Advanced Underwriting Consultants

Question of the Day – March 22

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:  What is the deadline for an employer to deposit employees’ contributions into their SIMPLE plan accounts?

Answer:  The deadline for depositing employee deferral is the end of the month following the month in which the employee, but for the deferral, would have been paid the compensation in cash.

The deadline for employer contributions is the due date for the return for the year in question, including extensions.

From the Department of Labor’s website (http://www.dol.gov/ebsa/pdf/simpleIRA.pdf):

Depositing and Investing Plan Contributions

Employee contributions must be deposited in the financial institution serving as trustee for the plan within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash. Your employer contributions must be made by the due date (including extensions) for filing your business’s Federal income tax return for the year.

Failure to deposit employee deferrals on a timely basis is a serious issue for the employer, akin to failing to deposit employee payroll tax deposits in a timely manner.

If timely deposits were not made, the IRS has instructions for how an employer can self-report and address the mistake.  Here’s a link to a description of the overview:  http://www.irs.gov/pub/irs-tege/simple_fixit_guide.pdf.  See item 7.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day. 

Question of the Day – October 15

Ask the Experts!

Here’s the question of the day.

Question:  What’s the deadline to make a contribution of unpaid sick pay into a 403 b plan after retirement?

Answer:  Two and one half months after severance OR the end of the tax year, whichever is longer.

Here’s an excerpt from the IRS website:

Post-Severance Contributions: Plans may permit ….contributions to be made to 403(b) plans after an employee separates from service.

Elective deferrals: Employees may defer some (up to their annual deferral limits) of their regular, accrued vacation and sick pay into their 403(b) accounts if received by the later of 2 ½ months from the date of severance or the end of the limitation year (in most cases, calendar year) in which the severance occurred.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.