The Solo 401k plan is created to give small business owners a low-cost and flexible way to set up a retirement saving with tax benefits. To qualify for the plan, small business owners only need to have self employed business activity without any full-time employee except for the owner and their spouse.
Since the Solo 401k plan is designed for individuals, it often requires much less administrative effort than traditional retirement plans. The plan owner can act as the plan trustee and administrator. By doing so, Solo 401k plan owners can eliminate extra costs and fees while taking control of their retirement plan.
As the plan administrator, plan owners will also need to keep up to date with the administrative requirements for the Solo 401k plan. Let’s take a look at the annual filing requirement for Solo 401k plans.
Annual Filing Requirements for Small Business Solo 401 k
The IRS does not require annual filing for all Small Business Solo 401 k plans. If a Solo 401k plan assets exceed $250,000 at any time during the tax year, however, filing will become mandatory. The total plan assets include cash, non-liquid assets as well as participant loan.
When a Solo 401k plan reaches this value, the plan administrator will need to fill out form 5500EZ to report return for their Solo 401k Plan.
The form also must be filed if the Solo 401k plan is terminated any time during the past year, regardless of the plan value.
While filing isn’t required for plans with a total asset of less than $250,000, many plan owners can choose to file annual return for their plan anyway. The reason is that if there is no filing of form 5500EZ, the statute of limitation will never start running on the plan. Plan owners are often recommended to file form 5500EZ for their Solo 401k plan, even when it is not required.
Annual Filing Deadline
To file annual return for a Small Business Solo 401 k, you only need to complete and file Form 5500EZ with the IRS. The deadline for the Solo 401k annual return is the end of the 7th month following the end of the plan year, most of the time it is July 31. If your Solo 401k plan year end is December 31st of 2015, the deadline is July 31, 2016.
It is important to file form 5500EZ for your Solo 401k on time. Failure to file Form 5500 EZ by the deadline can lead to a penalty as high as $15,000, plus interest.