Late Profit Sharing Contributions

[Guest lerieleech]

A company with calendar fiscal year maintains a PS plan with calendar plan year.

For the 2005 plan year, the TPA prepares an allocation report based on the amount of discretionary contribution the company wishes to make. For some reason, the company doesn't deduct those contributions on its 2005 return. It files the return before any contributions are made for the plan year, and plans to deduct the contributions on its 2006 return.

What is the latest date that the company could make the contributions?

[Guest mjb]

deductible contributions can be made for a tax year by the date for filing the tax return for such year plus extensions. Rev. Rul 76-28.

[Mike Preston]

Remember that any contribution made more than 30 days after the due date of the tax return counts as an annual addition for the subsequent period. If nobody quits this is rarely an issue, because if it falls into the subsequent year as an annual addition, the 100% of pay limitation makes the issue moot. But if somebody has very little compensation in the subsequent period, such a contribution/allocation could violate 415.

[Guest lerieleech]

Just to make sure I understand, assuming there are no 415 violations, are you saying that the contributions shown on the calendar 2005 report could be deposited by 3/15/07 (the due date of the 2006 return) and deducted for 2006? Or later, if the return is extended?

And, do the contributions lose their 2005 "identity" in any way aside from counting toward the 415 limit? It sounds as though from what Mike says that they are still allocated according to 2005 comp. I would assume they would also be allocated according to the plan document as it reads for 2005, in case there is a change. How about counting toward top-heavy minimums (if there is also a DB plan)? Or, what if the plan is crosstested to satisfy 401(a)(4)? Do the 2005 contributions get tested in 2005 even though they aren't made until 2007? Or do they get thrown into the 2006 test?