401 k audit question

[Guest flpensionguy]

OK, lets see if I can get this simplified, have a client who is under random audit, everything seems to be in order except timing of 401 k deposits. they were generally made on the 10Th of the month following calculation from prior month. IRS is asking that (audit year is 12/07) that employer provide breakdown of 401k amounts from weekly payroll for years 2006,2007,2008 in order to calculate and assess penalties for late deposits. the issue is who determines "reasonably segregate amounts" versus the employers pattern of the 10th of month following? total plan assets are about 500,000.00 all 401 k contributions about 18 participants total. Plan is not top heavy 2 key/owners have small amount of benefit in plan. Any input appreciated.

[rcline46]

They were late. Gonna have lost earnings and excise taxes. Just give it to them and don't argue, save your energy to fight another one.

[jpod]

How often did the employer have to make tax deposits during those years? Perhaps you can get the excise calculation simplified and the total excises reduced by working off of the tax deposit due dates. But I agree that 10 days into the following month is not defensible.