Q) What is the date for the Employer to deposit contributions to the plan and be deducted on the prior year’s company tax return?

A) In order for deposits to be considered timely and eligible for deduction on the Employer’s tax return, all money for the applicable plan year must be deposited by the appropriate tax filing deadlines.  The filing deadline for a corporation (whether it is a C or an S) is two and half months after the close of the corporate fiscal year.  For most companies, the fiscal year is a calendar year.  Therefore, the tax deadline is March 15^th.  If the return is extended, the deadline is extended another six months to September 15^th.  If, however, the entity is a partnership or sole-proprietorship, then the filing deadline is April 15^th unless an extension is granted and then the deadline maybe extended until October 15^th.

A) A 5500-tax form and applicable schedules is due seven months after the end of the plan’s year.  A one-time extension of time (another two and one-half months) may be obtained by filing form 5558 in a timely fashion.

A) For most of our clients, the plan’s are drafted to allow an employee to contribute up to the maximum percentage of compensation and dollar amount permissible under Section 402(g) of the Internal Revenue Code not to exceed the limits of Code Section 401(k), 404 and 415.  For the 2008 calendar year, the IRS permissible dollar amount is $15,500.  Compensation typically refers to gross pay.  However, a plan may change compensation to only include regular pay and no bonus pay, etc.  Refer to your plan’s document for the definition of compensation.  In addition, employees who attain age 50 or older during the 2008 calendar year, may contribute an additional $5,000 as a “catch-up” contribution.  

A) An employee who is a greater than 5% owner of the company in either the current plan year or preceding plan year or any employee who in the previous plan year had compensation in excess of $100,000.  For most plans, the previous year is the 12-month period that precedes the current plan year and a plan may choose to add the further criteria that an employee must be in the top 20% of all employees paid of the employer.  Also, depending on the fact set family relations to greater than 5% owners may also be affected by this definition and be deemed highly compensated.  Please consult with your plan’s analyst for further clarification regarding your particular plan.