Cash Basis Corp with a DB plan

[John Feldt ERPA CPC QPA]

A prospect says they have a DB plan and that they are a "cash basis" S Corp filer. Plan year and business tax year are the same. They believe they must fund the contribution by the end of their fiscal year in order to get a deduction on their business tax return that covers that same year. They state that any amounts contributed after the end of their plan year, even if they are for purposes of minimum contributions, can only be deducted in the year the contribution is actually made.

Does this sound right?

[Lou S.]

No, it does not sound right. Pension contributions as I understand it are an exception to the cash basis rule and are "deemed" made on the last day of the plan year if made timely for tax deduction purposes. I think the rules are laid out somewhere in 404.