The Form 5330 is the document on which excise taxes are reported for any violations or broken rules, such as errors in administering benefit plans. When any of these violations occur, this form must be filed with the IRS to report the error.
What is the Form 5330?
As mentioned above, the Form 5330 is a tool used to report excise taxes for 401(k) plans. In the event that the sponsors of such a plan are late with the deposit, this interferes with earnings and investments, so they must pay taxes on the lack of these earnings.
If these plan sponsors or administrators default on the payment, they must calculate the amount of excise taxes and pay them to the IRS using this Form 5330, but there are rules they must follow in filling out Form 5330. Keep reading this article to find out all the details.
What is a section 401(k)?
When we talk about section 401(K), we are referring to the defined contribution retirement savings plan, which is provided by the employer. That is, it is a benefit that includes payroll contributions so that each worker will have his or her retirement in the future.
Who must file Form 5330?
To complete the Form 5330, you need a person who is qualified and advocating for the administration of the plan. This document must be completed in the event that the employer fails to make agreed benefit plan payments, or if there is a change in plan assets.
These forms are completed in the year in which the noncompliance with the transaction and its requirements occurred. So, those who must file this form are:
- The employer noted as not complying with the terms and conditions of a multiemployer plan.
- The administrator of the plan company that committed the violation.
- The plan administrator posing as a plan sponsor.
When do I must file the Form 5330?
We already know who must file the form, and that this must be done in the event that excise taxes must be reported for a single plan, during the plan year. Now, when should the Form 5330 be filed? This depends on each excise tax and the reasons for the violation. The deadline varies for each tax.
Let’s take a look, below, at each of these deadlines, as agreed to by each item and/or section.
FACT: Plan administrators or employers may file a Form 5558 to request an extension of these deadlines, which may last up to a maximum of six months.
Deadline by section
- Section 4965: The 15th day of the fifth month after the close of the agreed fiscal year.
- 4971: The last day of the seventh month after the close of the taxable year. The limit may be extended to eight and one-half months after the last day of the plan year.
- 4971(g)(4); (3); (2); and (f): Same date as section 4971.
- 4973(a)(3): The last day of the seventh month of the taxable year.
- 4972/4975/4976/4977/4978: The last day of the 7th month after the close of the taxable year.
- 4979: The last day of the 15th month after the close of the taxable year.
- 4979A: The last day of the seventh month after the end of the taxable year.
- 4980: The last day of the first month after the close of the month in which the reversal occurs.
How to fill out form 5330?
To file this document, you must first download it from the official IRS website (here we leave the link so you can enter directly). Once downloaded, you must print it and fill it out with all the requested information.
Once you have everything ready and signed, you must send it to any of the addresses and/or sites that we will mention in the next section. The form must be mailed in paper, otherwise, it will not be valid.
You can complete your form with a ballpoint pen or typewriter, but it must be (without exception) in black or blue ink.
IMPORTANT: Do not exceed the limits of the lines to complete the annotations.
Where do I file the form 5330?
Once you have your completed the form , verify that all the information is correct, and then send it to one of the following places:
- Internal Revenue Service (IRS).
- Treasury Department.
- Ogden, Utah 84201.
- Approved private delivery services for mailing forms, such as the United States Postal Service (USPS).
Claims for refund or amended return/credit
The plan sponsor may make claims on an amended Form 5330 in the event you need to make any of the following claims:
- Receive overpayment credits.
- Claiming a refund for overpayment.
It is worth mentioning that the claimant(s) must explain the reasons for the amendment with details and evidence, otherwise, it will be more difficult to make the claim.
What are the excise taxes?
To make it easier to understand, we will leave you a table with the most common types of excise taxes, although in the form you will find up to more than 20 different types.
Excise tax percentage
Non-compliance with the agreed requirements on the financing of the profit plan.
|10% of shortfall.|
ADP/ACP test reimbursement issued more than two and a half months after the end of the year.
10% of the reimbursement amount (does not include investment earnings).
Excess of the annual tax deduction limit.
10% of the total non-deductible contribution.
15% of the loss of earnings.
|Reversal of overfunded money from sponsor’s benefit plan.||
50% of the reversal.
What violations can plan administrators commit?
Plan administrators, sponsors and participants can commit various violations with respect to the administration of benefit plans. If this happens, they will be required to file this form.
Among these mistakes that can be made, we can include the following (and most frequent) violations:
- Improper payments.
- Disqualified benefits.
- Prohibited tax shelter transactions.
- Excess of benefits and/or contributions.
- Lack of attention to critical conditions.
- Failure to comply with rehabilitation actions.
- Illegal assignments.
- Violation of requirements imposed for notification and/or deposit deadlines.
What are the penalties and interest for nonpayment?
Plan administrations, or sponsors, will be required to make their delinquent payments with interest, regardless of the time agreed upon for submission.
The IRS, specifically section 6621, is the one that will resolve what the amount of each tax will be for negligence, fraud and failure to file, among other penalties for delinquencies.
Let’s see the percentage of interest to be paid in case any of these violations are committed.
- Late filing: 5% per month.
- Total tax due: Up to 25%.
- Late payment: The rate may vary from 0.5% of the total amount of the tax, up to 25%.