The Internal Revenue Service has issued procedures employers can use when computing tax obligations resulting from delays in sending employees’ contributions to 401(k) plans and other retirement plans.
The procedures, described in IRS Revenue Ruling 2006-38, may affect employers that fail to meet plan payments deadlines even though they have the ability to do so.
Section 4975(a) imposes a 15% “first-tier excise tax,” or penalty tax, on an employer that profits from a prohibited transaction, and it imposes a 100% “second-tier excise tax” on employers that fail to correct prohibited transactions during a taxable period, Michael Rubin, an IRS employee plans specialist, writes in the revenue ruling.
Rubin writes in the revenue ruling solely about computation of the 15% first-tier excise tax. He helps clarify the nature of the “amount” subject to the excise tax.