late SEP contribution

[betheeg]

In a SEP plan, the employer has possibly left out an employee that was due a contribution for 2003. He had an extension on his taxes until aug 15, 2004. if the ee is due a contribution, i assume the contribution has to be made. but since it is after aug 15, can the employer still take a deduction on his tax return? and what is the process of making and reporting a late contribution?

thanks for any help..

[Gary Lesser]

Self correction under the EPCRS may be possible. But the amount is not deductible if paid after the extended due date until the following year (assuming all limits are otherwise met in that year). Special rules apply if a SARSEP. Generally, the restorative payment has to include earnings (if no earnings rate is known, then a reasonable interest rate may be used).

See Rev Proc 2003-44, Sec 6.10(4) and Sec 8 (regarding self-correction if failure is insignificant).