profit sharing contribution timing

[Guest tajcc]

How does a plan correct for a late profit sharing contribution?

1 Do they have to put earnings in as well?

2 How are the earnings calculated - is it the plan average or a rate determined by the IRS?

3 Do they have to file a 5330?

4 What about deductibility - they lose it for the plan year it was intended for, does it count for the year that it is actually deposited?

5 What about the earnings they are depositing - are they deductible?

Thank you for any feedback!

[Archimage]

Is it discretionary? If so, then the contribution was not late. There was no contribution for that given plan year.

[JanetM]

Don't forget to amend tax return is it was filed already. Yes, I know you have to make the contribution before you file, does'nt mean they always do.

[Guest tajcc]

This would be a discretionary profit sharing contribution for a 12/31/04 pye. It has not been deposited yet.

[Archimage]

Sorry, you can't do a contribution for 2004. The deadline was 9-15-05 for the 2004 tax year. You had until 10-15-05 to deposit and have it allocated for the 2004 plan year but deduct it for 2005 tax year.

[Nate X]

1 Do they have to put earnings in as well?

Yes, this can be corrected under EPCRS. www.irs.gov/pub/irs-drop/rp-06-27.pdf

2 How are the earnings calculated - is it the plan average or a rate determined by the IRS?

You have a few options. See Section 3 of EPCRS.

3 Do they have to file a 5330?

No. Profit Sharing Plans are not subject to IRC 412.

4 What about deductibility - they lose it for the plan year it was intended for, does it count for the year that it is actually deposited?

Yes & Yes. They will lose it for the plan year it was intended for and it does count for the year that it is actually deposited. See Section 6(4)(b) of EPCRS.

5 What about the earnings they are depositing - are they deductible?

No. Restorative payments are not deductible.

Thank you for any feedback!

You’re welcome.

[Moe Howard]

Arch, you sure about that?

I thought you have until the extended due date of the employer's income tax return, but not later than 10/15/05.

So, the cont could have been made by 10/15/05 and deducted on the employer's 2004 income tax return.

[Guest mjb]

See Rev. Rul 76-28 for timing rules on deduction of contributions which must be made no later than date for filing tax return w/extensions (provided than an extension was timely filed).