Can LLC member make 401(k) contribs now for plan year 12/03

[Guest Gee Bee Fran]

Hello All,

I have an LLC member with income passed through to him via a K1. He then files a Schedule C and pays self-employment taxes similar to a sole prop. Can he make a 401(k) contrib from bonuses/earnings received after 12/31/03 and deduct same from his taxable income for '03?

Any help would be appreciated!!

Thanks,

GeeBee Fran

[Mike Preston]

The amount of this individual's election was required to be in writing before the end of the year. If the result of that election is that money is due the plan, then that deferral must be adhered to. Where the funds come from is another matter. If your LLC member chooses to treat monies received in 2004 as the source of those funds, that is ok. There is a complete disconnect.

[Guest Thomas Pritchett]

I agree. The election needs to be made timely, but the timing of the submission of the deferral can be in the subsuqent year. With owner-employees, the determination of deferral limits can not be made until the SE earnings are calculated. I would adhere to the "due date of the return' rules for cash basis taxpayers as a deadline.

[jquazza]

When you tell that to clients, the written election sudenly pops up. It was in a drawer all along and they forgot to tell you what they were decided to defer.

[TBob]

jquazza - as long as the written election does pop up...I don't care what drawer it was in. All I need is a copy for my files...

It's funny how these things can materialize out of thin air when the owner's contribution is at stake. If the ink is still wet you might raise an eyebrow!

That would be like having one your very elderly participants provide a Pre-Tefra election that was printed on a laser printer!

[Guest Thomas Pritchett]

I'm a CPA. The frequency of those document sightings increases exponentially this time of year.

[Guest Gordy]

Speaking of election forms for SE participants, are there guidelines on how specific they must be? Can they simply specify a deferral of $13,000 or $16,000 for the year and they can make periodic deposits throught the year and make up the difference after year end? The periodic deposits won't tie to any income earned or be a specific % of a draw check or a uniform amount. You know, what ever they have available whenever they happen to think of it.