Client is self employed and has a qualfied profit sharing plan. He's on extenion and I need to confirm that he can still make a contribution for 2007. He qualifies re earned income and could contribute another $10,000. TB page 13-5 says that "employer contributions must be made by return due date, including extensions". I'm not sure if this includes existing pension plans or new ones in its first year of existence. Thanks for comments.
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SEP or IRA
Greenbriar, I believe there are subtle differences with respect to setting or contributing to these plans based upon whether they are SEPs or IRAs. Your post didn't tell us which, and that might determine the answer to your question.
Regards, Nashville -
It's neither
Nashville, it's a profit sharing plan, not an ira or sep. Thanks.Comment
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TTB, page 13-5 in reference to SEP-IRAs:
TTB page 13-5 in reference to qualified plans (including profit sharing plans):• New accounts can be set up any time by
return due date, including extensions.
• Contributions must be made by the
return due date, including extensions.
• New plan must be set up by the end of
the year for which contributions will
apply.
• 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)]Comment
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A new wrinkle
Bees,
I saw that in the TB but just wanted to confirm that the deadline for contributions applies to existing plans as well as new plans which 13-5 addresses. I have since reviewed the Master Tax Guide and it makes not distinction so I think we are safe.in making an additional contribution.
Here's a new wrinkle to the issue: client had an employee who was also in the plan but she resigned from his employ last April. I don't think he is obligated to make an additional contribution for her also. Can't find that one anywhere.Comment
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Not sure about profit sharing plans. However, TTB page 13-4 in regards to SEP-IRAs says:
Must be identical percentage for all
eligible employees. Must also contribute
the same percentage for employees who
separated from service prior to the end of
the year [Proposed Reg. §1.408-7(d)(3)].Comment
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Good catch
Thanks, Bees. I have more homework to do.Comment
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