Sub-S corp has a 401k plan. The company will be paying bonuses but probably not until after the end of the year. Can the employer pay the bonus in 2005 and still have it count as 2004 income? If so, how late into 2005 can this take place? Furthermore, if this allowable, can 401(k) contributions be made out of this bonus and count as 2004 401(k) contributions?

Thanks

While the IRS allows that there is some room for year end straddling to accomodate payroll practices, generally income is income in the year in which it is paid. Deferrals attributed to income otherwise payable in 2005 will be treated as contributions for the 2005 plan year, assuming that the plan year is a calendar year. It does not matter if the bonus is "for" 2004 work. I suspect that straddling would not be well received it if related only to a bonus, but we have no bright line guidance. 30 days is over the line. I would get nervous at two weeks.