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Tax research memo

Tax facts:

XCite Biotechnology has a 401(k) profit sharing plan. The employees and owners have made employee deferrals into the 401(k) and the company plans to match the employee contributions in February 2020 for those employees who are employed on December 31, 2019. 401(k) profit sharing plan that allows an employee to defer up to 15% of the W-2 Compensation of employees including owner employees. The deferrals are matched at 50% of the deferral up to 10% of the employee’s compensation.

Matching contributions are made only when you are employed on the last day of the year. The board of directors hopes to provide all employees with profit sharing based on the final financial figures and cash position, which is equivalent to 2% to 5% of salary. The contribution of profit distribution will be determined at a board meeting in March 2020.

Tax issues:

Can Xcite Biotechnology, Inc deduct the contribution to the 401k for 2019?

Tax question:

How can the limitations on 401(k) plan impact deductibility?

What are the limitations on the profit-sharing contributions?

What are the limitations on employees deferral?

What are the limitations on employer match?

What is the timing of the contributions?

What is timing and requirements for the deductibility of the 401(k) matching contribution?

When are the employee deferrals?

What is the max amount allowed employees to defer their salary in taxable year?

What and when is the deductibility contribution for those older employees or those who have higher compensation?


Last Updated on March 19, 2020

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