File a Form 5500-EZ

Things to consider:

Because Solo 401(k)s are retirement plans that are sponsored by a business with no full-time W2 employees, other than the owners (the tax code calls this an “employer-employee company”), they are not subject to the Title I, or the Employee Retirement Income Security Act (ERISA).

As a result, Solo 401(k)s have much simpler filing requirements, and it all hinges on the total value of the plan.  If the plan’s total assets are below $250,000 no annual filing is required.  If the total assets exceed $250,000 in any given tax year a Form 5500-EZ must be filed by July 31^st of the next year (unless an extension applies). 

Total value here means the total value of all assets held by the plan, even if the 401(k) has multiple participants, such as a husband/wife.  If the 401(k) covers you and your spouse or business partner as participants, the $250,000 threshold applies to the entire 401(k)’s value, not the value of what each individual participant has in the plan.

Example

Joe sponsored a Solo 401(k) in 2014 and rolled $100,000 into it.  In tax years 2018 and 2029, the Solo 401(k)’s total assets did not exceed $250,000.  Joe was not required to file a Form 5500-EZ for 2018 or 2019.

However, in tax year 2020, Joe rolled an additional $200,000 into the plan.  Joe’s Solo 401(k) now exceeds $250,000, and as a result, he must file the Form 5500-EZ by July 31, 2021.

Filing Tips

• Form 5500-EZ is due every July 31st of the following year.  (Ex: your plan’s assets exceeded $250,000 in during tax year 2020, so the form is required July 31, 2021)
• The form must be filed as a hard copy and sent directly to the IRS. The mailing address is:

Department of Treasury

Internal Revenue Service

Ogden, UT 84201-0020

• If sending by DHL, FedEx, or UPS, send to:

Internal Revenue Service

1973 Rulon White Blvd.

Ogden, UT 84404

• Form 5500-EZ cannot be filed electronically.
• Form 5500-EZ cannot be digitally signed.
• The IRS can impose a penalty of $25 per day (up to $15,000) for late filing of the 5500-EZ form.
• One-participant plans may file Form 5500-SF electronically in place of a Form 5500-EZ.  Be aware that all information appearing on the 5500-SF form, believe it or not, is a matter of public record, and can be accessed by anyone requesting such information.

Instructions for Form 5500-EZ

Part I – Annual Return Identification Information

• Check box A(1) if this is the first time you’re filing the form for your Solo 401(k). If you’re filing a final return for the Solo 401(k), check box A(3), though this only applies if you’re terminating the Solo 401(k).
• B is left unchecked, unless you filed an extension for your business’s tax return, or you’ve filed a Form 5558 for a specific extension on the Form 5500-EZ.
• C is left unchecked, unless the Solo 401(k) plan is maintained outside of the United States.

Part II – Basic Plan Information

• 1a Name of the Plan – enter the Solo 401(k)s name. If you’re unsure, look to your Adoption Agreement.
• 1b Plan Number – enter 001, unless you’ve restated your plan, or your business has maintained multiple 401(k)s. You can refer to the first page of your Adoption Agreement to confirm the plan number.
• 1c – Effective Date of Plan – enter the first day of the tax year you started your Solo 401(k). You can also refer to your Adoption Agreement to confirm the plan’s start date.
• 2a Employer’s Name – You will enter your business’s name and address here. If you are a sole proprietor, you will enter your name.  The in care of name, can be your name.
• 2b & 2c – enter your business’s EIN and phone number.
• 2d Business Code – refer to the Form 5500-EZ instructions to find the appropriate code for your business.
• 3a Plan Administrator’s Name – enter SAME
• 4a, 4b, 4c, and 4d are not required, unless changes were made to the plan.
• 5 deals with the question of whether or not any additional participants were allowed into the plan during the course of the tax year. Answer appropriately.

Part III – Financial Information

• 6a Total Plan Assets – enter the value of the 401(k)s assets at the beginning and end of the year. This figure would include any rollovers, and all assets held by the plan.
• 6b Total Plan Liabilities – enter the value of the plan’s liabilities such as operating payables, acquisition indebtedness (non-recourse loans) and all other liabilities.
• 6c Net Plan Assets – subtract line 6b from line 6a.
• 7a Employer Contributions – enter the amount of profit-sharing contributions made to the plan.
• 7b Participant Contributions – enter the amount of contributions made to the plan by all participants.
• 7c Others – enter the amount of all other contributions, including rollovers from other retirement accounts.

Part IV – Plan Characteristics

• Enter the appropriate codes, which typically include 2E, 2J, 3B, and 3D. If your plan assets are held in a brokerage account, include 2R.

Part V – Compliance and Funding Questions

• For #9, check Yes if any plan participant loans were made during the year, and enter the outstanding amount of the loan(s) at year end.
• Check No for #10
• Check No for #11

Sign and date the form, and mail a hard copy to the IRS.