Late Employer Deposits

[JKW]

A small plan just discovered an error in which they did not make their 2015 safe harbor and profit sharing contribution. They took the deduction and tried to process the contribution but the submission never went fully through so the money was never withdrawn from their account. They obviously already filed their 2015 tax return and may have already filed 2016. Is the only way to fix this amend the tax returns and not take the 2015 deduction or can they document the attempted the submission?

[Kevin C]

They are beyond the time period to deposit annual additions for the 2015 year, so the only way a 2015 contribution can be done now is under EPCRS.  The SH contribution is required, so it definitely needs to be corrected. If it isn't corrected, the plan is disqualified.  If the PS contribution was discretionary, I don't know if it can be corrected.  Rev. Proc. 2016-51, Section 6.02(4)(b) says that corrective deposits are considered annual additions for the year being corrected, but the normal rules under Section 404 regarding deductions apply. With a correction being made now, I read that as you would allocate for 2015, but deduct in 2017.  I'm not a tax person, but I would agree with you that they should not have deducted it for 2015 when it wasn't deposited.

[JKW]

Thanks.