Advanced Underwriting Consultants

Question of the Day – April 6

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My client sponsors a Section 401(k) plan at his business.  He deposits employee contributions to the plan at the same time the employees receive their paychecks.  What is the deadline for making employer contributions to the 401(k) plan?

Answer: Here’s what IRS Publication 560 says about this:

You generally apply your plan contributions to the year in which you make them. But you can apply them to the previous year if all the following requirements are met.

  1. 1. You make them by the due date of your tax return for the previous year (plus extensions).
  2. 2. The plan was established by the end of the previous year.
  3. 3. The plan treats the contributions as though it had received them on the last day of the previous year.
  4. 4. You do either of the following.
    1. a. You specify in writing to the plan administrator or trustee that the contributions apply to the previous year.
    2. b. You deduct the contributions on your tax return for the previous year. A partnership shows contributions for partners on Schedule K (Form 1065), Partners’ Distributive Share Items.

So employer contributions to a 401(k) plan for 2010 can be made as late as the due date of the tax year 2010 return plus extensions.

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