Important Year End Retirement Plan Deadlines
Keeping on top of deadlines is hard to do. To that end, the following are some of the important ones relating to your retirement accounts. Please let us know if you have any questions as to how these dates may pertain to your unique situation.
If you have a retirement plan account, please see important 2019/2020 deadlines below:
December 31, 2019 – Deadline to Contribute to 401(k) Plan and Other Defined Contribution Plans
Employee contributions to 401(k) plans (and other plans that require salary reductions or elective deferrals) must be made by the end of the year. For 2019, you can contribute up to $19,000 or 100% of your compensation, whichever is less. If the plan allows, participants age 50 or over may contribute up to $6,000 in additional catch-up contributions, meaning a total of $25,000 can be contributed. Note that your particular plan may have additional limits.
March 16, 2020 or September 15, 2020 – Employer Contribution Deadline for Partnerships and S-Corporations
Income tax returns for calendar-year businesses structured as a partnership or S-corporation are due March 16, 2020. Businesses generally have until the date of their filed income tax returns (including extensions) to make employer contributions to retirement plans. Therefore, an employer contribution for the 2019 tax year is due March 16, 2020 or September 15, 2020 if the return is extended.
April 15, 2020 – IRA Contribution Deadline
Contributions to your traditional IRA or Roth IRA must be made by April 15 (whether your tax return is extended or not). For 2019, you can contribute up to $6,000 ($7,000 if you are age 50 or older) or your taxable compensation for the year, whichever is less. Because eligibility and deduction limits apply based on your income level and whether you participate in another retirement plan, it might be wise to consult your adviser. For example, if your income is too high, you may not receive a tax benefit from a traditional IRA contribution, or you may not be eligible to contribute to a Roth IRA.
April 15, 2020 or October 15, 2020 – Employer Contribution Deadline for C-Corporations and Self-Employed Individuals
A calendar-year C-corporation deducting an employer contribution for the 2019 tax year must fund the contribution by April 15, 2020, unless the company’s tax return is extended. If you are self-employed and want to make an “employer” contribution to your retirement plan, you must also fund the contribution by the due date of your tax return, or the extension due date (October 15, 2020).
RMD DATES TO CONSIDER
December 31, 2019 – Annual Required Minimum Distribution (RMD) Deadline
If you are age 70½ or older, remember to take your required minimum distribution by the end of the year. If you have questions about retirement plan deadlines or limits, or would like help planning for retirement, please feel free to contact us.
April 1, 2020 – Deadline for First Required Minimum Distribution (RMD)
Unfortunately, you cannot keep retirement funds in your account forever. The IRS requires you to begin making withdrawals from your retirement plan account (other than Roth IRA accounts) when you turn age 70½. Each year, the RMDs must be made by December 31. However, for the first year that you turn 70½, you have until April 1 of the following year to take your first distribution. Therefore, if you turned 70½ in 2018, you’ll need to take a distribution by April 1, 2019. The penalty for missing an RMD is 50% of the missed payment, so you should not wait until the last minute. There are also sometimes planning opportunities for RMDs, which you should discuss with your adviser in advance.
SETUP DATES TO CONSIDER
If you are thinking of setting up a retirement plan for your small business the best time to get that done is NOW. Typical setup times run in the 2 to 4-week range. Waiting until December to setup a retirement plan is not advised if you want to make sure it is in-force for tax year 2019.
We are here to answer any questions you might have. Please do not hesitate to ask. Our purpose is to assist you in making good decisions over time in order to achieve your objectives.