contributions was January 30, 2003.

The deadline for the matching contribution is your filing deadline with extensions, October 15, 2003 for calendar year taxpayers. But if you have not made any deferral by now, your maximum match would be $0.

There is also an option to make 2% non-elective contributions which do not depend on deferrals. You might still be eligible for those.

Report all (salary reduction + matching or non-elective) contributions for you as an adjustment on 1040 line 31.