PS Contribution in 401(k) Plan

[msmith]

For the calendar year 2010, an Employer elected to contribute a 3% profit sharing contribution to all eligible participants. The contribution has not been deposited. However, the Corporation's tax return (not sure if extension applied for) and Form 5500 have been filed - both reporting the 3% allocation to all. Now, the Employer states he cannot afford the 3% allocation and only wants to contribute the 3% top heavy.

Can both returns be amended for the lesser contribution? I am not certain that Rev. Rul. 76-28 applies here.

[Bird]

In my opinion, the filing of the corporate and plan returns does not lock in those contributions. That is, if the employer does not make the contribution then the returns can/must be amended.

[Guest Sieve]

I agree with Bird. Note, also, that amending a return to remove a deduction may result in additional taxes owed, plus penalties & interest.

Now, to address your specific question about Rev. Rul. 76-28: The statement in that Rev. Rul. about the election made on the tax return being irrevocable applied only to the 1975 taxable year, as stated in the Rev. Rul. (because the provision of ERISA that expanded this deduction rule to cash basis taxpayers was to take effect for tax years after 1975, and this Rev. Rul. clarified that the election applied in 1976 to 1975 tax years).