See att’d from Form 5305 SIMPLE:
>>>>>> >>>>>>
Time and Manner of Contributions
The Employer will make the matching or nonelective contributions (described in 2a and 2b above) to the designated financial institution for
the IRAs established under this SIMPLE IRA plan no later than the due date for filing the Employer’s tax return, including extensions, for
the taxable year that includes the last day of the calendar year for which the contributions are made.
>>>>>>> >>>>>>>

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Thanks for your input! I neglected to mention that the owner is indeed a sole-proprietor. I called the investment company yesterday and interestingly, they don’t attach a year to the owner’s deferral or match, as individuals will contribute well into the next year for a prior year’s investment.

Again, thank you.

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[quote=”[email protected]“]Hi Alan,
I think he wants to know about [url=http://www.retirementdictionary.com/Salary-reduction-contribution.htm%5Dsa… deferral contributions[/url].
If the business is incorporated, which means that his salary deferral would be from W-2 wages he received from the company, then the deadline is 30-days following the end of the month to which the deferral applies. For instance, if the salary deferral was taken from his W-2 wages in December, it must be deposited to his SIMPLE IRA within 30 days after December 31.

There is differing opinions among ‘experts’ as to the deadline for depositing salary deferral contributions for an unincorporated business owner. The only written- reliable guidance for SIMPLE IRA addresses the 30-day period, and it does not make a distinction between unincorporated businesses owners and w-2 wage earners. However, some of us have ‘borrowed’ from the 401(k) rules for partnerships, which provide that the deadline is the business owner’s tax filing deadline. Of course, the salary deferral [url=http://www.retirementdictionary.com/election.htm%5Delection%5B/url%5Dmust have been made by the last day of the individual’s tax-year.[/quote]

As you state the election should be made before 12/31 of the year preceding the year in which the deduction by a self employed is sought. Isn’t the reason that contributions are allowed up until the return is completed (including any extension, is because a self employed owner often doesn’t know if he/she will have enough income to support the maximum allowed deferral election that can be made each year – (for 2009 $11,500 if under age 50)??

Recently (9/7/10) I completed a self employed owner return claiming the maximum deduction of $11,500. Before 12/31/09, the self employed owner had contributed only $7,500. Just this last week, my client informed me that his broker would not accept the extra $4,000 contribution (for the tax year 2009) to reach the maximum allowed of $11,500. Apparently my client had made a deferral election for 2009 of only $7,500.

So isn’t the lesson to be learned from this exchange and/or your advice, is that each self employed owner would be WISE to complete the ELECTION form for each coming year for the absolute maximum amount allowed for such year, since there will not be any negative repercussions if it turns out that his/her self employed income (when finally determined on an extended return) will not support the maximum deduction. The client simply contributes only the deferral amount allowed by his/her income – even as late as 10/15/09.

Apparently there isn’t any problem dropping down from the original “ELECTED” deferral, whereas there is a problem trying to increase the elected deferral once the deadline passes. Correct?

D Storhaug

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