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Changes in Employer Retirement Plan Contribution Deadlines   

 

June 06, 2017

Contribution deadline dates for many employers have changed. The chart below shows contribution deadlines for contributions paid in 2017.

 

Entity Type Tax Form Date (based on Dec. 31 tax year) Months After YearEnd Contribution Extension Available Until Extension Months

Sole Proprietorship / Individual

1040

April 15

3 ½ months

Oct. 15

6

Partnership

1065

March 15

2 ½ months

Sept. 15

6

S Corporation

1120S

March 15

2 ½ months

Sept. 15

6

Trusts & Estates

1041

April 15

3 ½ months

Sept. 30

5 ½

C Corporation (except 6/30 Y/E)

1120

April 15

3 ½ months

Oct. 15

6

C Corporation (6/30 tax year-end)*

1120

Sept. 15

2 ½ months

April 15

7

Tax-Exempt (nonprofit) Org.**

990

Oct. 15

9 ½ months

N/A

(none)

For those interested in more information, the following article explains why the changes were made and provide other information.

Congress has enacted legislation changing Employer Contribution Due Dates for many employers. These changes take effect for 2017.

The Internal Revenue Code states that Due dates for Employer Contributions are the due date of the Employer’s income tax return (Sec. 404(a)(6)). Congress has changed these tax return due dates for many entities, and the funding due dates have correspondingly changed. These changes affect contribution due dates for 2017 and future years. The new rules take effect for all tax years beginning after December 31, 2015.

These due dates are based on an employer’s taxable year-end. (Caution: A plan year-end and the Employer’s tax year-end are two different things and may be different. What is relevant for this article is the Employer’s tax year-end).

Due dates for contributions from individuals / sole proprietorships have not changed. These continue to be due by the following April 15, and If the individual requests a tax return extension, the funding deadline is extended to October 15.

Due dates for LLCs are determined based on how they file for income tax purposes.

The dates shown below are all based on an employer using calendar-year (December 31) tax reporting, except for the row showing C Corporations with a June 30 tax year-end. Employers using a fiscal tax year determine their contribution deadlines based on the same number of months from their tax year-end (2½ months or 3½ months, for example).

Deadline for Funding 2017 Employer Contributions to Retirement Plans

 

Entity Type Tax Form Date (based on Dec. 31 tax year) Months After YearEnd Contribution Extension Available Until Extension Months

Sole Proprietorship / Individual

1040

April 15

3 ½ months

Oct. 15

6

Partnership

1065

March 15

2 ½ months

Sept. 15

6

S Corporation

1120S

March 15

2 ½ months

Sept. 15

6

Trusts & Estates

1041

April 15

3 ½ months

Sept. 30

5 ½

C Corporation (except 6/30 Y/E)

1120

April 15

3 ½ months

Oct. 15

6

C Corporation (6/30 tax year-end)*

1120

Sept. 15

2 ½ months

April 15

7

Tax-Exempt (nonprofit) Org.**

990

Oct. 15

9 ½ months

N/A

(none)

 

Why Did Congress Change Tax Return Due Dates?

The short answer was so that pass-through entities (Partnerships, S Corporations, Trusts and Estates) would issue Schedule K-1 in time for partners / shareholders / beneficiaries to be able to reasonably be able to report their pass-through income, deductions and other information.

In the past some pass-through entities, including Partnerships, Trusts and Estates, were not required to file a tax return until the same dates as individuals. These returns were all due April 15. While individuals requesting an extension helped in some cases, the overall deadline system did not all line up with when the Schedule K-1s were needed. (Note: Prior to 2008 this problem was even worse. In those years, partnership, estate, trust and individual extensions all ran through October 15 so that even requesting an individual tax return filing extension often did not allow adequate time for individuals to prepare a correct tax return. This led to unnecessary amended tax returns having to be filed).

Requirements for filing state income tax returns (required in 43 states) complicated the challenge, particularly since different states require out-of-state income to be treated in different ways. Taxpayers with complex investments faced additional hardships. Some investments report transactions that can be legally treated and reported in several ways on the individual’s Form 1040, requiring time for comparison and analysis.

The new timetable is intended to provide adequate time for individuals to be able to obtain Schedule K-1 and finalize their tax returns timely.

Congress’s motivation in making this change was to minimize the problem described above. A significant side effect, however, is that the law ties employer retirement plan contribution deadlines to this date. The contribution deadline is the tax return due date, and it is extended when the employer requests an extension for filing the tax return.

The change in tax return due dates accelerates retirement plan funding deadlines for some employers. In some cases, Employers who otherwise might not otherwise request an extension for tax filing may choose to do so to allow additional time before funding a contribution. One caveat in taking this approach is that the Employer will need to ensure its tax return is not filed until after the initial due date, as this would invalidate the extension request.

How Limited Liability Companies (LLCs) are Taxed

LLCs that are 100% owned by one individual may elect to be taxed as Disregarded Entities. Their tax filing is included on the owner’s Form 1040, usually on Schedule C, and no other income tax filings are required.

LLCs that are taxed as Partnerships file IRS Form 1065 and follow the Partnership dates shown on the attached chart named Deadline for Funding 2017 Employer Contributions to Retirement Plans.

LLCs taxed as S Corporations file IRS Form 1120S and follow the S Corporation dates on the attached chart.

LLCs taxed as C Corporations file IRS Form 1120 and follow the C Corporation dates on the attached chart.

* Why Do June 30 Year-End Corporations Have Different Rules?

Before legislation can pass Congress, the Congressional Budget Office (CBO) has to determine that, using a 10-year time horizon, the legislation is revenue-neutral and that it will not worsen the national deficit. The CBO has to consider the government’s September 30 fiscal year-end in making this determination.

CBO ascertained that the aggregate revenue effect of making all the other (non-corporate) changes was unbalanced, the but that by tweaking the reporting for June 30 tax-year corporations the tax revenue shortage could be balanced. This was purely a federal budget balancing issue; there was no policy reason. This was the only practical path to getting the bill through Congress. CBO and Congressional staffers concluded that the June Corporation treatment would not significantly frustrate the positive intent and objectives of this bill and practically speaking, there was no political opposition to the June Corporate issue that would make it difficult to pass.

** When Must Non-Profits Fund 2017 Employer Contributions to Retirement Plans?

The tax return that most tax-exempt organizations are required to file is an IRS Form 990 (or 990EZ). This return is an information return, and IRS guidance does not classify it as an income tax return for purposes of the contribution deadline rule. The usual rules which would connect employer retirement plan contributions therefore do not apply; using their definitions there is no income tax return.

In the absence of an income tax return, contribution deadlines are governed by the Sec. 415 deadline rules. Those rules have a different perspective and state simply that for a contribution to be treated as an annual addition for the prior year, the section 415 crediting deadline is 9½ months after the close of the taxable year in which the limitation year ends. For a non-profit using the calendar year for tax reporting purposes, the contribution deadline is October 15 of the following year.

Note: about previous rules with earlier deadline. Prior to July 1, 2007, earlier regulations set this deadline as the 15th day of the 6th calendar month following the close of the employer’s tax year. For non-profits using a calendar year for tax purposes, this was June 15.