Last December was a bit quieter than usual at IAI, and it wasn’t just due to the fact that almost all of us were working from home. We’re usually really busy with getting new retirement plan documents in place for business owners who want to start making tax-deductible contributions, given that the deadline for doing so has long been December 31. This year, due in large part to the pandemic, many business owners were uncertain what their income would look like in 2020 and 2021, so were reluctant to commit to a new plan by year-end.
The good news is that these business owners have a second chance to get a plan in place that will allow for deductible contributions in 2020. The SECURE Act, signed into law in late 2019, included a provision extending the deadline for adopting a new plan, from December 31 to the date that taxes are filed for the year. It would be impractical to wait all the way until that tax filing date to adopt a plan, for a slew of reasons, but it will certainly be possible to set up a new 2020 plan sometime in, say, May 2021.
If you own a business (or advise someone who does) and find that you have a “tax problem” in 2020, contact your IAI consultant today to discuss how putting a retirement plan in place retroactively could help!