Timing of Profit Sharing Contribution/Deductibility

[Pammie57]

if a client files an extension on their corporate return for 2015, (they are an S Corp) - do they have until the extended due date to fund the profit sharing contribution to be able to deduct it for 2015? I think so, but want some back up. Thanks..

[Belgarath]

Yes. See IRC 404(a)(6).

[actuarysmith]

What happens if they file their corporate return earlier than the extended deadline?

I think they have to fund by the time they file their return. Correct?

[Belgarath]

No, that's not correct. You can file the return prior to the deadline, yet still have until the deadline to actually make the contribution. But always be aware that the minimum funding deadline (if applicable) is independent of the tax extension deadline.

[K2retire]

And we typically tell them they must make the deposit before they file so that they don't "forget" to make it and have to amend the return.

[jpod]

Really? You intentionally give them wrong information?

[Kevin C]

Years ago, I had a discussion with a client's CPA about deposit timing. He told me that under the accounting method used for their tax filing, they could only deduct contributions made before the return was filed.

[jpod]

I don't know about "accounting method," but I would never sign the return as the preparer if the return claimed a deduction for a contribution which had not yet been deposited, but that's a different issue then the one discussed here.

[K2retire]

Really? You intentionally give them wrong information?

It's more along the lines of assuming they won't file until the last day when we tell them to make the deposit before they file.

[Hypothetically]

A little twist on this - what if after making the contribution and the tax filing deadline, we discover they under contributed and need to put more money in PS in order to pass all required tests? Can they contribute additional now (2016) for 2015 and deduct in 2016 (this is due to an error), or must this be a non-deductible contribution?

[jpod]

Absent some weird facts which I can't imagine, it would be deductible in 2016 (subject to the applicable deduction limit for 2016).