Timing of Required Deposit and 415

[buckaroo]

Plan year and fiscal year are calendar year. Client has not made required top heavy minimum contribution for 2006. His corporate taxes are due (on extension) on 9/17/2007 (since 9/15/07 is a Saturday). If the client does not make the contribution by 9/17/2007, our understanding is that the client has 30 additional days after the IRC 404(a)(6) period to make the contribution and the deduction will be taken on the 2007 return, but the contribution will still be attributable to 2006 (for 415 annual addition purposes). Furthermore, if he makes the contribution after the additional 30 days, he can still take the deduction for 2007, but the contribution will count as an annual addition in 2007.

Questions:

If a person terminated in early 2007 (January 2nd), earned $100 in 2007, and was to receive a 2006 T-H min contribution of $900, does he have a 2007 415 violation? If so, how is it resolved? Does it matter if he is a HCE or NHCE?

When does the required T-H minimum need to be made if it is after the 30 additional days? Is it by the filing date of the 2007 taxes? If not, when?

If possible, please provide a citation. Thank you in advance.

[BeckyMiller]

Whoa there, buckaroo. You need to go to the final 415 regulations. 1.415-6(b)(7) To get the deduction on the 2006 return, the rules of IRC Section 404(a)(6) must be met - that includes a DEPOSIT not later than the due date of the return. The extra 30 days is ONLY for the 415 limits. Some folks believe that this does allow you to game the tax years - count something against the 415 limit for one year, but be deductible in the subsequent year. Other folks think that IRC Section 404(j) or is it (h) (don't have my Code on me) requires that for any amount to be deductible it has to be ALLOCATED in the year deducted.

If you are in the liberal school - meaning it just has to be allocated by year end, not with respect to that year, then if you made the contribution within 30 days of the 404(a)(6) due date, it would count against 415 for 2006 and be deductible in 2007.

[Mike Preston]

Plan year and fiscal year are calendar year. Client has not made required top heavy minimum contribution for 2006. His corporate taxes are due (on extension) on 9/17/2007 (since 9/15/07 is a Saturday). If the client does not make the contribution by 9/17/2007, our understanding is that the client has 30 additional days after the IRC 404(a)(6) period to make the contribution and the deduction will be taken on the 2007 return, but the contribution will still be attributable to 2006 (for 415 annual addition purposes). Furthermore, if he makes the contribution after the additional 30 days, he can still take the deduction for 2007, but the contribution will count as an annual addition in 2007.

Agree with everything.

If a person terminated in early 2007 (January 2nd), earned $100 in 2007, and was to receive a 2006 T-H min contribution of $900, does he have a 2007 415 violation? If so, how is it resolved? Does it matter if he is a HCE or NHCE?

I presume you mean in the case where the deposit is not made until the 30 day grace period. Yes, there is a 2007 415 violation. I'd pay him extra $$$$$ compensation before the end of 2007 if it were me. It doesn't matter whether it is HCE or NHCE. Correction would be via EPCRS.

When does the required T-H minimum need to be made if it is after the 30 additional days? Is it by the filing date of the 2007 taxes? If not, when?

Like a bad penny, this question keeps coming up. The answer is: nobody knows. The IRS refuses to give us any hard guidance (probably they don't know). It needs to be made one day before the day that when the IRS audits you they say that your plan is disqualified for making the deposit one day too late.

[Belgarath]

I agree with Mike. At least Revenue Procedure 2006-27 (Appendix A, .02) does provide for a "fix" - so one could possibly take the approach that at least the plan won't be disqualified if you make the contribution and it is subsequently audited, as long as you made it within the timeframes for SCP, depending upon whether "significan" or "insignificant" depending upon the demon facts and circumstances. However, if you are audited before you fix it, it brings you right back to...exactly what Mike said.