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Mishmash of Dates to Open a Business Retirement Plan

September 29, 2016

The logic of the tax code is beyond understanding. If you want “proof” just look at the mishmash of deadline dates when the various retirement plans can be opened. Note that in some cases these deadlines do not apply to businesses formed after the deadline dates shown below.

SIMPLE Plan (Savings Incentive Match Plan for Employees) Individual Retirement Account, SIMPLE 401k and Safe Harbor 401k
Deadline to establish plan: October 1 of the fiscal year.
Contribution deadline: Due date including extensions of the tax return for which the deduction is claimed. It is sooner for contributions by participants.

401k including solo 401k and Roth 401k
Deadline: December 31 of the current fiscal year.
Contribution deadline: Due date including extensions of the tax return for which the deduction is claimed. It is sooner for contributions by participants.

SEP (Simplified Employee Pension Plan)
Deadline: Due date including extensions for the tax year for which the deduction will be claimed. With extensions this can be as late as October 15 of the year following the year the deduction is claimed.
Contribution deadline: Due date including extensions of the tax return for which the deduction is claimed.

IRA and Roth IRA
Deadline: Due date (not including extensions) for the tax year for which the deduction will be claimed. This can be as late as April 15 of the year following the tax year.
Contribution deadline: Due date (not including extensions) for the tax year for which the deduction will be claimed.

Keogh (HR-10), money purchase, profit sharing and defined benefit pension plans
Deadline: December 31 of the current fiscal year.
Contribution deadline: Due date including extensions of the tax return for which the deduction is claimed.

As can be seen, there is no consistency and in some cases no logic to the differences in deadlines to establish the plans and to make contributions. However, these plans can provide great tax benefits and defer the income tax due on substantial income if used in the right situations the right way. To benefit you must be informed. I suggest discussing with your accountant or tax preparer how you might benefit from using the retirement plans listed above.

As to the mishmash – it is what it is and we just need to abide by the deadlines. Someday perhaps Congress will get its act together and simplify nonrevenue generating rules such as indicated here.

Brian Lovett, CPA, JD, partner at Withum assisted in the preparation of this listing.

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