What your CPA needs before a pension deduction is real

On October 26, 2025, a lot of owners are already talking to their CPA about next year's extension, this year's estimate, and whether a cash balance plan could change the 2025 return. The CPA's answer is often slower than the owner wants. That slowness is not skepticism about pensions in the abstract. It is a refusal to put a number on a return before the file contains the things the number depends on. A deduction is a claim on a specific return, by a specific taxpayer, for a contribution that was actually paid into a specific trust by a specific date, in an amount an independent Enrolled Actuary can stand behind. Until those pieces exist, the honest CPA response is "not yet."

Sterling Pension Group is the third-party administrator and the consulting coordinator. We are not the CPA, and we are not an actuarial firm. We do not sign the return, and we do not certify Schedule SB. This briefing is not tax, legal, or actuarial advice. It is the list of what a careful CPA is reaching for when they say they cannot rely on the deduction yet, written so you can gather it instead of forwarding a one-line email that says the contribution "can be around" some round figure.

The taxpayer has to be the employer

The first thing the CPA needs is the name of the employer that sponsors the plan. Not the owner's personal name, unless the owner is the employer. A sole proprietor deducts the contribution on the owner's return because the business and the taxpayer are the same. A partnership deducts it on the partnership return. The partners feel it through the K-1, in the shares the partnership agreement actually provides, which may not match the way draws were taken during the year. An S corporation deducts it on the S corporation return. The shareholder does not get a separate personal deduction for the same dollars, and a personal check written from the shareholder's household account is the wrong shape of payment unless the CPA tells you otherwise after looking at the facts. A C corporation is its own taxpayer again.

That sounds clerical. It is the reason pensions get restated in March. Owners who have taken distributions all year, and a modest W-2, sometimes want the contribution to be computed on the cash they took home. Plan compensation for an S corporation shareholder is W-2 wages. Distributions are not compensation. For a partner or a sole proprietor, the relevant figure is earned income, and the contribution itself feeds back into that calculation. The CPA and the actuary have to loop. If you send only a profit-and-loss statement, you have not sent compensation. Publication 560 is the IRS booklet that gives both of them a common public starting point. It does not calculate your earned income.

Send the classification of every entity, the ownership percentages, and whether a spouse or another entity is in a controlled group or an affiliated service group. The CPA cannot know the deduction limit for "the practice" if the practice is two LLCs and a management company. Coverage and the deduction both look through that structure. So does the question of which employees belong in the census. If you are not sure, say you are not sure. A wrong "there are no related businesses" is worse than a delayed answer.

Three numbers, not one

The CPA is not looking for a single maximum pasted into an email. A defined benefit plan produces at least two statutory figures, and a well-run file produces a third. The minimum required contribution is the funding obligation. Miss it, and the plan can owe an excise tax that starts at 10 percent of the unpaid minimum, with a further tax if the shortfall is not corrected. The maximum deductible contribution is the ceiling on what the employer may deduct for the year. Those two numbers are not the same. The actuary can also recommend an amount inside the range the document allows, which may be below the maximum because the formula, the investment position, or next year's flexibility says not to fund to the top.

For 2025, label the statutory limits you are working under so the CPA is not left to guess which year's table you meant. The elective deferral limit is $23,500. Catch-up is $7,500, or $11,250 for ages 60 through 63. The defined contribution annual-additions limit is $70,000, and catch-up sits on top of that rather than inside it. The compensation cap is $350,000. The defined benefit dollar limit is $280,000 of annual benefit. The IRA limit is $7,000, and it is irrelevant to the employer's deduction except as a personal item the CPA may already be tracking. The source for the headline figures is IR-2024-285. The shape of the $280,000 benefit limit — an annuity limit, reduced in specified cases, not a contribution cap — is explained on the IRS defined benefit limits page.

If someone has shown you an illustrative deposit, the CPA needs that word to stay attached to it. An illustration is a teaching picture under stated assumptions. It is not Schedule SB, and it is not a deduction. Sterling does not certify it. The independent Enrolled Actuary does, when there is a valuation for this employer for this year. Until that letter exists, the CPA should not book the illustration. You should not book it either, including in an estimated-tax conversation. "We might do something in this neighborhood" is a planning sentence. It is not a line on Form 1120-S.

When both a defined benefit plan and a defined contribution plan cover the same employees, a combined deduction limit can apply. Elective deferrals are treated differently from employer profit-sharing money in that analysis. PBGC coverage, which is plan-specific, can change whether the combined limit applies in the way owners have heard about at a conference. The CPA needs the actuary's deductible maximum computed on the actual plans, not a stack of the $70,000 defined contribution limit plus a cash balance illustration. The Pension Benefit Guaranty Corporation's coverage guidance is the public starting point for the coverage question. It is not a determination for your plan.

The deposit, the date, and the proof

Section 404 generally requires the contribution to be paid, not merely accrued in a spreadsheet, by the employer's filing deadline including extensions, if you want it treated as made on the last day of the tax year. The CPA will ask for proof that the dollars reached the plan's trust: a custodian confirmation, a wire advice, the account number, the date. A journal entry in the operating account is not that proof. A transfer to a personal brokerage account titled in the owner's name is not that proof. If the trust account does not exist yet, the deduction conversation is early, no matter how confident the illustration looked.

