Partner Deferrals Not Received at Financial Institution

[Spencer]

Partnership issued checks for partner deferrals upon completion of the K-1s in early April. Financial institution still has not received checks. Checks were not mailed return receipt so there is no tracking. Tax returns have been filed, showing the deferrals. Can client stop payment and re-issue the checks to correct this?

I know we may have an issue with DOL and the 7 day deposit rule (it is a small employer), but for now, client's concern is how to fix this as it pertains to IRS deductability.

Thanks!

[mbozek]

Partnership issued checks for partner deferrals upon completion of the K-1s in early April. Financial institution still has not received checks. Checks were not mailed return receipt so there is no tracking. Tax returns have been filed, showing the deferrals. Can client stop payment and re-issue the checks to correct this?

I know we may have an issue with DOL and the 7 day deposit rule (it is a small employer), but for now, client's concern is how to fix this as it pertains to IRS deductability.

Thanks!

No real answer just observations:

If partnership filed an extension to file firm tax return by Apr 18 then date for making contributions is automatically extended and new checks can be issued.

Are the returns you are referring to the returns of the partners who received the K-1?

I have always wondered how a taxpayer proves a contribution is made on time if the only documentation is a postmark on the date the return is due. Does the financial institution keep the envelope with the postmark in its records? Or does the financial institution record the contribution for the prior tax year on its records which is accepted by the IRS? There is a case where the tax court accepted an affidavit from the taxpayer which stated that the tax return was deposited in a mail box before the due date over IRS objections.

There are very few reasons why the checks have not been deposited or returned to sender:

letter was lost in the mails- highly unikely but sometime letters are delivered after extended delay because letter was routed to wrong Post office zip code or PO box.

letter with checks went to wrong department at bank where it is lost in some one's in box.

Checks are being held by an employee of bank awaiting instructions from some fuctionary because they were not sent to correct department that deposits checks or there is no record of which account the checks are to be deposited to and person holding checks does not know who to contact. This is the most likely reason. Many times the employer sends the check to PO box of a bank with inadequate information on the account #s that are to to recieve funds or does not include a deposit slip.

[Spencer]

Are the returns you are referring to the returns of the partners who received the K-1?

Yes, the partners returns.

I suspect you are right - checks are sitting on someone's desk, waiting for further info. CPA is anxious to resolve matter and wants to stop payment and re-issue checks.