Self-employed individuals, locum tenens professionals, and small business owners manage their own retirement plans to secure their future. However, staying compliant with the Internal Revenue Service (IRS) requirements for retirement plans is just as important as maximizing your retirement savings to avoid unnecessary penalties.
Let us guide you as we discuss the IRS Form 5500-EZ and provide you with insights on how to navigate the late filing penalty relief program to ensure that our retirement plans remain on a solid path.
What is Form 5500-EZ?
The IRS Form 5500-EZ, or Annual Return of a One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan, is an annual information return for reporting one-participant retirement plans, such as Solo 401(k) and Individual Retirement Account (IRA).
Filing Requirements
You must file Form 5500-EZ for your one-participant retirement plan once the value of its total plan assets exceeds $250,000 at the end of the plan year. But if the plan is in its final year, this form must be filed regardless of the value of its plan assets.
A one-participant plan is defined as a retirement plan that covers and provides benefits to the following:
- Business owner and spouse, whether the business is incorporated or not, OR
- Partners and their respective spouses, in a business partnership.
This form must be filed on or before July 31st following the plan year. If the filing date falls on a weekend or a holiday, the due date moves to the next business day.
Filing Procedures
- Paper Filing. You may file in paper form using the official IRS printed Form 5500-EZ to handwrite on the form with blue or black ink; or download and complete a Fillable Form 5500-EZ from the IRS website before printing. File the paper form at the following address: Department of the Treasury Internal Revenue Service Ogden, UT 84201-0020
- Electronic Filing. For plan year that begins in 2022, a filer may use the EFAST2 filing system to electronically file their Form 5500-EZ.
Note that if you expect to file at least 10 returns of any type with the IRS (such as 1099, W2 forms, income tax returns, etc.) within the year, you must electronically file this form otherwise you will be deemed as non-compliant even if a paper file has been submitted.
Penalties on Failure to File by Required Date
The IRS imposes a penalty of $250 per day plus interest, to a maximum of $150,000 per plan, for failing to file Form 5500-EZ on time.
IRS Penalty Relief Program for Late Filing of Form 5500-EZ
The Rev. Proc. 2015-32 established a permanent penalty relief program for those who fail to file Form 5500-EZ by the required date. It replaced the pilot and temporary relief program that was granted in 2014.
The program gives the plan sponsor or administrator an opportunity to pay a fixed fee for voluntary complying with the reporting requirements after failing to file on time. The required fee is $500 per return, to a maximum of $1,500 for 3 or more delinquent returns for the same plan.
To avail this program, the applicant must have not received a CP 283 penalty notice (Penalty Charged on Your Form 5500 Return) for the subject delinquent return and must file a Paper Form 5500-EZ together with the other documents as required by the IRS.
Application for each plan must be submitted separately but all delinquent returns for the same plan may be submitted together.
Reasonable Cause Penalty Relief Program
You may file for a Reasonable Cause Relief Program as an alternative to the penalty relief program if you believe that your grounds for late filing will qualify as a reasonable cause. Reasonable cause includes emergencies such as fire, casualties, natural disaster, death in the family, serious illness, etc.
Applying for this program requires no fee, however if the IRS denies your application for reasonable cause relief, the penalty with respect to the delinquent return will be assessed and you will be given a CP 283 Notice, which in turn, will disqualify you to file for IRS Penalty Relief Program.
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