Deductibility of Contributions

[emmetttrudy]

Cash Balance Plan - Maximum deductible contribution for 2009 plan year was $150,000. An amount of $200,000 was contributed during the calendar year 2009, leaving $50,000 in non-deductible contributions.

It is my understanding that a deduction for this $50,000 can never be taken? Obviously not for 2009, but not for 2010 either, correct? So the plan sponsor just loses out on any deduciton for this $50,000?

[Mike Preston]

Before I would take such a draconian position, I would need to see more facts. What type of employer? What is the earned income/taxable income in future years? In general, a non-deductible contribution from an earlier year is deductible in a future year, but the national office of the IRS does think there are some constraints. In practice, the auditors at the local level think there are fewer than the national office does.

[emmetttrudy]

OK, thanks. Some "hope" was what I was looking for. Ultimately I am going to refer them to their "expert" CPA on the deductibility issue but I wasn't sure there was even a possibility they could deduct the amount in a future year.

[Guest Sieve]

FWIW, don't forget the excise tax for non-deductible contributions to a qualified plan. (IRC Section 4972 & IRS Form 5330.)