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Discussion Archives:S Corp SEP limitations
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Discussion Forum Index --> Tax Questions --> S Corp SEP limitations
Tookie1 (talk|edits) said:
| 27 August 2007
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| If an S Corp has income of 50,000 and the wage base is enough to support a SEP contribution of 60,000 based on the 25% rule, can the S Corp take a deduction for the 60,000 SEP even though this deduction will throw the S Corp into a loss of 10,000? Thanks
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Kevinh5 (talk|edits) said:
| 27 August 2007
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| is the corp on an accrual accounting basis?
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JR1 (talk|edits) said:
| August 27, 2007
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| When you say the wage base is enough...do you mean that you've actually paid salary? If so, then sure, you can kick up a loss. Watch your basis/at risk issues...since the accrued SEP doesn't add basis.
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JR1 (talk|edits) said:
| August 27, 2007
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| And it doesn't matter if you're accrual or not for the accrued SEP.
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Kevinh5 (talk|edits) said:
| 27 August 2007
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| ????? we had a similar discussion about accrued payroll taxes a few months ago and someone was adamant about whether or not a cash basis taxpayer could even accrue the employer portion of fica not paid until the following year.
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Kevinh5 (talk|edits) said:
| 27 August 2007
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| And so, my take was that, while the contributions may be made up through the extended due date of the employer return, THEY CANNOT BE ACCRUED for a cash basis taxpayer. Emphasis is entirely my interpretation.
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JR1 (talk|edits) said:
| August 27, 2007
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| That was Paul's take and he might have had a fan or two, and I was remembering that as I wrote. I disagree as it comes to the PR taxes. But as to retirement accruals, I'm not so certain...and wondering who my cash basis folks are that I might have done that with. Including me for a part of it.
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Kevinh5 (talk|edits) said:
| 27 August 2007
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| yeah, but did you read Riley2's post at the bottom of the 2nd thread above? He agrees with PVV
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JR1 (talk|edits) said:
| August 27, 2007
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| Noooo. I hate it when that happens. I'm doomed then.
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Kendrick (talk|edits) said:
| 27 August 2007
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| Wait a minute. I thought cash basis corporations, or whatever, COULD accrue Retirement Plan accruals and deduct them in the year of the accrual, and could have until the deadline of the extended tax year to make the deposit. Hmmmm.
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JR1 (talk|edits) said:
| August 27, 2007
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| I can't find anything at all that speaks to either of these issues. Maybe I'll look at Riley's Rev Ruling from three decades ago.
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JR1 (talk|edits) said:
| August 27, 2007
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| OK, so I'm using an "other basis of accounting" that has been consistent....
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Dennis (talk|edits) said:
| 27 August 2007
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| Pension contribution is not an accrual. The deduction is allowed by code and specifically applies to the year ending before it has to be paid. Expense and liability.
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JR1 (talk|edits) said:
| August 27, 2007
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| Riley's RevRuling is actually helpful, providing insight to the nitpicky attitude of the service as regards to cash v accrual. If that nitpicky on how to handle PR tax expense, then clearly, retirement accrual doesn't fly. Even tho', many of us when booking our PR entries make all of that rather automatically without regard to what basis the company is on.
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Jdugancpa (talk|edits) said:
| 27 August 2007
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Shootin' from the hip, here, but all most individual taxpayers are cash basis, are they not? Yet an IRA can be made up to the original due date of the return and a SEP can be made up to the extended due date of the return. These, too, are violations of pure cash basis accounting, but allowed, nonetheless.
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