When is contribution credited?

[Hojo]

I know this has been asked before, but my search capabilities have failed me.  Is there a definition of when a contribution can be credited?

Must it be the date that the contribution has cleared the account or can it be the date that the contribution has left the control of the sponsor?

In this case, the sponsor sent a check on 9/14, was received by the trustee on 9/15, but it did not clear until 9/18.

[Lou S.]

I think this falls under the timely mailing is timely filing rule and 9/14 would be the date.

https://www.law.cornell.edu/uscode/text/26/7502

But be prepared to defend the timely mailing part upon audit.

[Hojo]

Thank you Lou!

[truphao]

post-mark date governs.  Have a client in a similar situation (the client is doing everything very last possible minute and I am about to resign on that reason).  Told him to run to the post office on 9/15, mail it with the certified receipt and save everything for documentation in case of audit. After seeing the mailing date of 9/15 I am comfortable signing SB with 9/15 contribution date.

[thepensionmaven]

OK, that sounds good, but what if the contribution was wired, let's say a contribution for a DB, 9/15, minimum funding applies. 

The contribution not credited to the individual's account until after 9/15.

Is the client stuck with a minimum funding penalty?

[Lou S.]

I don't think the regs have been updated in quite some time to consider the prevalence of electronic payments. I have a hard time believing the IRS would challenge it or try to impose the penalty if there is evidence the wire/ach payment was initiated timely but credited after the date but can't say for sure. Also while regs address post mark, I would think you would get the same reliance using a private delivery service with evidence of pick up on or before 9/15 but again I couldn't say for sure. I think it would be nuts for the IRS to accept a post mark by "snail mail" and not accept a wire trail timely initiated, but then the IRS would be final arbiter.

 

[truphao]

I think "post mark" concept extends to a proof of delivery triggered by snail mail, private delivery service or electronic transaction.  I would be comfortable signing SB with 9/15 contribution date given the transaction has been originated on that date.   I would be OK even taking it further and signing SB with 9/15 if the bank received the request on 15th but did not wired/ACHed/Zelled/Paypaled/whatever money until 16th.