"Tax Talk" - Summer 2021
In this issue of Tax Talk, ABG Southwest advisors update you on important compliance deadlines coming up for defined contribution plans, and also discuss the importance of the Retirement Savings Contribution Credit and how this credit can be applied.
Upcoming Compliance Deadlines
- July 15, 2021
- Deadline for defined benefit plans that have a funding shortfall for the preceding plan year to make the second-quarter contribution for the 2021 plan year to their plan trust.
- July 29, 2021
- Summary of material modifications is due to participants—i.e., 210 days after the end of the plan year in which the change was adopted—unless it was included in a timely updated summary plan description (SPD).
- August 2, 2021
- Form 5330, which reports excise taxes related to employee benefit plans, is due to the IRS.
- Form 5500 is due to the IRS—i.e., due seven months after the plan year-end.
- Form 5558 is due to the IRS; also called the Application for Extension of Time to File Certain Employee Plan Returns, it is used to apply for an extension to file Forms 5500 and/or 5330.
- Deadline for annual benefit statements for plans not offering participant-directed investments.
- August 14, 2021
- Deadline for participant-directed defined contribution plans to provide participants with the quarterly benefit/disclosure statement and statement of plan fees and expenses that were charged to individual plan accounts during second quarter of 2021.
- September 15, 2021
- Deadline for money purchase pension, target benefit and defined benefit plans to make required contributions to their plan trust—i.e., by 8 1/2 months after the plan year-end—and for sponsors that filed a corporate tax extension to make 2020 employer profit-sharing and matching contributions.
- Minimum funding deadline for the 2020 plan year for pension plans that do not have a funding shortfall for the preceding plan year.
- Form 5500 due to the Employee Benefits Security Administration (EBSA) from plans eligible for an automatic extension linked to a corporate tax extension.
- September 18, 2021
- Requirement to include lifetime income disclosures in benefit statements furnished to participants of defined contribution plans.
- September 30, 2021
- Summary annual reports are due to participants from plans with a December 31 year-end—i.e., due nine months after the plan year-end or two months after filing Form 5500.
2021 Saver’s Credit
The Retirement Savings Contribution Credit or more commonly known as the “Saver’s Credit” encourages eligible taxpayers to contribute to their employer-sponsored retirement plan or a traditional and/or Roth IRA and reduces their tax burden. There are two benefits to this:
- Contribution to the plan qualifies as a tax deduction.
- Credit reduces the taxes owed on the individual’s adjusted gross income. The saver’s credit can be claimed for 50%, 20% or 10% of the first $2,000 contributed to a retirement account.
An individual is eligible for this credit if they are 18 years old or older, not a student, and not claimed as a dependent on another person’s return. The individual’s adjusted gross income cannot exceed the limits in the chart below.
2021 Saver’s Credit Income Limits
Saver’s Credit Example
Amy, who is an administrative assistant, is married and earned $40,000 in 2021. Amy’s spouse was unemployed in 2021 and didn’t have any earnings. Amy contributed $2,000 to her 401(k) plan for 2021. After deducting her 401(k) contribution, the adjusted gross income shown on her joint return is $38,000. Amy may claim a 50% credit of $1,000 for her $2,000 contribution on her 2021 tax return.
We Welcome Your Questions
As always, ABG Southwest advisors are standing by to support you and your employees. Please contact your ABG Southwest primary relationship manager for additional information or assistance in meeting some of these important deadlines. Or, contact us!