Exclusion of Eligible Participant from PS contribution in Prior Yr

[tjw572]

I have a situation where the prior year profit sharing calculation missed giving a contribution to an eligible employee that should have entered the Plan.  The normal correction method is to do a make-up contribution for the prior year plus earnings.  Total contribution due is approx $1k.  However, I have an extra issue with this Plan.  It is a partnership subject to the self-employment calculation.  To be technically correct, 2018 should be redone adjusting the contributions/plan compensation of the partners in 2018.  That would cause many more problems, i.e. amendment of the partnership return, the individual returns of the partners.  Would it be more practical to factor it into the 2019 partnership calc along with the staff ER contributions for 2019?

[Mike Preston]

Yes. 

[Larry Starr]

On 2/22/2020 at 1:38 PM, tjw572 said:

I have a situation where the prior year profit sharing calculation missed giving a contribution to an eligible employee that should have entered the Plan.  The normal correction method is to do a make-up contribution for the prior year plus earnings.  Total contribution due is approx $1k.  However, I have an extra issue with this Plan.  It is a partnership subject to the self-employment calculation.  To be technically correct, 2018 should be redone adjusting the contributions/plan compensation of the partners in 2018.  That would cause many more problems, i.e. amendment of the partnership return, the individual returns of the partners.  Would it be more practical to factor it into the 2019 partnership calc along with the staff ER contributions for 2019?

Actually, that is you only choice; I don't see any other.

[Luke Bailey]

On ‎2‎/‎24‎/‎2020 at 10:09 AM, Larry Starr said:

Actually, that is you only choice; I don't see any other.

To (perhaps) elaborate on Larry's point, in fact a contribution made in 2020 to make up for something that should have been contributed in 2018 is a 2020 deduction, affects partnership income (for business and tax) in 2020, etc.