Do we need to amend last year's 5500?

[Guest notapensiongeek]

We've got a Profit Sharing Plan, PYE 12/31/2005. Discretionary contribution was funded timely, 5500 completed and filed, participant statements distributed, etc. and we get a call today from the client informing us that an employee that was listed as a new hire on the 2005 census was really a participant from 1998 - 2002 (but he never had an account balance). Turns out he was called to active military duty back in 2002, which is why he left. Anyway, he returned to work in 2005 and we didn't give him a contribution because he got deleted from our software system after years of inactivity so he looked like a new employee.

Side note: they did not make a contribution 2002, 2003 or 2004, but they did in 2005.

To correct this (pursuant to Rev. Proc. 2006-27 page 76 (2)(a)(i)), we've given him a 2005 contribution based on what would have been his full-year wages had he not gone on military leave in 2005. His contribution will be deposited this week, and the client will take this as a deduction on their 2006 return.

My question is: do we have to amend the 2005 5500 and Schedules to account for his contribution, or can we just show it as a current year contribution in 2006? I'm sure the RIGHT thing to do would be to amend the 2005 return and re-run all the reports, but is it really necessary? This guy's contribution is only about $500, and it will take several hours to re-run everything. Any thoughts on this?

Thanks!

[Leopurrd]

I wouldn't re-run all your reports just for $500; Usually, when I run into something like this, I show it as a new contribution coming in for the next year (in your case, 2006). I've never heard of anything negative resulting from reporting like this, but perhaps someone else on the board has ran into something different??

Vicki

[pmacduff]

It's my experience in an audit situation that the auditor compares the plan contribution with the Employer's 1120 deduction. So I would report on the 2006 (as you said) and that will coincide with the 1120 deduction for 2006.

[Guest notapensiongeek]

Cool, thanks. That was the answer I was hoping for!