The SECURE Act changed the deadline for establishing a profit sharing plan or cash balance plan in order for employer contributions to be made for the 2021 tax year. The new rules extended the 12/31/21 deadline to the tax filing deadline for your practice, including extensions. Tax returns for S-Corps and partnerships are due 3/15 while those on extension have a 9/15 deadline. Sole Proprietors and Single Member LLCs that haven’t elected to be treated as an S-Corp are due 4/15 with a 10/15 deadline if an automatic extension request is filed with the IRS.
If you have not set up a retirement plan yet, it is now possible for you to profit share yourself up to $58,000 in deductions for the 2021 tax year. If you have traditionally maxed out your profit sharing contribution, you could now add on a cash balance plan for 2021 to defer paying taxes on another $50,000 – $200,000 of income and also earning compounded tax deferred growth on the money invested.
Given the 4-6 week process of running projections and setting up a 401(k)/profit sharing plan/cash balance plan, a practice owner looking to take advantage of the new deadline might consider filing for a tax extension for their practice tax return. This later deadline applies to the Solo 401(k)s as well, providing self-employed practice owners with no staff besides a spouse with the opportunity to possibly make larger retirement plan contributions than those available with a SEP IRA.