Retirement plans need to file a tax return? I thought the point was to defer taxes.

As is the case for most individual or joint taxpayers, 401(k)s and most other retirement programs also are required to provide a Form to the IRS each year. Instead of a 1040, though, where a tax amount is identified for payment or refund when all is said and done, retirement plans remit information about the plan to the IRS on a Form 5500 which remits details about the plan such as how many employees are covered and how the plan trust fared over the course of the year. Depending on the size of the plan (for the most part), either a Form 5500-SF or -EZ might be appropriate for use instead of the full Form 5500 which requires a series of Schedules and additional information in comparison.

Who puts this together for me?                                                                                  

Typically, companies retain the services of a third-party plan administrator (TPA) like Benefit Resources to prepare their plan’s Form 5500. While pretty straightforward with the exception, perhaps, of the plan characteristic codes, since your TPA is involved with the other more complicated elements of annual plan administration, it’s a natural fit for them to step in and prepare this Form for your signature; some might even sign it for you! Even if you have elected to pay a bit more for your TPA to step in and lend their signature to save you the short exercise, it is a good idea to develop a strategy to review this Form each year to ensure it’s in good order.

What is the deadline for my Form?

The deadline for your Form 5500 is seven (7) months after the close of your plan year, so it’s dependent on the structure of your plan. Since most 401(k) plans operate on a calendar year, this means the deadline is July 31.

What happens if I forgot to file an extension?

While this certainly represents an opportunity to make changes to the administration of your plan, you might be able to work this out! There is a option to claim a “special extension” without any formal request to the IRS. Most often, the reason for the special extension is to align the due date of the Form 5500 to the due date of the business tax return which already applied for its extension. In this case, you’ll have an additional 1 ½ months to file which means September 15.

I’m afraid I may file my Form late. Is there anything I can do?

Yes, the IRS will remain interested in seeing your Form even if it’s deemed to have been submitted past the deadline so they created a mechanism called the Delinquent Filers Voluntary Compliance Program (DFVCP) which allows you to catch up. If you’re interested in what the application fee might be, here’s a direct link to that site or perform an internet search for “DFVCP calculator”. As they mention on that page, most small plan sponsors can expect to pay $750 for each late filing but that the fee is capped at $1,500. This means if you learn that you have more than two late filings to complete, you’ll be subject to the same penalty and it’s in your best interest to take care of all of them all at once. In our experience, more often than not the reason there are more than two late filings to submit is because the sponsor was unaware of the requirement; if you want to chat about your specific circumstances or are considering engaging us for the work, we would be happy to hear from you!