3939 / When may an employer take a deduction for contributions made to a pension, profit sharing, or stock bonus plan?
An employer’s contribution generally is deductible only in the taxable year it is paid, except for certain carry-forwards ( Q 3735).1 Both cash and accrual basis employers, including self-employed individuals, are deemed to have made a contribution in the preceding tax year if the payment is on account of that year and is made no later than the due date, including extensions, of the employer’s tax return.2
In contrast, minimum funding rules may require that a contribution be made earlier than the time at which it is deductible ( Q 3742).
A payment will be considered made on account of the preceding tax year if the plan treats it as if received on the last day of that year and either the employer designates, in writing, that the payment is made on account of the previous year or the employer claims it as a deduction on its tax return for the preceding tax year. This kind of designation is irrevocable.3 See Q 3724 for requirements of quarterly estimated contribution payments applicable to certain plans.