corrected SEP contribution after due date
Employer erroneously does not include an employee (unrelated, not an officer or highly compensated) in the calculation of SEP contribution. After tax return due date, realizes mistake and is REQUIRED to cure the defect by making the required contribution, along with a reasonable estimate of earnings, thereon. Does employer get a deduction for the SEP contribution and/or the contribution of a reasonable estimate of earnings? These are both contributed AFTER the extended due date for the year to which the contribution relates.
Permalink Submitted by Alan Spross on Sat, 2011-07-30 01:06
I could not locate a cite directly on point. However, the IRS site does indicate that if the contribution is NOT made by the extended due date, it is not deductible for the tax applicable tax year. That means if it is not deductible in the year it is actually made, the deduction is totally lost. That would seem to indicate that the deduction could be taken in the year it is actually made, rather than being forfeited.
Permalink Submitted by mk foss on Sat, 2011-07-30 02:58
I agree with Alan. Most small businesses report deductions on a cash basis but a special provision allows a deduction for a retirement contribution in the year the contribution relates to, if it is paid on time. When it is late it reverts to the general rule.