If you have been following our advice you are now an LLC taxed as an s-corp. You are paying yourself a reasonable salary with enough room to not have to make estimated tax payments, and you stopped contributing to a SEP-IRA and have opened an Individual 401(k) plan and rolled all your IRAs into it so you can make “backdoor” Roth IRA contributions.
Having the Individual 401(k) plan now requires you to file an annual form with IRS called Form 5500. The deadline for filing is the last day of the seventh month after the end of the plan year, which is July 31 for calendar-year plans.
Since an Individual 401(k) is a one-participant plan, you will use Form 5500-EZ. You still have a one-participant plan even if you have employed your spouse so he or she may also make 401(k) contributions. Spouses together count as one participant.
The form is fairly simple and covers the basics of employer information, plan administrator information, a number of plan participants, plan assets, and contribution amounts by type, employee, employer, and rollovers. Generally, the only information that changes every year is plan assets and contributions.
You are not required to begin filing this form until plan assets reach $250,000. However, we have made it part of our process to file from the first year of the plan and not wait until reaching $250,000.
We do this to provide an audit trail for IRS to see how and when contributions were made to the plan from its inception. Filing the form anyway gives IRS the annual data to reconcile against your s-corp and personal tax returns.
Regardless of plan assets, you will need to file this form during the final year of the plan. If IRS has only a final plan year Form 5500 it can lead to questions of how the plan got to its size and were all contributions reported correctly. Filing the form annually anyway removes any doubt.
If you are working with us, then we take care of this form and the deadline for you. If you are not working with us, you will have to remember this every year. You have enough on your plate already. Call us today to help you with strategy and important deadlines.