Change-in-Accounting Method ?

[JAY21]

If a client has been consistently contributing and deducting DB contributions for the plan and fiscal year that coincide (both calendar year), but now wants to change so that the 2003 minimum funding contribution (made in 2004) is deducted for the 2004 fiscal year (2003 tax return would show zero contribution), is this a change in accounting method that requires IRS approval ?

[SoCalActuary]

Potentially, a business audit could assert that this is a change in accounting practice.

However, the IRS specifically allows the deduction to move back one year in the event contributions were made timely for funding standards, but later than the tax return for the business.

Personally, I would not look to file for a change in accounting method.

[david rigby]

Sounds like it is related to the financial statement of the sponsor not the plan. I would defer to the sponsor's auditor.

[JAY21]

SoCal: Is that still true even if the 2003 tax deduction deadline has not passed ? The 2003 tax return is on extension until 9/15/04, but they just happened to file the tax return in early June before client discovered he had more money to contribute, but CPA & client does not want to file an amended 2003 tax return. They want to report the 2003 contribution as a 2004 tax deduction. It's just a one man employee/owner plan.

Just want to make sure I can still take advantage of the one-year kick back on deductions you mentioned if we're still within the 2003 deadline (since I believe the deadline is tied to the extended tax return deadline not the date the tax return was actually filed).

[SoCalActuary]

I would have to research, but I think it still works. The amount is deductible but not yet deducted. The contribution will be timely for FSA minimum.