Navigating the labyrinthine world of IRS forms can often feel daunting, especially for those from different fields other than financial planning. Amidst this complexity, solo 401k plan holders having more than $250,000 in their retirement portfolio, find themselves facing an annual obligation – the filing of IRS Form 5500-EZ. This guide explains the step-by-step processes to file the IRS Form 5500 EZ.

The IRS Form 5500 EZ must be filed within 7 months after the close of the fiscal year. While it may seem like a straightforward task, completing Form 5500-EZ can be a time-consuming endeavor for self-employed individuals who are already juggling the many responsibilities of running their businesses.

The good news is that with the right guidance and knowledge, filling out this form doesn’t have to be an arduous and confusing process. In fact, it can be completed in as little as an hour, ensuring that you remain in compliance with IRS regulations and can continue to grow your solo 401k with confidence.

I have referred to the IRS portal to summarize the steps and define the jargons, which will help you file Form 5500 EZ easily for your solo 401k plan.

By the end of this guide, you’ll not only have a clear understanding of what’s required but also the confidence to tackle this annual task with ease, allowing you to focus on what truly matters—securing your financial future.

What is IRS Form 5500 EZ?

IRS Form 5500 EZ is a crucial document that solo 401k plan holders are required to file annually to fulfill specific reporting and filing obligations related to retirement plans.

Solo 401k plan holders who maintain an account balance exceeding $250,000 are obligated to complete IRS Form 5500 EZ.

Additionally, self-employed individuals and small businesses with multiple retirement accounts having a cumulative balance exceeding $250,000 must also file the IRS Form 5500 EZ.

Even if a self-employed individual or a small business has closed their solo 401k account, regardless of the balance, they are still required to fill out IRS Form 5500 EZ.

In cases where a couple shares two accounts within a single solo 401k plan and the combined balance surpasses $250,000, both accounts must be reported separately.

Example:

Imagine you are a small business owner, and your sole employee is your spouse. You establish a solo 401k plan and open two separate accounts for both you and your spouse. If the combined balance in both accounts exceeds $250,000, you are obligated to file IRS Form 5500 EZ for each account separately.

IRS Form 5500 EZ Instructions:

Downloading the IRS Form 5500 EZ

To download the IRS Form 5500 EZ: To download the form, you can visit the IRS website or follow this direct link to obtain IRS Form 5500 EZ.

After completing the form, be sure to download and print it for signing. When signing, use either a black or blue pen, avoiding felt-tip pens or other writing instruments that might cause signatures or data to bleed through the paper.

One-sided documents should remain free of markings on the blank side. Avoid using glue or other sticky substances on the paper form and refrain from including extraneous information such as arrows or notes on the form.

Mail your completed Form 5500-EZ for the applicable plan year to the IRS office in Ogden, Utah, for processing. Refer to the “Where To File” section in these instructions for specific mailing details.

IRS Form 5500 EZ-Support:

For assistance, you can reach the IRS Help Line at 877-829-5500. This toll-free telephone service is available Monday through Friday.

IRS Form 5500 EZ-When to File:

IRS Form 5500 EZ must be filed by the last day of the 7th calendar month following the end of your plan year or your company’s fiscal year.

Typically, self-employed businesses and small businesses adhere to the calendar year as their fiscal year, meaning IRS Form 5500 EZ must be submitted by July 31st of the subsequent year.

If the filing due date falls on a Saturday, Sunday, or legal holiday, the return may be filed on the next non-holiday business day.

IRS Form 5500 EZ-Where to File:

File Form 5500-EZ at the following address:

Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0020

IRS Form 5500 EZ-Penalties:

Yes, you guessed it right – there are penalties for failing to file IRS Form 5500 EZ by the due date. The penalty is $250 per day, up to a maximum of $150,000 per plan for a year.

How to file the IRS Form 5500 EZ

There are 5 sections of the IRS Form 5500 which you need to fill in:

Part I: Annual Return Identification Information

Part II: Basic Plan Information

Part III: Financial Information

Part IV: Plan Characteristics

Part V: Compliance and Funding Questions

Part I: Annual Return Identification Information

• Enter the fiscal year starting and ending dates (MM/DD/YYYY format) for which you are filing the form. It should not be more than 12 months.
  
• Section A:
  Choose the box “the first return filed for the plan”, if you are filing the Form 5500 EZ for the first time. Do not check this box if you have ever filed for this plan, even if it was a different form (for example, Form 5500).
  
  Choose the box “the final return field for the plan”, if you are closing your plan, by distributing the balance either to all the participants or transferring the balance to another plan. The final plan year is the year in which distribution of all plan assets is completed.
  
  Choose the box “an amended return” if you are filing the Form 5500 EZ again to make corrections in the last Form 5500 EZ file.
  
  Choose the box “a short plan year”, if you are filing the Form 5500 EZ for a period of less than 12 months.
  
• Section B:
  Section B is for extensions.
  Select “Form 5558” if you are filing form 5558 for requesting the IRS for extension in filing of Form 5500 EZ.
  
