What is Form 5500? Everything You Need to Know

November 8, 2023

Did you know that your retirement plan may require a tax return filing? If you have a retirement plan, that is something like a 401(k), a S.E.P., a Single(k), solo(k), or anything other than a standard I.R.A. that an individual owns. Your retirement plan may have to file a tax return. The combined balance of all the participants is $250,000 or more.

The form 5500 has a couple of varieties: an S.F. short form, an easy and a full-fledged 5500 form, and any retirement plan, whether it’s a solo K with a rollover from your former employer. You contribute a little each year to 401(k) plans with thousands of people in them and are subject to the 5500. Again, you have a filing requirement 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 each husband and wife participate in their own company 401k plan or a solo K plan for smaller businesses. If you rolled over some money from a former employer and then made more contributions, you can easily hit that $250,000 mark.

So what needs to happen? It would be best if you had a third-party administrator who would help you take care of your requirements of keeping the plan up to date in compliance with the I.R.S. and E.R.I.S.A. laws. E.R.I.S.A. is the department of labor. Those are the standards for retirement plans. 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 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 issues and keep you very clean. There is a program through the I.R.S. that you can do a voluntary compliance initiative to 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 onboard 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 31 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 with PYOPAccounting.com. Please follow us on Facebook and Instagram. 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 at donna@pyopaccounting.com.

Donna Bordeaux, CPA with PYOPAccounting.com

Creativity and C.P.A.s don’t generally go together.  Most people think of C.P.A.s as nerdy accountants who can’t talk with people.  Well, it’s time to break that stereotype.  Lively, friendly, and knowledgeable can be a part of your relationship with your C.P.A., as demonstrated by Donna and Chad Bordeaux.  They have over 50 years of combined experience as entrepreneurial C.P.A.s.  They’ve owned businesses and helped business owners exceed their wildest dreams.   They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.