Using a 401(k) plan is one of the easiest ways to contribute to your retirement nest egg because once you're signed up, you sit back and watch as the money is automatically withheld from your paycheck and contributed to your account. However, the Internal Revenue Service limits how much you can contribute each year -- $17,500 as of 2013 ($23,000 after age 50) -- and sets the deadline for how late you can make your annual contribution.
When you're contributing to a 401(k) plan as an employee, you generally must make your 401(k) contributions by the end of the year -- Dec. 31. Any contributions made after that date are typically treated as being made for the following tax year. This is different from the contribution deadline for individual retirement accounts, which allow you to contribute to your IRA up until your tax filing deadline for the year -- typically April 15 of the following year.
In some cases, such as if you own your own business, you might be both the employee and the employer for your 401(k) plan. Though you're required to have the plan set up by the end of the calendar year, the employer contributions can be made by either April 15th for unincorporated businesses or March 15th for corporations. For example, if you have a solo 401(k) that's already set up for your sole proprietorship, you can make the employer contribution up to April 15th of the following year.
Contributing for a Prior Year
To have your contribution count for the prior year, you must meet certain conditions. First, the contributions must be made by your tax filing deadline, including extensions. Second, the plan must have been established before the end of the prior year. Third, the plan must treat the contributions as if they were made on the last day of the prior year. Fourth, you must either tell the plan administrator in writing to apply the contributions to the prior year or deduct the contributions on your tax return for the prior year.
Besides not using up your contribution limit for future years, making sure you get your contribution in on time helps ensure you maximize your employer's matching contribution. For example, say your employer matches your first $3,000 of contributions each year. If you contribute $3,000 in 2013 and $3,000 in 2014, you'll get a total of $6,000 in matching contributions -- $3,000 each year. However, if you miss the deadline for 2013 and instead contribute $6,000 in 2014, your employer will only match the first $3,000, which costs you your 2013 match.
- US News: Don't Miss Your 2012 Money Deadlines
- Forbes: Solo 401(k) 2012 Deadlines and Tax-Savings Update: How You Can Cut Your Tax Bill by $10,000
- Internal Revenue Service: Publication 560 -- Retirement Plans for Small Businesses
- Internal Revenue Service. "SEP Plan FAQs - Contributions." Accessed April 18, 2020.
- Internal Revenue Service. "Extension of Time To File Your Tax Return." Accessed April 18, 2020.
- Internal Revenue Service. "2021 Limitations Adjusted as Provided in Section 415(d), etc." Accessed Nov. 2, 2020.
- Internal Revenue Service. "IRA FAQs - Contributions." Accessed April 18, 2020.
- Internal Revenue Service. "Publication 560: Retirement Plans for Small Business." Accessed April 18, 2020.
- Internal Revenue Service. "Retirement Topics - 401(k) and Profit-Sharing Plan Contribution Limits." Accessed April 18, 2020.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."