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Article Date:
October 2015

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How Many $15,000 Penalties Do You Face for Not Filing Form 5500-EZ?

Do you have a solo 401(k) plan with more than $250,000 in it?


Did you, your tax preparer, or the plan administrator file your Form 5500-EZ? Are you sure?


Don’t assume that your tax preparer filed the 5500-EZ. It’s not part of the income tax filing package.1 And don’t assume that your plan administrator filed it. It’s likely not one of the administrator’s duties.


The penalty for not filing the required 5500-EZ for a plan year is $25 a day, capped at $15,000.2 It takes less than two years (600 days) to reach the $15,000 maximum. That’s for failing in one year.


What if you failed to file the required returns each year for 10 years? You’re looking at $150,000 in penalties.


Technically, when you fail to file, you face up to $15,000 in penalties for the year when your “one-participant retirement plan” or combination of plans have more than $250,000 in assets at the end of the plan year.3


For purposes of the 5500-EZ, a one-participant plan means a retirement plan such as a defined benefit pension plan, defined contribution profit-sharing plan, or money purchase pension plan other than an employee stock ownership plan (ESOP) that covers only the owner, or the owner of a wholly owned trade or business (whether or not incorporated) and his or her spouse, or partners, or partners and their spouses, of a business partnership.4 The solo 401(k) is an example of a profit-sharing plan.


Good News


Under a new IRS program, you can avoid these penalties altogether for a relatively tiny fee. ... Log in to view full article.

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