Updated: Apr 23
If your Self-Directed Solo 401(k) plan has a cumulative balance of $250,000 or more by the end of the year, you will need to file Form 5500-EZ or Form 5500-SF. (Refer to these blog posts for more information about calculating the amount and which Form you need to file.) What happens, though, if your plan has been over the minimum amount for a while and the Form should have been filed for previous years, but wasn’t? I have provided exact verbiage from the IRS’s website, below, that explains how to find, fix, and correct the mistake. At the bottom of this article, you will also find a link to information about their penalty relief program as well as a link to the Department of Labor’s (DOL) delinquent filer program, which includes calculators and online payment information. When reading this information, remember that Self-Directed Solo 401(k) plans are “non-ERISA” plans because they only include the business owner and his/her spouse or business partner(s), if/when applicable.
Here is a post from the IRS's website:
401(k) Plan Fix-It Guide - You haven't filed a Form 5500 this year
"ERISA and the Internal Revenue Code require many employers and plan administrators to submit reports to government agencies and furnish certain plan information to participants. Most 401(k) plan sponsors are required to file an annual Form 5500, Annual Return/Report of Employee Benefit Plan. For an explanation of how to file your Form 5500 return, in addition to the EFAST electronic filing requirements, visit www.efast.dol.gov.
Very small employers whose employees are limited to owners or partners and their spouses must file Form 5500-EZ with the IRS for any year in which plan assets exceed $250,000 ($100,000 for years prior to 2007).
All plan sponsors, regardless of plan asset value, must file a final return for the year their plan is terminated and all assets distributed.
How to find the mistake:
Many employers identify the mistake of not filing an annual Form 5500-series return when they receive a letter from IRS or DOL stating the employer didn't file one. It’s normally a year after it was due and includes a substantial penalty. Late filed returns are subject to penalties from both IRS and DOL, so it’s very important to identify this mistake before we do.
The IRS penalty for late filing of a 5500-series return is $25 per day, up to a maximum of $15,000.
The DOL penalty for late filing can run up to $1,100 per day, with no maximum.
To identify this mistake, find your signed copy of the return, and determine if it you filed it timely.
How to fix the mistake:
Correction of a late filed Form 5500-series return isn’t available under EPCRS. If you determine you didn't file your Form 5500-series return, the correct by filing the delinquent return as soon as possible. DOL maintains a Delinquent Filer Voluntary Correction Program (DFVC) that is available to plans that are subject to Title 1 of ERISA. IRS has a penalty relief program for sponsors of certain non-ERISA plans required to file Form 5500-EZ who are late filers.
Example: Employer Z sponsors a 401(k) for its employees and failed to file a Form 5500-series return for the 2015 year.
How to correct the mistake:
Employer Z can’t correct the failure to file a Form 5500 return under EPCRS. If the IRS contacts Employer Z about its delinquent Form 5500-series return, Z may file the return in response to the letter. Z should include an explanation of why it didn't file the return and request a waiver of the penalty. If the IRS hasn’t assessed any penalties and the plan is subject to ERISA, Z may use the Department of Labor’s Delinquent Filer Voluntary Correction Program (DFVC). If Z uses this program, IRS won’t pursue any late filing penalties if Z meets certain conditions.
If Employer Z sponsors a one-participant plan, Z can file a delinquent Form 5500-EZ with the IRS. Z should include an explanation of why the return(s) weren’t filed and request a waiver of the penalty. If IRS hasn’t assessed penalties, then Z should consider using the IRS Form 5500-EZ penalty relief program.
How to avoid the mistake:
Understand your responsibilities to file the return. The plan administrator has the responsibility for ensuring that the return is filed timely. Never assume someone else is filing the return for you.
Make an identified person or outside service provider responsible for timely filing the return.
Use a calendar (tickler file) that notes the deadline for filing the return; and implement a communication mechanism to alert the plan administrator and any outside service providers of the upcoming deadline to file."
The information provided above can be found here: https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-you-havent-filed-a-form-5500#:~:text=The%20IRS%20penalty%20for%20late,per%20day%2C%20with%20no%20maximum.
Information regarding: Penalty Relief Program for Form 5500-EZ Late Filers can be found here: https://www.irs.gov/retirement-plans/penalty-relief-program-for-form-5500-ez-late-filers
Information regarding: Delinquent Filer Voluntary Compliance Program (DFVCP) Penalty Calculator and Online Payment with Instructions, Examples and Manual Calculations can be found here: https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/correction-programs/dfvcp#