What's the deadline for making a profit sharing plan contribution for a calendar year plan?

[Guest soupsmp]

Plan year-end is 12/31/02, what is the deadline for the profit sharing contribution to be made? If possible, please let me know via e-mail: scott.paterniani@gt.com

[four01kman]

Generally, by the tax filing date (including extensions).

[mbozek]

If the contribution is not made by the date for filing the income tax return with extensions, the deduction will be taken for the tax year in which the contribution is made.

[Guest Bubby]

mbozek: Can you give me a cite for allowing contributions for a plan year more than 8 1/2 months after the end of the PY? Thanks!

[Brian Gallagher]

I thought that the P/S money just had to be segregated from the company's general assets by the tax filing date, but not necessarily allocated to the participant accounts. In other words, the check has to be cut and entered into the accounting ledger so in thoery, the company doesn't have access to that money any more.

Am I way off base?

[mbozek]

IRC 404(a)(6)/ Rev. rul 76-28 permit deduction to be taken for the prior year if the contribution is made by the last day for filing return with extensions. If the contributions are made after the date for filing the tax return with extensions, then under 404(a) (1) the contribution is deducted in the taxable year it is made, E.g., Contribution made on Nov 1, 2003 for employer with a calendar tax year is deductible in 2003 but not 2002.

[Guest Bubby]

But can that contribution, which is made after the tax filing deadline, be allocated to the prior plan year even though it is not deductible in the prior tax year?

[IRC401]

In theory, you can make a contribution at any time and allocate it for any year.

In practice, the 415 regs specify for what limitation year the contribution must be treated as allocated for 415 purposes. If the 415 regs state that the contribution must be allocated (for 415 purposes) for Year B, and if you want to allocate for Year A, you may allocate for Year A as long as the plan manages to comply with the 415 limits.

Suppose that an employee quits during Year A and has no 415 compensation for Year B. If you want to give that (former) employee an allocation (for Year A), but the 415 regs require that the allocation be treated as being made for Year B, you have a problem.

In addition, there are the issues of making sure that you comply with the terms of the plan document and SPD.

[Brian Gallagher]

As for the "the contribution being made", doesn't the "mailbox rule" apply? The chack has to be "in the mail" by Sept 15th? (assuming of course the extension)

[pmacduff]

My opinion is that the funds need to be "deposited" by September 15th; not good enough to be "in the mail" (i.e. postmarked). In any event, I would not want to defend in an audit situation that the "check was in the mail" timely. Just MHO - avoid trouble before it happens & invest by due date.

[R. Butler]

If its mailed by the due date that is sufficient. The cite I have is PLR 8536085.

[pmacduff]

I though PLRs were only applicable to the taxpayer & situation applied for....so - still don't think I'd want to face that in an audit with just the PLR as my site. As an aside, does anyone have a quick link to the PLRs? I tried to look up the PLR number given in R. Butler's post and didn't have any luck.....I was using the lookup systems on these boards but may have not done it properly.

[david rigby]

It will be difficult to find a link to PLR from 1985. Good luck.

There have been several discussions on these Message Boards about this topic. Try the "search".

[mbozek]

There are numerious plrs accepting deductible contributions mailed by the due date for both IRAs and hr-10 plans and the IRS has never questioned the contributions because it is no different than the rule for filing a tax return. The taxpayer needs to retain proof that the contibution was mailed out on the due date by a certified receipt or other documentation. Or the contribution could be made by a wire transfer.