Partnership 401(k)

[bzorc]

Partnership consists of 5 doctors: One doctor is a 95.96% owner, and the other four doctors own 1.01% each. 3 Doctors are considered Highly Compensated by definition, and the other 2 are not.

For 2018, all 5 doctors made elective deferrals to a 401(k) Plan. 95.96% doctor owner wants to make the additional $36,500 employer discretionary contribution on his behalf, not realizing that his plan is a New Comparability plan and undoubtedly top-heavy as well (I am not the TPA on this, getting second hand information here). Their current TPA requires "a couple of weeks to perform the "pressure testing" (never heard it called that before)" to see what the employer contribution will be for the company.

Complicating matters, the accountant filed the Form 1065 without extension; no employer contributions have been made as of today. The question coming for all is if the 2018 Form 1065 is amended to reflect the employer contribution that is necessary, does that give the company the additional time to make the contribution and have it deductible for 2018.

Thanks for any replies.

 

[C. B. Zeller]

If the Form 1065 was already filed then the deadline to make a contribution deductible for 2018 was March 15. Amending the form now would not extend the deadline.

Interestingly (and somewhat off-topic), I was told by an IRS auditor that filing an extension for your tax return does not extend the deadline if the return is actually filed before the unextended due date. For example, your deadline is March 15, you file an extension on March 1, file your return on March 14, and deposit your contribution April 1, the contribution is not deductible on the return. However if you had simply waited a few days to file the return it would have been ok. His reasoning was that the extension filing is only a request to extend the deadline, and if the return is filed timely then the request does not apply.

[Bird]

I've been starting to wonder if contributions for the partners aren't due on April 15, the due date of their own returns where the deductions are actually taken.  Contributions for the employees, taken on the 1065, would be due March 15.  I'm not sure why not...

I've also heard that filing a return on time invalidates an extension.  And I've said that so it must be true.  Being in a wondering mood...who is checking that?

[Belgarath]

Personally, I think the IRS auditor's assertion is ridiculous. Revenue Ruling 66-144 clearly states otherwise for a corporation, and ERISA amended 404(a)(6) to make that provision applicable to cash basis taxpayers.

In my humble opinion...

[Earl]

I always thought "due by the due date of the Plan Sponsor's tax return" making the Partner contributions due 3/15 is the Partnership return is not extended.

Publication 560:  a partner isn't an employer for retirement plan purposes. Instead, the partnership is treated as the employer of each partner

but I keep hearing "due by the due date of the return on which the deduction is taken" which I have never seen in any official printing.

[Luke Bailey]

My understanding is that the deadline is the 1040 deadline of the partner, i.e. 4/15. Also, my understanding was that if you file an extension, you have until the extended due date to make the contribution. I think I researched that once. The auditor may have been getting confused with when statute of limitations runs on return filed under extension, which is from date of filing, not last date could have been filed.