Short explainer (YouTube video) by Donna Bordeaux about retirement plan tax filing requirements, focusing on Form 5500. It explains when retirement plans (e.g., 401(k), SEP, Solo K) must file—primarily when combined participant balances reach $250,000 or more—describes Form 5500 types, the role of a third-party administrator for ERISA/IRS compliance, and practical advice about voluntary compliance and deadlines.
Questions this video answers
$250,000
July 31st
SF (short form), EZ, and the full Form 5500
The Department of Labor (ERISA standards)
Chapters
Did you know that your retirement plan may have a tax return filing requirement? If you have a retirement plan that is something like a 401k, a SEP, a single K, solo K, anything other than a standard IRA that is owned by an individual, your retirement plan may have to file a tax return if its combined balances of all the participants is $250,000 or more. The form 5500 has a couple of different varieties. An SF short form, an EZ and a full fledged 5500 form. Any kind of retirement plan, whether it's a solo K with a rollover from your former employer and you contribute a little each year, all the way on up to 401k. Plans that have thousands of people in them are subject to the 5500. Again, the way that you have a filing requirement is if all of the combined participants balances are greater than $250,000. Now that number can sneak up on you. So again, picture a simple business solution where husband and wife each are participants in their own company's 401k plan or solo K plan, which is for smaller businesses. If you rolled over some money from a former employer and then make some more contributions along the way, you can easily hit that $250,000 mark. So what needs to happen? You need to have a third party administrator and they will help you take care of all of your requirements of keeping the plan up to date in compliance with the IRS and ERISA laws. ERISA is the Department of Labor. Those are the standards for retirement plans and they will the third party administrator will also assist in filing that Form 5500 for you when appropriate. Now what if you've passed that limit and you don't have a third party administrator to help you? You may have a little trouble. The third party administrators do not want to take on someone who already has compliance issues. They want to start with you before you have any issues and keep you very clean. There is a program through the IRS that you can do a voluntary compliance initiative where you can get caught up and get back into compliance. But that of course takes a little work and can be a little more expensive. So I strongly suggest as you start up a retirement plan, if you think you may hit that $250,000 threshold within the next two to five years, please have a third party administrator on board each of those years to watch as you grow and keep everything compliant. That's a whole lot easier route than trying to unscrew it. Also, by the way, that return is due on July 31st of each year. So if you are nearing those numbers or need to double check, please make sure you're aware before that filing deadline. I'm Donna Bordeaux from campgroundaccounting.com Please follow us on Facebook and Instagram. Make sure you check out our blog and our website from the link below. Subscribe to our YouTube channel and hit the bell to be notified when we post. To contact me, email me@donnaampgroundaccounting.com.
