Spousal Solo401K Deposit Deadline Rules Different?

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hawkwarrior
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Joined: Wed Jan 17, 2018 2:05 am

Spousal Solo401K Deposit Deadline Rules Different?

Post by hawkwarrior » Wed Jan 17, 2018 2:12 am

I am the sole proprietor and my wife is my employee. As the sole proprietor I understand my deadlines for making my contributions/deadline is the tax filing deadline

For the employer/profit share contribution to my wifes spousal contribution my understanding is the deadline for this is also the tax filing deadline.

However I have read two conflicting pieces of information when it comes to the employee salary deferral portion of the spousal 401k deposit deadlines.

Scenario 1 Employee Contribution deposit deadlines:
" both employee and employer contributions can be made up to the company’s tax return deadline"

"while employee and employer contributions may be extended until the company tax return deadline you will typically need to file a W-2 for your wages (e.g. an s-corporation) by January 31, 2018. The W-2 will include your wage income and any deduction for employee retirement plan contributions will be reduced on the W-2 in box 12. As a result, you should make your employee contributions by January 31, 2018 or you should at least determine the amount you plan to contribute so that you can file an accurate W-2 by January 31, 2018.

This contadicts with Scenario 2 in which I have read:

"Salary deferrals/elective must be deposited no later than the 15th business day of the month following the month of defferal.

They say the profit sharing contribution can be deposited until the tax filing deadline but salary deferrals must be deposited by the 15th of the following month.

My plan was set up at year end so I am not sure if I can make a contribution for my wife from earlier payroll or even Dec now that Jan 15th of 2018 has passed.

Can anyone clarify the rules regarding deposit timelines for the employee salary deferral portion of the spousal 401K contribution.

nolesrule
Posts: 444
Joined: Thu Feb 26, 2015 10:59 am

Re: Spousal Solo401K Deposit Deadline Rules Different?

Post by nolesrule » Wed Jan 17, 2018 8:47 am

W-2 payroll deferrals must occur on the date of the payroll check and must be withheld from the pay. So you can't make a deferral from previously issued payroll, and since it's now 2018 you can't cut any pay checks for 2017.

ERISA Stone
Posts: 1462
Joined: Tue Jun 24, 2014 8:54 am

Re: Spousal Solo401K Deposit Deadline Rules Different?

Post by ERISA Stone » Wed Jan 17, 2018 10:55 am

If you are a sole proprietor you can make 401k contributions up to the filing deadline. If your wife was an S-corp, for example, and received W-2 income, the 401k contributions would have to be made through payroll. Since there is no payroll for a sole proprietor, this isn't an issue.

For this statement:
They say the profit sharing contribution can be deposited until the tax filing deadline but salary deferrals must be deposited by the 15th of the following month.
I really wish this could be removed from regulations. Neither the IRS nor the DOL adheres to it. 401k contributions (from payroll) should be deposited to the trust within 7 business days or they are considered late deposits. At that point, they must be reported on the Form 5500, Schedule I or H, and the plan sponsor should provide lost earnings.

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PaddyMac
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Re: Spousal Solo401K Deposit Deadline Rules Different?

Post by PaddyMac » Wed Jan 17, 2018 11:58 am

I would think that "spousal" rules would only apply if your wife was not an employee? (i.e., non-working spouse?) Not sure though, as we both work in our business.

In any case, you're both self-employed so you can use the tax filing deadline for Individual 401k. Been around that block before. Nobody cares anyway at the IRS, and they are running on empty this year in particular.

ERISA Stone
Posts: 1462
Joined: Tue Jun 24, 2014 8:54 am

Re: Spousal Solo401K Deposit Deadline Rules Different?

Post by ERISA Stone » Wed Jan 17, 2018 12:05 pm

For additional information, please see Spirit Rider's post in the link about a qualified joint venture, assuming your wife isn't a W-2 employee.

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