Administering the Solo 401(k) Plan - The IRS Form 5500-EZ
In general, the solo 401(k) plan is easy to operate. There is generally no annual filing requirement unless the fair market value of your solo 401(k) plan asset exceeds $250,000, as of December 31 of the previous year. If your solo 401(k) plan assets exceed $250,000 as of 12/31 of the previous year, you will need to file a short information return with the IRS (Form 5500-EZ). In such a case, the Solo 401(k) Plan participant will need to file a short information return with the IRS (Form 5500-EZ). The IRS Form 5500-EZ is due on July 31 and is filed in paper form
IRS FORM 5500-EZ
HOW TO REPORT THE FAIR MARKET VALUE OF ASSETS HELD BY YOUR SOLO 401K PLAN TO THE IRS
The Internal Revenue Service (“IRS”) Form 5500-EZ is an annual information return that is required to be filed by every “One-Participant Plan” (owners and their spouses), also known as a solo 401(k) Plan, with plan asset value in excess of $250,000 as of December 31 of the previous tax year. The purpose of filing and reporting the fair market value (“FMV”) of your solo 401(k) plan’s assets is to inform the IRS of assets over $250,000 annually held in a solo 401(k) Plan. You must file the Form 5500-EZ if a plan meets the requirements alone or combined with any other qualified retirement plan owned greater than 80% by the business owner or a related party (one controlled group) exceeding $250,000.
You do not have to file the form 5500-EZ for a prior 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 plan year does not exceed $250,000.00, unless the previous plan is the final plan year of the plan. In other words, if the value of your solo 401(k) plan assets as of 12/31 of the previous year is less than $250,000, you have NO filing requirements with the IRS with respect to your solo 401(k) plan.
- The Form 5500-EZ is due every July 31st of the next plan year. Ex: for a plan that was established in the prior year, the IRS Form 5500-EZ is due by July 31 st, of the following plan year. If the filling date falls on a Saturday, Sunday, or legal holiday it may be filed on the next day that is not.
- The Form 5500-EZ is filed for the previous plan year. Hence, if you established your plan in 2015 and your plan assets exceeded $250,000, then you would file the Form 5500-EZ in 2016. Whereas, if you established the solo 401(k) plan in 2016, a filing would not be due until 2017 if your plan assets exceeded $250,000 in value as of 12/31 2016.
- The Form 5500-EZ must be filed as a hard copy and sent directly to the IRS at the following address:
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0020
- To file the Form 5500-EZ using a private delivery service, you must use the approved IRS Designated providers (PDS) as follows:
- DHL Express (DHL): Same Day Service.
Federal Express (FedEx): Priority Overnight, Standard Overnight, FedEx 2 Day, FedEx International Priority and FedEx International First.
United Parcel Service (UPS): UPS Next Day Air, UPS Net Day Air Saver, UPS 2 nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express.
The Private delivery services should use the following address:
Internal Revenue Service
1973 Rulon White Blvd.
Ogden, UT 84404
- The Form 5500-EZ cannot be e-filed electronically.
- The Plan Administrator or employer (owner) must use the official printed paper Form 5500-EZ obtained from the IRS, and use blue or black ink for a wet signature. NO ELECTRONIC SIGNATURE ALLOWED. Print, sign and date before mailing.
- Do not use a felt tip pen or other inks that bleed through, the other side should be blank.
- Do not use arrows or make notes on the Form 5500-EZ and only enter information in the specific fields provided. Abbreviate if necessary.
- Do not include schedules or attachments. However, you should retain them for your records.
The Internal Revenue Code imposes a penalty of $25 a day (up to $15,000).
COMPLETING THE IRS FORM 5500-EZ
It is important to work with a tax professional when completing the IRS Form 5500-EZ. When working with the IRA Financial Group, our tax professionals and CPAs will help you complete and file the IRS Form 5500-EZ if your plan has assets valued at $250,000 or above as of December 31 of the previous year.
PART I - Annual Return identification Information:
Enter the beginning date of the plan and then the ending date.
A) Check (1) the first return filed for the plan;
B) Typically, do not check this box unless filed Form 5558 for an extension of time.
C) Typically, do not check this box unless this plan is maintained outside the United States.
PART II – Basic Plan Information:
1a) Enter the name of the plan as it appears on the EIN letter from the IRS: ABC CONSULTING 401K TRUST.
