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Can an LLC contribute to a retirement account after the fiscal year ends?

Can an LLC contribute to a retirement account after the fiscal year ends?

Q: Can an S Corp fund a SEP IRA?

Yes, an S Corp can fund a SEP IRA for its employees, including the owner. Contributions are made by the employer and are tax-deductible. The SEP IRA allows for higher contribution limits compared to traditional IRAs, making it an attractive option for S Corps looking to provide retirement benefits.

Full question:

Our LLC, S corp, has a profit sharing plan which places money in each employees individually directed retirement account. My question is, is it legal to place funds into a retirement account after the fiscal year or even the calendar year has passed ( i.e. contributing to 2016, or even earlier)?

Category: Employment
Date: 04/07/2025
State: Illinois

Answer:

Yes, contributions to a profit sharing plan can be made after the end of the fiscal or calendar year, as long as they are made before April 1 of the following year or according to the plan's provisions. However, you cannot exceed the annual contribution limits for any given year.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

What retirement plan is best for S Corp owners?

The best retirement plan for S Corp owners often depends on their specific financial situation and goals. Common options include a Solo 401(k), which allows for high contribution limits, and a SEP IRA, which is easy to set up and manage. Profit-sharing plans can also be beneficial, as they allow for contributions based on company profits. It's advisable to consult with a financial advisor to determine the most suitable plan.

What is the profit-sharing plan for S Corp?

A profit-sharing plan for an S Corp is a retirement plan that allows the company to contribute a portion of its profits to employees' retirement accounts. Contributions are discretionary and can vary each year based on the company's profitability. This type of plan can incentivize employees and help with tax deductions for the S Corp.

Can you withdraw from a profit-sharing plan?

Yes, you can withdraw from a profit-sharing plan, but there are specific rules and potential penalties. Withdrawals are typically allowed after reaching retirement age, or in cases of hardship. Early withdrawals may incur taxes and penalties, so it's important to review the plan's terms and consult a financial advisor before proceeding.