Profit sharing contribution question
I am the owner of a small government contracting form. We file our taxes on the government’s calendar (Oct-Sept). Therefore, we have already filed our taxes for 2010.
W plan to make a profit sharing contribution for the first time in January 2011. If we want it to count for 2010, will we need to re-state our taxes from 2010 in order to have the contribution count towards 2010 taxes? Is it a better idea to go ahead and make it a 2011 contribution?
Permalink Submitted by Alan Spross on Wed, 2010-12-01 23:09
What type of plan do you have, eg Simple IRA, 401k etc?
You must make the contribution by the deadline for the type of plan you have, and the actual deadline date may be affected by your use of a fiscal tax year rather than a calendar year. But if you are allowed the 2010 contribution, it will have to be reflected on the 2010 return, meaning the return would have to be amended. But first, we should be sure you can make the contribution in January for the type of plan you have.
Permalink Submitted by Martin Helmer on Thu, 2010-12-02 01:59
Assuming this is a profit sharing plan with a 2009 plan year ending 9/30/10, your employer contribution deadline is the original due date of the business tax return. So that’s December 15 for a corporation or January 15 for a partnership. Also assuming the plan document was signed by 9/30/10 and is effective retroactively to 10/1/09.
Normally you would wish to be contributing for the 2009 year and would have to amend the already filed return. As for the plan participants’ Forms W-2, you would normally not need to check the retirement plan box for 2010 for a January contribution. This means their participation in the plan will not reduce their potential deduction for contributing to an IRA until their 2011 tax year.
If you decide to have the contribution be for the subsequent plan year, it will count against the 25% employer limit for that subsequent year.