The funding deadline and the deduction deadline are different jobs. For a calendar-year defined benefit plan, the minimum required contribution is generally due September 15 of the following year, 8.5 months after year-end. Quarterly installments can be due earlier for some plans that have a funding shortfall. Many small plans fund once, by the minimum-funding date, but that is a conclusion the actuary reaches, not a habit you should assume. The deduction deadline follows the return. A partnership or S corporation on a calendar year is generally due March 15, or September 15 if extended. A sole proprietor is generally due April 15, or October 15 if extended. An owner who extends has often moved the deduction date and has not moved the funding date. An owner who files on time has often made the deduction date earlier than the funding date. The CPA needs to know which return you intend to file, and when, because the contribution has to be in the trust by the deadline you actually use.

Say, this month, whether you expect to extend. "We always extend" is useful. "We might extend if the pension number is large" is circular, and the CPA cannot plan estimates around it. The deadline calendar is a way to see the funding date and the filing date as separate rows. Use it that way. Do not let a software reminder labeled "pension" collapse them.

The paper that has to be in the file

The CPA is not being difficult by asking for the adoption agreement, the signature page, and the date the plan was adopted. A contribution cannot be deducted for a year the plan did not cover. Retroactive adoption, where the law allows it, still has a document with a date, and it still cannot manufacture 401(k) deferrals out of wages that were already paid. If the plan was adopted this fall for 2025, the CPA should see that. If the plan is only being discussed, the CPA should see that too, in the form of an empty folder rather than a guessed accrual.

The census belongs in the same file. Not a headcount. Names, compensation, hours, and who is excluded and why. Staff contributions the formula requires are part of the employer's deduction. They are not a separate "cost of having employees" that the owner may ignore while deducting only the owner's credit. If the illustrative owner number you were shown omitted staff, tell the CPA it omitted staff. The page on staff cost is the conceptual version of that warning. The actuary's letter is the version that can be used.

Trust identification belongs in the file: the plan's employer identification number, the custodian, and the account that will receive the wire. So does a statement of who the trustee is. So does any prior Form 5500 if the plan is not new, because a deduction for a year that has an overdue return is a bad fact to discover in April. The IRS Form 5500 corner explains the return. The Department of Labor's Form 5500 page is where filing mechanics live. The CPA may prepare the business return and still not prepare the 5500. Ask which firm is doing which, and do not assume the pension administrator filed something the CPA thinks the recordkeeper filed.

If a 401(k) already exists, the CPA needs that plan's contribution totals for the same year. Deferrals, match, profit sharing, and forfeitures all press on the annual-additions limit. Catch-up has to be identified as catch-up or it will be miscounted. A payroll report through the most recent pay date, plus an estimate of remaining pay dates, is more useful than a year-end wish. Administration includes reconciling those sources so the CPA is not handed two spreadsheets that do not add up.

The enrolled actuary's work product is the piece the CPA is entitled to wait for. At this stage of the fall, a full Schedule SB for 2025 often does not exist yet, because the year is not over and compensation is not final. What can exist is a feasibility range: minimum and maximum under stated census assumptions, clearly marked as subject to the final valuation. Ask for the range in writing. Ask what would move it by more than a small amount: a compensation change, a new hire, an investment loss, a delayed deposit. The CPA can use a range to think about estimates. The CPA cannot use a range as the deduction. When the final certification arrives, the return should follow the certification, not the autumn estimate that felt more convenient.

What you should not ask the CPA to bless

Do not ask the CPA to confirm a number that was built by adding the $70,000 defined contribution limit to a pension illustration and calling the sum the tax shelter. Do not ask them to ignore a staff contribution because the staff "do not care about the plan." Do not ask them to deduct a 2025 deferral that was never withheld. Do not ask them to use a benefit limit of $280,000 as if it were the cash you will wire. And do not ask them to treat Sterling's coordination, or a recordkeeper's proposal, as the actuarial certification. The certification has a name on it. The name is an Enrolled Actuary who is independent of this firm.

Fees are part of the CPA's practical file even though they are not the deduction limit. Administration, actuarial certification, Form 5500 preparation, and PBGC premiums if the plan is covered are costs of running the plan. Some of them are deductible business expenses in the CPA's hands under ordinary rules, and some of them are paid from the plan if the document and the law allow it. That classification is the CPA's job. The split of roles is described on the fees page so you can see, before you are surprised by three invoices, that one vendor was never going to send all three. Illustrative contributions are a separate page for a reason. They are conversation pieces. They do not go on the return.

If the CPA says the file is not ready, believe them. The remedy is the missing page, not a different CPA who will sign faster. A deduction that is unwound after a valuation, or after a payroll report shows compensation below the cap you assumed, is more expensive than an October that felt slow.

What to do in the next two weeks

Build the file the CPA actually asked for, even if they asked for it in a short email. Entity documents and tax classification. Ownership and any related businesses. The 2025 payroll register and a compensation estimate through year-end. The 401(k) adoption agreement, if one exists, and year-to-date deferrals. The pension adoption documents, if they exist, or a clear statement that they do not. The trust account details, or a clear statement that the account is not open. A written note of whether you intend to extend the 2025 return.

Then ask the actuary's side, through whoever is coordinating the plan, for the minimum and the maximum under the current census, labeled as preliminary if the year is still open. Do not forward an illustrative figure with the label removed. When that stack exists, send it to the CPA as one package and ask us to fill the pension gaps rather than the tax judgment. Two weeks from today is November 9. The limits for 2025 will not have changed by then. The quality of the file can.