1b) Enter the numbers 001 for this year and every year’s future fillings use the same number. Note – if this plan will be amending an existing solo 401(k) Plan, you will need to include the appropriate 3 digit code (i.e. 002), which can be found in the plan Adoption Agreement.
1c) Enter 01-01-2012 as of the date the plan became effective.
2a) Enter the name of the Adopting Employer:
ABC Consulting LLC
dba or c/o if applicable.
1234 Ginger Street
(P.O. Box ONLY if USPS does no does not deliver).
2b) Enter the Adopting Employer EIN XX-XXXXXXX no SS#. If plan is under a Sole Proprietor, YOU MUST OBTAIN AN EIN FROM THE IRS by completing the online application:
Alternatively, you can acquire an EIN by preparing and faxing the Form SS-4 to the IRS at I-800-829-3676 then call 1-800-829-4933 to receive your EIN by phone. The EIN is issued immediately once the application information is validated.
2c) Enter the Adopting Employer telephone number: 888-888-8888.
2d) Enter the 6 digit applicable code XXXXXX that best describes the nature of the plan sponsors business from the list of principal business activity codes included at the end of these instructions.
3a) Enter the Plan Administrator information OPTIONAL. If preparer is the same as above, enter the same information.
3b) Enter and repeat the same EIN XX-XXXXXXX number as listed in 2b.
3c) Enter the Plan Administrator telephone number: 888-888-8888.
4a) Enter the name of the Trust (this is optional): ABC CONSULTING 401K TRUST.
4b) Enter the EIN number as it appears on the EIN letter from the IRS: XX-XXXXXXX.
5a), 5b) and 5c) is not required if no changes were made to the plan.
6a) Enter the total number of participants at the beginning of the year. If solo 401K plan: Ex: 1 participant. Note – if the plan will include the spouse of a participant or a second business owner, then the appropriate number would need to be included (i.e. 2).
6b) Enter the total number of participants at the end of the plan year. If solo 401K plan: Ex: 1 participant. Note – if the plan will include the spouse of a participant or a second business owner, then the appropriate number would need to be included (i.e. 2).
PART III – Financial Information:
7a(1) Enter the “Total Plan Assets” or the same amount in 7a(2)from last year; if filed Form 5500-EZ previously. Otherwise, this figure includes “Total Plan Assets” as: rollovers, unrealized gains and losses such as appreciation/depreciation in assets. It also includes specific assets held by the plan at any time during the plan year (for example, partnership/joint venture interests, employer real property, real estate (other than employer real property), employer securities, loans (participants and non-participant loans), and tangible personal property). Please do not include the annual contribution amount.
7a(2) Enter end of year “Total Plan Assets” as listed above. Please include annual contribution amounts, if applicable.
7b(1) Enter “Total plan liabilities” to include but are not limited to benefit claims payable, operating payables, acquisition indebtedness (i.e. nonrecourse loan) and other liabilities. Do not include the value of future distributions what will be made to participants.
7b(2) Enter end of year “Total plan liabilities” as listed above.
7c(1) Enter “Net plan assets” which equals the sum of subtracting 7b(1) from 7a(1).
7c(2) Enter end of the year “Net plan assets” sum of by subtracting 7b(2) from 7a (2).
8a) and 8b) Enter total cash contributions received and/or receivable from employer and participants during the plan year.
8c) Enter all contributions including rollovers received from other plans during the plan year valued on the date of contribution.
PART IV – Plan Characteristics:
9) Enter the applicable two-character feature Codes. In most cases, the following codes would be used: 2E, 2J, 3B, 3D. Note, if your plan assets are held in a brokerage account, then you would want to include2R.
PART V – Compliance and Funding Questions:
10) Check YES if any of the participants entered into a loan from the plan and the amount or NO if not applicable.
11) Check NO.
11a) Enter N/A for amount.
DO NOT complete any information for 12a) , 12b) , 12c) , 12d) and 12e). This pertains to a defined benefit plan.
IRA Financial Group offers all of its Solo 401(k) Plan clients the service of completing the IRS Form 5500-EZ for no additional fee. We want to make sure our solo 401(k) Plan clients that are required to file an IRS Form 5500-EZ are getting the necessary support they need to make sure the form is completed properly. All solo 401(k) plan clients required to file the IRS Form 5500-EZ will work our in-house CPAs to help prepare and file the IRS Form 5500-EZ.