Can sole prop delay contrib until 10/15?

[Guest rickw]

I hear arguments on both sides as to whether the 2nd 1040 extension to 10/15 counts toward extending the contribution deadline for a PS plan. I know 1.404(a)-1( c ) says "extensions", but some folks are nervous because that gives sole proprietors one more month to fund than a December FYE corporation. Help! Thanks!

[MGB]

Note: I do not do filings, nor advise employers directly, so I do not have any experience in this. I only read and interpret rules to help others that do.

I think you should be able to go to 10/15. I don't see any justification for the argument of comparing to corporations.

BUT (there is always a but)...I would not feel so comfortable about a recently filed extension request. This extra two months is not automatic, it must be applied for and you only get it if the IRS OKs your request. So, if you haven't gotten that OK yet, then on 8/15, you have hit a deadline. If that deadline is moved to 10/15 at a later date, it seems like a gray area as to whether or not the contribution should have been made on 8/15.

[R. Butler]

For tax deduction purposes, employer contributions must be made by the due date of the employer's federal tax return including all valid extensions. If the sole proprieter has a valid extension thru 10/15, then he has until 10/15 to make the contrib. See 404(a)(6).

MGB makes a good point about the 10/15 extension not being automatic, but I've never seen a request rejected. Form 2688 does state that if you did not originally file the 4868, the extension will only be granted only for undue hardship, but absent that I don't know why they would deny the request.

[Blinky the 3-eyed Fish]

I am sure you know the 412 funding deadline is 9/15. I just thought I would mention it since I had a sole proprietor client fund on 10/15 based on his accountant's advice and contrary to ours.

[david rigby]

Correct, but that deadline appears in IRC 412, which does not apply to a PS plan.

BTW, there have been several discussion threads on this topic. You can use the Search feature to look for them.

[Blinky the 3-eyed Fish]

I didn't see the plan type was specified, but now I do in the first post.

[jevd]

Blinky,

You must be in the NorthEast. Even three eyes can't help in the dark.

Have a pleasant week-end.

[mwyatt]

I'd second Blinky's observation (I did see the PS reference at the beginning). I've also had some accountants fall into that trap after dealing with PS plans for a long time, that they also assumed that the same held true when the client moved to a DB plan. So I guess it is OK to take the deduction for the DB plan, but they have the pleasure of donating 10% of the amount to the IRS's Widows and Orphans fund since they went past the minimum funding deadline.