IRC 4972 Mess-ups; accrued salaries to the rescue in some cases, perhaps

[Guest Enda80]

Hypothetical situation; looking over those 4972 issues, those taxes on nondeductible contributions to qualified employer plans, I was wondering if accrued salaries can allow one to avoid paying a 4972 charge?

The situation is this; the compensation listed on the 941 quarterly return records for the 415 limitation year only amount to a figure that cannot accomodate the contribution made (i.e. the compensation is not four fold or more of the contribution). Does accrued salary help, even if it was not actually paid?

[Mike Preston]

I think there was a discussion about this point just recently here on BenefitsLink. Apparently, if the plan is drafted such that it takes into account accrued compensation (which may involve specific definitions of compensation and the like) and the compensation you are referencing is truly accrued as of the end of the year and is paid in the first 2 and 1/2 months of the subsequent year, then it may be able to be taken into account.

I would recommend ERISA counsel review the particulars of the plan to see whether it is allowed in the case you are referring to.