I just set up a SIMPLE IRA plan for a client effective 10/1/03.
The fiscal year of the corp ends 9/30/03.
Is there any matching contribution for compensation from 1/1/03 to 9/30/04?
If so is this deducted on their 9/30/04 corp tax return?
How should I work and deduct the the 10/1/03 to 9/30/04 plan company contributions ?
Any other thoughts on this confusing area would be appreciated ! The fund companys are useless here !!

Technically, the matching contribution is not based on compensation earned during a period- it is based on the salary deferral contributions made by the participant for the year. Bearing in mind that salary deferrals cannot be made from compensation earned before the effective date of the plan or the salary deferral agreement…therefore, if the plan was effective October 1, and the employee was able to defer $8,000 from October 1 to December 31, the employer must match $8,000.


SIMPLE contributions for 2003 are deductible for the 10/01/03 to 09/30/04 year [IRC § 404(m)(1), 404(m)(2)(A)]

Contributions for the 2003 Simple IRA plan are deducted on the 9/30/04 return. The Simple must be maintained on a calendar-year basis. So, deferrals made in January 2004, will be deducted on the 9/30/05 return.

The matching contribution limit of 3 percent of compensation is based on compensation for the entire calendar year.