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Timing Pension Plan Contributions
Some Contributions May be Made After the Close of the Tax
Year
Did you know that contributions to certain qualified
plans you provide to your employees can be made after the close of your
tax year?
Such plans include SEP or SIMPLE plans that allow you
to make contributions on behalf of your employees by the due date of your
return, including extensions. If you do not have employees, this rule
still applies. Because contributions to a SEP are discretionary, you can
wait until the end of the year before you decide whether to make a
contribution to the SEP plan.
If you have a SIMPLE plan and have elected to match contributions that
your employees make to the plan, you are required to make the
contributions by the due date, including extensions, of your tax return.
However, the SIMPLE plan must be set up before October 1 for the year in
which the deduction is claimed.
There are other types of qualified plans that you may have in your trade
or business, such as a profit-sharing plan or Keogh plan. If you have a
money purchase Keogh plan, contributions are subject to the minimum
funding rules. These rules state that contributions must be made on a
quarterly basis. Knowing the rules will save you from possible penalties
for failure to make contributions on time.
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