401 k match deduction
With a S-corp the Safe Harbor match to an employees 401k is that treated a tax deductible expense to the employer? If so, is there a limit to how much can be deducted and is that matching amount treated like regular w-2 wages? Do you know IRS code that spells this out?
Thank you for your help
PS. I was asked this by a CPA 😮
Permalink Submitted by mk foss on Fri, 2012-09-21 05:14
The amounts deferred into the plan as well as the employer match are deductible by the employer. Form W-2 reports the salary reduced by the 401k contribution; the employer deducts that net amount as salary and deducts the deferral as a pension/profit sharin contribution. The employer match does not appear on Form W-2, it is deducted on the same line as the employee deferral.
There are limits as to how much can be contributed per employee ($50K this year I think) and what percentage of earnings can be contributed – 25%.