Solo 401K/Profit Sharing - Contribution Question

[bbrownatl]

Ok, I'm somewhat inexperienced in this area but I want to make sure I do this right. I have an individual who is the 100% owner of an S-Corp and is paid a salary by the S-Corp. The client setup a solo 401K/Profit Sharing plan for 2008. The salary deferral portion obviously takes place in 2008 and gets deducted on line 17 Pension, profit-sharing, etc. Now, the employer contribution portion ($10K) won't be made until some time before 4/15/09. Begin on the cash basis, I would think that this would NOT be deducted in 2008 but rather show up in 2009. Am I thinking about this correctly? Anyway, to reflect both the salary deferral and employer match in 2008?

Thanks for the insight.

[New York Enrolled Agent]

I believe the "elective deferral" portion is simply a part of the entry for officer compensation on line 7 of Form 1120S. The salary deferral is a voluntary act by the employee and is not part of any entry on line 17.

The company (employer) contribution (you post this = $10K) would be deductible on line 17. §404(a)(6) allows for a 2008 deduction provided the payment is made to the plan account by the due date of the 2008 return (including extensions).

[bbrownatl]

Thanks for the clarification. Now, the employer portion $10K is not being paid until some time before 4/15/09. My main question is that as a cash basis taxpayer, how would you present this on the balance sheet in Schedule L? Would you show a payable for the $10K? I assume so since it was not actually paid. Again, thanks for your assistance.

[veritas]

Best to make

the employer contribution by 3-15-09 assuming the corporation is on a calendar year. You can file an extension which will allow the contribution to be made by 9-15-09.

[Bees Knees]

TTB Small Business Edition, page SB6-1 in the chart entitled: Where To Deduct Qualified Pension Plan and IRA Contributions:

Under Form 1120S, Employer contributions and elective deferrals made on behalf of an
S corporation shareholder/employee:

It says to deduct these on Form 1120S, page 1, line 17, Pension, profit-sharing plans.


On page SB6-5 under due dates (to make and take a current year deduction) for qualified plans (including solo 401(k) plans) it says

Elective deferrals must be deposited
into the employee’s account no later
than the 15th business day of the
month following the payday. Employer
contributions must be made by the
return due date, including extensions.
[IRC §404(a)(6)]

Thus you can deduct the employer contributions on the 2008 return as long as they are paid by the tax return due date, including extensions. Both employer and employee contributions are deducted on line 17 of page 1 of the 1120S.

[JCH]

I always thought that only the employer contributions to the 401(k) went on line 17, not the employee contribution, but maybe I'm confused.

[Bees Knees]

I always thought that only the employer contributions to the 401(k) went on line 17, not the employee contribution, but maybe I'm confused.

According to TTB, both go on line 17 for an S corporation.