Problem with closing Solo 401k. Need help with Form 5500 EZ

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Problem with closing Solo 401k. Need help with Form 5500 EZ

Joe Gee
Investor · New Orleans, LA · Member since 2012 · 53 posts · 30 votes

Hello BP!

I have a problem. My Solo 401k administrator disabled my account for non-payment (long story). But they won't assist with filling out a final form 5500 EZ with the IRS. I closed the account with Fidelity not realizing I had to file a final 5500 EZ regardless of the amount in the account (-$5,000). So now im past the due date and panicking because I saw the fines are hefty.

Can anyone assist with this?

Thanks in advance.

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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
8h

Joe, I’d get this addressed sooner rather than later, but I’d first confirm whether closing the Fidelity account actually terminated the Solo 401(k) plan and when all plan assets were distributed or transferred.

If the plan was actually terminated, a final Form 5500-EZ is required even if the plan's assets were below $250,000. The $250,000 threshold generally provides an exemption from the annual filing requirement for qualifying one-participant plans, but it does not eliminate the final-return requirement when the plan terminates.

The good news is that the IRS has a specific penalty-relief program for eligible delinquent Form 5500-EZ filers. For an eligible one-participant, non-ERISA plan, the current fee is $500 per delinquent return, with a $1,500 maximum per submission for the same plan, subject to the program's requirements.

I would not use the DOL's DFVC program for this. The DOL specifically excludes Form 5500-EZ filers from that program. I'd have someone familiar with retirement-plan filings review the plan termination date, whether any prior-year filings were required, and whether you qualify for the IRS penalty-relief program before filing anything. Happy to connect!

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  • Hossein Sharifi
    Member since 2023 · 56 posts · 25 votes
    3d

    This is fixable, and it's more common than you'd think. A one-participant plan has to file a final-year Form 5500-EZ even when it's under the $250K threshold where filing is otherwise waived. That means the form is simple: mark it as the final return, enter zero assets at the end of the year, and file.

    On the penalty: the statutory late-filing penalty is steep ($250 a day, up to $150,000), but the IRS runs a late-filer penalty relief program for Form 5500-EZ that replaces it with a small flat amount per late return, as long as you file before the IRS contacts you. Search "Form 5500-EZ late filer penalty relief" on IRS.gov for the current rules, amount and how to pay. I'd move on this soon, before a notice arrives.

    Practical steps:

    1. Pull the plan name, plan number and EIN from old Fidelity or administrator statements.

    2. File the final-year return, plus any earlier year that was missed.

    3. A CPA or ERISA/retirement-plan preparer can usually do this in an hour or two for a flat fee. Worth it for a penalty problem.

    If a notice does arrive, answer it with a reasonable-cause explanation (the administrator disabled the account and wouldn't assist) and the relief request.

    0Reply
    • Joe Gee
      OP
      Investor · New Orleans, LA · Member since 2012 · 53 posts · 30 votes
      2d

      Thanks so much Hossein!

      0Reply
  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    8h

    Joe, I’d get this addressed sooner rather than later, but I’d first confirm whether closing the Fidelity account actually terminated the Solo 401(k) plan and when all plan assets were distributed or transferred.

    If the plan was actually terminated, a final Form 5500-EZ is required even if the plan's assets were below $250,000. The $250,000 threshold generally provides an exemption from the annual filing requirement for qualifying one-participant plans, but it does not eliminate the final-return requirement when the plan terminates.

    The good news is that the IRS has a specific penalty-relief program for eligible delinquent Form 5500-EZ filers. For an eligible one-participant, non-ERISA plan, the current fee is $500 per delinquent return, with a $1,500 maximum per submission for the same plan, subject to the program's requirements.

    I would not use the DOL's DFVC program for this. The DOL specifically excludes Form 5500-EZ filers from that program. I'd have someone familiar with retirement-plan filings review the plan termination date, whether any prior-year filings were required, and whether you qualify for the IRS penalty-relief program before filing anything. Happy to connect!

    [email protected]941-914-7779
    INVESTOR FRIENDLY CPA®5241 Reviews
    WebsiteView Page
    TaxMD® | Tax Planning Software
    WebsiteView Page
    1Reply
  • Aaron ZimmermanBusiness Member
    Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
    2h

    I use a company called my mysolo401k 40 handle my filings. I’d get in touch with them and see if they can help.

    [email protected]
    Brick House CPAs53 Reviews
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