  Note: Form 558 is used by certain filers of Forms 5500, 5500-EZ, or 5330 to apply for a one-time extension of time to file the returns. A one-time extension of time to file Form 5500-EZ (up to 2½ months) may be obtained by filing Form 5558 on or before the normal due date (not including any extensions) of the return. You must file Form 5558 with the IRS.
  
  Select “automatic extension” if your solo 401k plan year and income tax year are the same, and you have been granted an extension of time to file the federal income tax return.
  
• Section C:
  Since you are a self-employed or a small business filing for the Form 5500 EZ, you do not need to check the Box C.
  
• Section D:
  Check this box for “Late Filer Penalty Relief Program” if you want some relief in the penalties imposed on you due to late filing of Form 5500 EZ.
  
  Please be aware that each submission under the program must include a completed paper copy of Form 14704 attached to the front of the oldest delinquent return in the submission. Form 14704 can be found at www.irs.gov/pub/irs-pdf/f14704.pdf
  
• Section E:
  Again this one is not for you (self-employed or small businesses filing the IRS Form 5500 EZ).

Part II: Basic Plan Information

As is evident the Part II: Basic Plan Information will ask for information regarding the plan, the Employer, plan administrator and other general information.

Lines 1a-1c asks for the name of the plan, three digit plan number and the date on which the plan got effective. The three digit plan number is assigned by the employer (for solo 401k, it is you), and is numbered consecutively starting from 001. 

Please note that, once a plan number is used for a plan, it must be used as the plan number for all future filings of returns for the plan, and this number may not be used for any other plan even after the plan is terminated.

Lines 2a-2d, is all about information regarding the employer. It also asks for your 9 digit Employer Identification Number (EIN) which you can apply for here in this portal.

Note: You can use Form 8822-B, Change of Address or Responsible Party — Business, to notify the IRS if you changed your business mailing address, your business location, or the identity of your responsible party.

Lines 3a-3c, you need to fill this, if the plan administrator is a different person other than the you the employer. If you are the employer as well as the plan administrator, then write “Same” in line 3a and leave all the other lines blank.

In case you have a plan administrator, you need to fill its details along with its EIN.

Lines 4a-4d, if the employer’s name, the employer’s EIN, and/or the plan name has changed since the last return was filed for this plan, enter the employer’s name and EIN, the plan name, and the plan number as it appeared on the last return filed for this plan.

Lines 5a-5b: these fields ask for the number of participants at the beginning and end of the year. The IRS describes a “participant” as 

“Participant,” for purposes of lines 5a(1)–5b(2), means any individual who is included in one of the categories below.

1. Active participants (for example, any individuals who are currently in employment covered by the plan and who are earning or retaining credited service under the plan) including:
   1. Any individuals who are eligible to elect to have the employer make payments under a section 401(k) qualified cash or deferred arrangement, and
   2. Any nonvested individuals who are earning or retaining credited service under the plan.

This category does not include (a) nonvested former employees who have incurred the break in service period specified in the plan or (b) former employees who have received a “cash-out” distribution or deemed distribution of their entire nonforfeitable accrued benefit.

2. Retired or separated participants receiving benefits (for example, individuals who are retired or separated from employment covered by the plan and who are receiving benefits under the plan). This category does not include any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan.
3. Other retired or separated participants entitled to future benefits (for example, any individuals who are retired or separated from employment covered by the plan and who are entitled to begin receiving benefits under the plan in the future). This category does not include any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan.
4. Deceased individuals who had one or more beneficiaries who are receiving or are entitled to receive benefits under the plan. This category does not include any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the beneficiaries of that individual are entitled under the plan.

Part III: Financial Information

Line 6a, asks for the total plan assets, separately at the beginning and the end of the year. It includes all rollovers and transfers received from other plans, unrealized gains and losses like appreciation and depreciation in the plan assets (as the assets in the solo 401k will be invested). 

Please note that the plan assets at the beginning of the year should be the same as the plan assets at the end of the last year.

Line 6b, asks for the liabilities, which includes but are not limited to benefit claims payable, operating payables, acquisition indebtedness, and other liabilities

Line 6c, “net plan assets”,  is simply obtained by subtracting line 6b from 6, i.e. (Total Plan Assets-Total Plan Liabilities).

Line 7a, 7b and 7c: Enter the total contributions received in the solo 401k plan by the employer, participants and others (including rollovers).

Part IV: Plan Characteristics

Part V: Compliance and Funding Questions

This section is a Yes/No type, which asks you for participant loans, and if the plan is a defined benefit plan. There are different sub-sections from 10a, 11a-11e. It is better to consult your CPA for this section, if it feels cumbersome.

Conclusion

In conclusion, IRS Form 5500 EZ may seem like a daunting task, laden with complexities and obligations. However, I hope with this guide, you now possess the knowledge to file the form for your solo 401k plan obligation.

However, in case you still find any difficulties or confusions, please consult a professional financial advisor.