401(k) Deposit Timing

[Medusa]

One person doctor corporation. For 2005, we told the doctor that he could contribute $14,000 401k plus $28,000 profit sharing. He deposited the $28,000, and his 2005 W-2 shows the $14,000 deferral.

However, he never deposited the deferral. Is it too late? He files a 5500EZ so DOL probably not an issue.

Med

[Guest mjb]

Contributions to a plan must must be made by the date for filing the plan sponsor's tax return for the tax year including extensions or 8 1/2 months after end of tax yr. See Rev Rul 76-28. If the 14k deferral was claimed as a deduction on tax return he needs to file amended return

[jpod]

I assumed from the OP that the $14,000 was paid to the Doc, rather than contributed to the Plan, in which case the corporation is entitled to a tax deduction, although not as a plan contribution. The W-2 and the Doc's 2005 tax return are wrong.

If, on the other hand, the $14,000 never left the corporation, the corp. gets no deduction and presumably owes back taxes for 2005, but the Doc would not. Query, however, whether FICA or at least Medicare was overpaid on the $14,000.

[Bird]

If the W-2 shows $14,000 withheld, then I'd guess that the money was withheld and I'd treat $14,000 of the $28,000 that was deposited as a completion of the deferral. Then he'd lose $14,000 of the corporate contribution/deduction. That's a lot easier fix than deferrals that were withheld but not deposited, or (yuk) deferrals that showed on the W-2 but were never withheld. (I suppose if they were withheld but not deposited you might want to try to deposit them now, with an earnings fix, so you don't lose the corporate deduction on the profit sharing.)

But I'd want to follow the money first to make sure I understood exactly what happened. Knowing whether or not the money was actually withheld is going to help narrow down the choices.