DB contributions made after minimum funding deadline and before tax return due date

[Guest Nineteen]

I am working on a one-man sole proprietor DB plan with a calendar year plan year. He has already made the minimum contribution needed for 2004, but can make an additional deductible contribution for 2004 if he chooses to do so.

He has yet to give his tax info to his accountant, so his tax liability for 2004 has not yet been determined.

I understand that he is able to make additional contributions up to his deduction limit until his tax filing deadline of October 15. Our actuary has also stated that only contributions made by September 15 are reported on the 2004 Schedule B.

My question is: Do the assets on Schedule I include the additional contributions, which would then result in a discrepancy between Schedules B and I?

I tried searching but couldn't find anything.

[Mike Preston]

If it is to be taken into account under 404a6, then you would treat it like any other contribution made after the end of the year under 404a6. That is, if you reflect the receivable contribution in your reporting, you include this amount as a receivable.

[david rigby]

IMHO, the contributions on Schedules B and I (or H) need not agree, but should be reconciled. In this case, it appears you want to record an accrued contribution on the I but not on the B. Is that correct? All my experience is with the opposite situation. To dig deeper, perhaps there is value in review of the instructions for the I/H.

There may be practical reasons why a sponsor will take the position that they will record a contribution for the current year even if it could be recorded for the prior year.

[AndyH]

I wonder if the question is being misinterpreted. Nineteen, presuming that both the plan and sponsor are on calendar years, are you saying that the sponsor wants to contribute an amount between 9/16 and 10/15 and deduct it for the prior year even though it cannot be reported on Schedule B because contributions up to 9/15 can be included there? If that is the question, the answer is no, they are not deductible for the prior year and should be reported nowhere.

They would have to be contributed on time to be includible on the B.

But having said that, I don't think the Sch I needs to agree with the B if the I is done consistently on a cash basis and the B is using the allowable period after the PYE.

[JAY21]

Andy, why aren't they deductible ? If a sole prop gets 2 extensions to 10/15 and elects to deduct the contributions (404) for the prior year instead of current year, then it would seem to me they are deductible. What am I missing ?

[Guest Nineteen]

This plan's return is prepared on an accrual basis, so in prior years, the contributions on Schedule I and Schedule B have matched. The instructions for the schedules don't address the possible discrepancy, and I haven't had this come up before.

I think everybody understands the question. Basically, my client has already deposited the minimum needed (let's say it's $100,000), but was given a contribution range of $100,000 to $150,000 (max deductible). His tax liability most likely won't be calculated until after 9/15, at which point he'll decide whether or not an additional deduction is needed. I was thinking the same as Jay21, i.e. that he has until 10/15 to make additional deposits (say $25,000 on 10/10) and can deduct $125,000 on his 2004 return, with only $100,000 being reported on the 2004 5500 Schedule B.

Andy, if you have a cite for your position, it would be greatly appreciated. It would actually make my life easier, since this client tends to do everything last minute.

[AndyH]

Well, I am mistaken. Sorry for the confusion. I wasn't aware of this rule.

p.s. Of course this occurs all the time with different plan and fiscal years so this rates a "duh".