The first step in the process is determining if you are required to file Form 5500-EZ. This is critical. Penalties can be as high as $15,000 if a required Form 5500-EZ is not filed. So let’s take a look.
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Who Must File Form 5500-EZ
You are required to file Form 5500-EZ if your retirement plan is a one-participant plan (or a foreign plan) that must file an annual return and you are not filing Form 5500-SF.
What is a one-participant plan? A one-participant plan is a defined benefit plan, defined contribution plan or money purchase plan that:
- Covers just you (or you and a spouse) and you (or you and a spouse) own the entire business (which could be incorporated or unincorporated); or
- Covers only one or more partners (including spouses and partners) in a business partnership; and
- Does not provide any benefits for anyone aside from you (or you and your spouse) or one or more partners (including partners and spouses).
A one-participant plan must file a Form 5500 annual return (either 5500-EZ or 5500-SF) unless the plan meets the filing exclusions noted below.
You should be filing Form 5500-EZ if ANY of the following conditions exist:
- The plan is a solo 401(k) and the only eligible participants are the owner(s) and spouse(s).
- The plan assets (either stand alone or combined with other plans) exceeds $250,000.
- The plan assets are below $250,000, but the plan terminated during the year.
In addition, do not file with Online5500 if the plan is a defined benefit plan or cash balance plan (this should be filed by the administrator of that plan).
Who Does Not Have To File Form 5500-EZ
You are not required to file Form 5500-EZ for a one-participant plan if the total plan assets and the combined assets of all other one-participant plans maintained by the company does not exceed $250,000, unless this is the final year of the plan.
The $250,000 threshold is calculated by taking the plan assets as of the end of the year (December 31st for a calendar year) and adding to that amount any funds that were contributed subsequent to year-end for the prior plan year.
For example, assume that a one-participant plan has $240,000 of invested assets as of December 31, 2021. Then in January 2022, the owner makes a contribution of $20,000 for plan year 2021. The assets for plan year 2021 as of December 31st would be $260,000. As such, the plan is required to file Form 5500-EZ for plan year 2021.
Total plan assets as of the end of the plan year are listed on line 6a(2) of Form 5500-EZ. Remember that if a company maintains two or more one-participant plans, the total plan assets of all the plans should be combined to determine the $250,000 threshold.
Also, do NOT file Form 5500-EZ if any of the following conditions exist:
- The only retirement plan you have is a SEP.
- The plan is an Employee Stock Ownership Plan (ESOP).
What is a Foreign Plan?
A foreign plan is a retirement pension plan that is operated outside of the United States mainly for nonresident aliens. A foreign plan is required to file an annual return if the employer who maintains the plan is:
- A domestic company; or
- A foreign company with income derived from sources within the United States (including foreign subsidiaries of domestic employers) if contributions to the plan are deducted on its U.S. income tax return.
By now you should have been able to determine if you have a filing requirement. If so, just click on the button below to get started!