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I had an S-Corp that I closed down in 2013. I didn't realize I needed to file a form 5500-EZ because although the assets in the Self Managed Individual 401K were less than $250,000, you need to file the form if it's the last year of the plan.

I just now got around to moving the funds to a rollover IRA. As far as I was concerned, I was 100% kosher. Usually, you can leave funds in a 401K. I'm somewhat nervous because there is a warning in the instructions for the form that says:

The Internal Revenue Code imposes a penalty of $25 a
day (up to $15,000) for not filing returns in connection with
pension, profit-sharing, etc., plans by the required due
date.

See form: http://www.dol.gov/ebsa/pdf/2013-5500inst.pdf

I could do any of the following:

  1. Back date the form.
  2. Put the correct dates on form and hope there are no penalites because (as far as I know) I have not failed to pay any taxes or done anything illegal or even "shady".
  3. Simply not turn in the form. After all, it only came to my attention recently that I needed to fill in the form.

Thoughts?

Thanks, Dave

P.S. Note, I originally posted this in https://startups.stackexchange.com/. I couldn't figure out how to link or delete it there. I did do some more searching and see that form 5500 is at least mentioned in this group. If there's a better group to post to, please let me know.

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    4. Talk to a CPA immediately and find out what you should do. Seriously though - this is really a legal question. Ignorance is certainly not a reason to avoid penalties - and not owing anything may sometimes be a mitigating factor, but oftentimes is not. Find a CPA knowledgeable about these issues and ask them. – Joe Mar 15 '16 at 16:44
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EDIT

Note the definition of the "last plan year" from the instructions. If you just distributed the money by rollover, it seems like you may not be late at all!

Final Return All one-participant plans should file a return for their final plan year indicating that all assets have been distributed. Check box A(3) if all assets under the plan(s) (including insurance/annuity contracts) have been distributed to the participants and beneficiaries or distributed or transferred to another plan. The final plan year is the year in which distribution of all plan assets is completed. [Emphasis added]

Top of page 5 https://www.irs.gov/pub/irs-pdf/i5500ez.pdf

ORIGINAL

Getting professional help, as others have mentioned, is probably a good idea in this case. You may, in addition, want to learn more about this:

Late Filer Penalty Relief Program. The Department of the Treasury and the IRS established a permanent penalty relief program for late annual reporting for non-Title I retirement plans effective June 3, 2015, providing administrative relief to plan administrators and plan sponsors from the penalties otherwise applicable under sections 6652(e) and 6692 for failing to timely comply with the annual reporting requirements imposed under section 6058. If the Form 5500-EZ is being filed under this late filer penalty relief program, the applicant must print in red letters in the top margin above the form’s title on the first page of the return: “Delinquent Return Submitted under Rev. Proc. 2015-32, Eligible for Penalty Relief.” Each submission must include a completed paper copy of Form 14704 attached to the front of the oldest delinquent return in the submission. Form 14704 can be found at www.irs.gov/pub/irs-pdf/f14704.pdf. See Rev. Proc. 2015-32, 2015-24 I.R.B. 1063, for more information.

https://www.irs.gov/instructions/i5500ez/ch01.html

Those instructions reference this Form 14704, which, at first glance, looks like you may be able to cap your penalty. But, again, this is a case that's probably worth getting professional help.

https://www.irs.gov/pub/irs-pdf/f14704.pdf

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Back date the form.

Doesn't matter. The date that matters is either the postmark date or receipt by the IRS date (depending on the form, read the instructions), no-one cares about the actual date printed on the form itself. That besides of backdating being fraudulent, of course.

Put the correct dates on form and hope there are no penalites because (as far as I know) I have not failed to pay any taxes or done anything illegal or even "shady".

Probably won't help, but you can try. These kinds of things are simple to detect and are automated.

Simply not turn in the form. After all, it only came to my attention recently that I needed to fill in the form.

Bad idea, since this can blow your whole plan, including all your deferred compensation in it, and you'll end up with a tax bill on an early distribution dated to the original due date.


What you should be doing is hiring a licensed professional (Enrolled Actuary/Enrolled Agent/CPA) to prepare the form, and find a way to ask for a penalty waiver due to a reasonable cause (I'm sure there's something reasonable somewhere...). Some penalties are waved under the "first time offense" rule (that is if you don't have any other IRS-related skeletons in the closet). A professional will guide you which path to take, and worst case - you'll have to pay for you ignorance.

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