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Form 5500 and the Automatic Filing Extension

“My client failed to file his Form 5500 for his company’s 401(k) plan by the deadline of July 31, 2020. Is there any way to get a filing extension?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business. A recent call with a financial advisor from Pennsylvania is representative of a common inquiry related to filing IRS Form 5500.

Highlights of the Discussion

Your client would have had to have filed a Form 5558, Application for Extension of Time To File Certain Employee Plan Returns by the company’s regular due date (i.e., July 31, 2020, in this case) to request a one-time extension (for 2 ½ months) to file its Form 5500 for the year. However, if your client has filed for an extension to submit his company’s business tax return for 2019, he still may be in luck with respect to filing his plan’s Form 5500 for the year.

The IRS will grant an automatic extension of time to file the Form 5500 Annual Return/Report of Employee Benefit Plan for a year—until the business’s due date for filing its federal income tax return—if  all of the following conditions are met:

  1. The plan year and the employer’s tax year are the same;
  2. The employer has been granted an extension of time to file its federal income tax return to a date later than the normal due date for filing the Form 5500; and
  3. A copy of the application for extension of time to file the federal income tax return is maintained with the filer’s records.

 An extension granted by using this automatic extension procedure cannot be extended further by filing a Form 5558, nor can it be extended beyond a total of 9½ months beyond the close of the plan year. (See the Instructions to Form 5500, page 4.)

Unfortunately, if your client did not file Form 5558 for the one-time extension, and does not qualify for the automatic extension to file by the tax return deadline, he could face late filing penalties. Those penalties could be reduced by participating in the Delinquent Filer Voluntary Correction Program.

Conclusion

Business owners who have been granted an extension to file their business tax returns automatically receive an extension of the deadline to file Forms 5500 Return/Report for their retirement plans, if they satisfy certain conditions.

© Copyright 2020 Retirement Learning Center, all rights reserved
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Tax Reporting of Retirement Plan Contributions for Unincorporated Businesses

“Tax season has me wondering how sole proprietors deduct contributions they make to their qualified retirement plans?”

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare. We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Oklahoma is representative of a common inquiry related to deducting retirement plan contributions.

Highlights of the Discussion

Unincorporated business owners, such as sole proprietors, farmers and partnerships, are among the IRS’s list of “pass through” business entities. Why the name—because the profits of these firms directly pass through the businesses to their owners, and are taxed on the owners’ individual income tax returns.

Special rules apply for how such businesses report and deduct contributions to their retirement plans for themselves and their employees. The following table provides a general, informational summary of annual tax reporting requirements for unincorporated business owners who make retirement plan contributions. The table is based on the instructions to the filing forms noted. IRS Publication 560, Retirement Plans for Small Businesses provides additional information. Please consult a tax advisor for specific guidance.

Tax Reporting of Retirement Plan Contributions for Unincorporated Businesses

Type of Employer Contributions for Common Law Employees Contributions for the Business Owner
Sole proprietorship Line 19 of 2018 Schedule C, Profit or Loss From Business (attachment to IRS Form 1040)

 

Instructions to Schedule C

 

Line 28 of 2018 Schedule 1, Additional Income and Adjustments to Income,(attachment to IRS Form 1040)

 

Instructions for Schedule 1

 

Farmers Line 23 of 2018 Schedule F, Profit or Loss From Farming, (attachment to IRS Form 1040)

 

Instructions to Schedule F

 

Line 28 of 2018 Schedule 1, Additional Income and Adjustments to Income, (attachment to IRS Form 1040)

 

Instructions for Schedule 1

 

Partnership Line 18 of 2018 Form 1065, U.S. Return of Partnership Income

 

Instructions to Form 1065

 

Box 13 of Schedule K-1 Partner’s Share of Income, Deductions, Credits, etc. (attachment to Form 1065)

 

Instructions for Schedule K-1

 

 

 

© Copyright 2020 Retirement Learning Center, all rights reserved