5 Considerations For Filing Form 5500 Preparation
The IRS Form 5500-EZ filing due date is July 31 for most plans (without extension). Accordingly, at this time of year, we see increased activity relative to Form 5500-EZ preparation and filing. Close review of the Form 5500-EZ is advised to ensure it is properly prepared and does not unnecessarily raise red flags to the DOL (Department of Labor) and/or IRS (Internal Revenue Service). The following is a short list of considerations and questions aimed at helping avoid government inquiry otherwise prompted by a “wrong” answer on the Form 5500-EZ. The bottom line is that it is critical to follow the Form 5500-EZ instructions and carefully review the entries in order to avoid triggering an investigation. Here are a few issues for your consideration:
- Use the correct plan name and plan sponsor name (as well as the correct employer identification number “EIN”). This might seem a strange recommendation, but reportedly there are a lot of missteps in this regard. Often, it is just an error; other times, changes occur as the result of the change in sponsoring entity that are not recognized and/or are not appropriately addressed.
- Obtain appropriate proof of the Form 5500-EZ filing (and the filing of the Form 5558 extension form). These steps are often overlooked by plan sponsors. It is easy to obtain such proofs in order to avoid an argument with the government over the imposition of potentially significant fines for not filing or for filing late.
- If you failed to file a Form 5500 or will file late, quick participation in the DOL’s Delinquent Filer Voluntary Compliance Program (“DFVCP”) should be explored.
- The IRS added some new questions to Form 5500-EZ this year aimed at identifying compliance issues (or more likely, noncompliance). After issuing the new version of the form with the questions, the IRS indicated those questions should not be answered. Accordingly, do not answer those questions. Answering them might highlight a failure to follow the Form 5500-EZ instructions, and may also communicate compliance problems.
- The DOL and IRS continuously state that where an answer on the Form 5500-EZ is described as “other,” it will have a tendency to garner their attention. Accordingly, effort should be made to avoid using that response. As an example, we have seen recently loan interest being reported as “other,” when in fact the instructions specifically provide a place to report accrued, but unpaid interest on participant loans.
In summary, close review of the Form 5500-EZ will likely save time and money later. It is the plan sponsor who signs and submits the form under penalty of perjury; accordingly, the signer has a keen interest in ensuring the Form 5500-EZ is properly and accurately completed. It is better to discover and address those matters sooner rather than later.
Paul Konrad
July 27, 2016 @ 7:37 pm
From the instructions:
Who Does Not Have To File Form
5500-EZ
You do not have to file Form 5500-EZ for the 2015 plan
year for a one-participant plan if the total of the plan’s
assets and the assets of all other one-participant plans
maintained by the employer at the end of the 2015 plan
year does not exceed $250,000, unless 2015 is the final
plan year of the plan. For more information on final plan
years, see Final Return later.
Example. If a plan meets all the requirements for filing
Form 5500-EZ and its total assets (either alone or in
combination with one or more one-participant plans
maintained by the employer) exceed $250,000 at the end
of the 2015 plan year, Form 5500-EZ must be filed for
each of the employer’s one-participant plans including
those with less than $250,000 in assets for the 2015 plan
year.
Dmitriy Fomichenko
September 16, 2016 @ 11:20 pm
Paul, not sure I understand what is your question…