USA SEP deduction for S-Corp cash basis

[taxesanddeath]

1)

How are SEP contributions reported for a S-Corp? Line 17 Pension, profit-sharing, etc., plans?

2)

For a CASH basis S-Corp, are SEP contributions deducted from the 1120S Tax Return in the year the contribution is made, or in the year the contribution is for?

Example, an employee's W2 shows $20,000 wages for 2020. The SEP contribution of $5,000 or 25% is not made until Feb 2021 after the year ended. Is the $5,000 deducted on the 2020 1120S Tax Return or on the 2021 tax return?

 

[TaxCrunch]

That's correct, expense the SEP contributions under the profit sharing expense line on line 17 of the 1120S. SEP contributions are an exception to the traditional cash basis rules - you are allowed to expense them in the original tax year - even though they are paid in the following year. This only applies if the SEP contribution is actually paid by the tax return filing date (including extensions). If it's paid after the extension, it would have to be expensed in the year it was paid. So, when filing correctly, on the 1120S you'll expense the SEP contributions on line 17 - and record a SEP payable account on the balance sheet.