The SECURE Act change brings the deadline for establishing new qualified plans in line with what the deadline has been for setting up new SEP IRAs.
Importantly, the new extended deadline only applies to qualified plans that are entirely employer funded, such as profit sharing plans and pension plans. It does not apply to 401(k) plans. Because of the timing rules for 401(k) deferral elections, a new 401(k) plan effective in one year cannot be established after the end of that year.
While the 2019 SECURE Act extended the deadline to adopt a Solo 401k plan from the end of the year to the business tax return deadline including any timely filed extension, the IRS has not yet updated its prior guidelines stating that employee contributions must be elected by the end of the year.
Therefore until the IRS issues final guidance, the conservative approach is to adopt the plan by 12/31/2020 to ensure that both employee and employer contributions can be made for 2020 in 2021 by your business tax return plus extension.
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