Allocation

[Guest msjudees]

I have a one man profit sharing plan with salary of $210,000. 25% of salary is $52,500. However, 415 limit is $44,000. Can client make $52,500 Employer Profit Sharing contribution and deduct $52,500, but only allocate the maximum of $44,000 and put remainder in suspense for future allocation without incurring any penalties? If penalties, what are they? Thank you.

[david rigby]

Are you suggesting something "trumps" the 415 limit?

[Guest msjudees]

I have a one man profit sharing plan with salary of $210,000. 25% of salary is $52,500. However, 415 limit is $44,000. Can client make $52,500 Employer Profit Sharing contribution and deduct $52,500, but only allocate the maximum of $44,000 and put remainder in suspense for future allocation without incurring any penalties? If penalties, what are they? Thank you.

I know that only the 415 limit can be allocated, my specific question is, can the full 25% contribution be made and deducted without being allocated and be put in suspense to be allocated in later years. Thank you.

[Guest greybeard]

What about a non-deductible contribution incurring an excise tax? Is it worth it?

[Belgarath]

No, you can't. See 404(j)(1)(B).

And if you do make a nondeductible contribution, (and no exception applies) penalty is 10%. See IRC 4972.

[david rigby]

Plus an audit?

[Jim Norman]

Amend the PS to add 401(k). Defer $15,000, contribute PS of $29,000.

Add a DB plan, design for a contribution of $23,500.

Total DC annual additions = $15K + $29K = $44K.

Total 404 deduction is DB + PS = $23,500 + $29K = $52,500

I have a one man profit sharing plan with salary of $210,000. 25% of salary is $52,500. However, 415 limit is $44,000. Can client make $52,500 Employer Profit Sharing contribution and deduct $52,500, but only allocate the maximum of $44,000 and put remainder in suspense for future allocation without incurring any penalties? If penalties, what are they? Thank you.