Tax error: didn't file 5500-EZ form -- now what?

Question

How do I avoid the $25/day penalty for goofing and not filing my self-employed 401(k) form for six months? I didn't realize I was supposed to.

Answer 1

You only have to file forms if you owe the government. If you look on the back of your W-4, section 12 I believe, it says this. This means that if you want a refund, it is up to you. Trust me, if the government owes you, they are not honest enough to make you file a claim.

If you owe them, then yes, you have to file the form. You could wait until next year, and make the amendment then.

Answer 2

If you are eligible to use Form 5500EZ, then you need not begin filing until the total plan assets have exceeded 100K. If this is so then first determine if the form is in fact late and what was the actual due date. Assuming you have a calendar year plan, the 5500EZ is due seven months after the plan year end. So for 2005 it was due 07/31/2006. An extension for this form may be filed (Form 5558) (due date: 10/15/2006) and an automatic extension is granted if your tax returns for that year were put on extention (due date: the final due date of the tax returns).

File the 5500EZ immediately including a copy of any applicable extensions. Wait to hear back from the IRS. If you don't get a letter within a year or so advising you of late fees you are most likely fine. There is no rhyme or reason to why sometimes if you are late they fine you and sometimes you get off scott free. If you do get a letter you can try the "dog ate my homework approach" and ask for the fines to be waived or lessoned. This will most likely fail.

I further recommend you contact a TPA to help you with this and with your plan going foward.

Answer 3

File the form as soon as possible.

You may get a notice in the mail. If so, send a letter requesting an abatement of the penalties and interest (if any). To the best of my knowledge, the 5500 is an information form.

The only issue is that potentially the Department of Labor might get involved with the penalty issuance. ( I work with larger companies, so only know to go off that.)

In any case, treat the first notice always as an automatically generated letter. Call, write a response...........do something as a follow up. Most like to submit and pony up the fees. Argue your case, admit fault if you have to, but try to get them to be gentle. It does work, depending on the severity of the case.

Answer 4

Prison

Answer 5

admend your tax return