date of SIMPLE employe contributions please?

[WITAXLADY]

need clarification please?

Can an employee still contribute to his Simple plan thru work for 2021? His own business, so he can easily change the W-2,  - can he contribute until April 15th?

O know the business can put in for the matching contribution - but he wants to u[p his personal and

my take is he can do this until Apr -

Is this correct for a Simple? thx

WI taxed out

[Margaret CPA in OH]

QF says employER contributions by return due date but employee self-employed elective deferrals must be deposited as soon as reasonably possible but no later than 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash.  A self-employed taxpayer's elective deferral must be deposited by January 30 of the following year ( January 30, 2022 for 2021 amounts).  I always hustle early January to get my books and deferral done as I have a SIMPLE although no employees any longer.  I have a tad more time for my matching amount.

[Lee B]

You don't say what kind of SIMPLE Plan, what kind of business entity, whether there are other employees?

Standard answer is employee contributions must have have been deducted from wages/paychecks as of 12/31/21

And as Margaret says,both the employee and employer contributions need to be paid no later than January 31 2022.

[WITAXLADY]

thank you - 1120S, just family, H/W, children

[kathyc2]

48 minutes ago, Margaret CPA in OH said:

A self-employed taxpayer's elective deferral must be deposited by January 30 of the following year

Margaret, a Sch C SP has until due date of return to make their contributions.  You scared me a minute, since I rarely do mine in January!  From Pub 560:  

Example 2.

 

You are a sole proprietor whose tax year is the calendar year. Contributions under a SIMPLE IRA plan for the calendar year 2021 (including contributions made in 2022 by April 18, 2022) are deductible in the 2021 tax year.

[Margaret CPA in OH]

So then QF is in error although I thought I was clear in distinguishing between the SP deferral and the SP as employER contribution.  I quoted "self-employed taxpayer's elective deferral must be deposited by January 30 of the following year (January 30,2022 for 2021 amounts.)"  The employER (same as the SP) contribution, 2 or 3% is due by the return due date, including extensions.  I did not quote from an IRS publication but from the current Quickfinder and have followed these dates since I began my plan about 15 years ago.  I suppose I should notify Quickfinder publishers (Thomson Reuters) that they are in error.  Nah, I will keep doing what I do and others may decide differently.

In any event, I took the original post as a SP (his own business) but it was clarified to be an Scorp. 

[Lee B]

46 minutes ago, kathyc2 said:

Margaret, a Sch C SP has until due date of return to make their contributions.  You scared me a minute, since I rarely do mine in January!  From Pub 560:  

Example 2.

 

You are a sole proprietor whose tax year is the calendar year. Contributions under a SIMPLE IRA plan for the calendar year 2021 (including contributions made in 2022 by April 18, 2022) are deductible in the 2021 tax year.

We are discussing an S Corp not a Schedule C

[kathyc2]

19 minutes ago, cbslee said:

We are discussing an S Corp not a Schedule C

I was trying to be helpful that self employed don't need to rush to make their SIMPLE contribution, but it seems like I'm pissing people off.  Whatever.

[Margaret CPA in OH]

kathyc, not me, I just read 'his own business' and jumped to the conclusion that is was a Sch. C.  It wasn't clarified that is was an S-corp until I answered.  As I have had employees with W-2's, it still seemed it was a Sch. C.  All seems to now be clear or not.  And what I was quoting was from a QF booklet, not IRS regs or law.  No offense taken, hope not received.  We are all friends here trying to help each other out and sometimes things are misinterpreted/misunderstood/mistyped/unclear.

I will now crawl back into my cubby and continue to lurk while waiting for the party plans in the air to be finalized.  And you should come, too!

[Margaret CPA in OH]

Welp, angels fear to tread here but, again, from QF, it just says "Employers with 100 or fewer employees (including self-employed individuals) that do not maintain another retirement plan." are eligible to establish a SIMPLE IRA.  It doesn't distinguish between employer entities - sole proprietors, S or C corps or p'ships.  From irs.gov:

Available to any small business – generally with 100 or fewer employees

Easily established by adopting Form 5304-SIMPLE PDF, Form 5305-SIMPLE PDF, a SIMPLE IRA prototype or an individually designed plan document

Employer cannot have any other retirement plan

No filing requirement for the employer

Contributions:Employer is required to contribute each year either a:

Matching contribution up to 3% of compensation (not limited by the annual compensation limit), or

2% nonelective contribution for each eligible employee

Under the "nonelective" contribution formula, even if an eligible employee doesn't contribute to his or her SIMPLE IRA, that employee must still receive an employer contribution to his or her SIMPLE IRA equal to 2% of his or her compensation up to the annual limit of $305,000 for 2022; $290,000 for 2021; $285,000 for 2020 (subject to cost-of-living adjustments in later years)

Employees may elect to contribute

Employee is always 100% vested in (or, has ownership of) all SIMPLE IRA money

and further down:

When must contributions be deposited?

Employee salary reduction contributions - within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee (including self-employed individuals) in cash

Employer matching or nonelective contributions - by the due date (including extensions) for filing your federal income tax return for the year

If you haven't deposited contributions by their due date, find out how you can correct this mistake.

Hope this helps!  It's IRS words this time, not QF

[jklcpa]

Margaret and cbslee are correct. Employee deferral should have been withheld from payroll, and those amounts are to be contributed by the end of month following the month of deferral.

OP's client now wants to go back and make those changes that never occurred, and I wouldn't want to be a part of that.

Also, employer contribution can't be increased unless the company was using a reduced percentage below the 3% maximum, or by inflating salary after the fact, and again, something I would not do.

[Medlin Software, Dennis]

6 hours ago, WITAXLADY said:

so he can easily change the W-2

The W2 was due out by the end of January.  It should not be something manipulated.  Also points out the person is an employee (receives a W2) and should be receiving proper timely paychecks, not something manipulated after EOY.  OTOH, I hear it far too often - "we have always done it that way", such as issue one "paycheck" per year, and manipulating after the fact...  Same with not bothering to handle >2% S Corp owner insurance until the year is done, or only on the last paycheck.