PFranckowiak Posted December 19, 2014 Share Posted December 19, 2014 I have a takeover plan that had late contributions due to a change in payroll company. By using the DOL calculator all of the earnings for the missed deposits are small and the excise tax is under fifty cents. Since I have to list each week separately, the excise tax then is zero. Do you file a 5330 showing no tax due? or do you put something in so you can pay the small penalty and have it filed. Not sure then how to indicate on the 5500. Client would like to just deposit the earning and the small excise tax to the employees accounts. (It amounts to less than $10.00 as the amounts involved are so small. Any suggestions? Thanks Link to comment Share on other sites More sharing options...
ESOP Guy Posted December 19, 2014 Share Posted December 19, 2014 Here is one conversation on this topic. http://benefitslink.com/boards/index.php?/topic/35750-de-minimus-excise-tax-amount-for-form-5330-late-deposit/#.VJSaYMAgAY Link to comment Share on other sites More sharing options...
PFranckowiak Posted December 19, 2014 Author Share Posted December 19, 2014 Thanks - but my amounts round down to zero excise tax on the 5330, should it still file it with zero tax due? Pat Link to comment Share on other sites More sharing options...
ESOP Guy Posted December 19, 2014 Share Posted December 19, 2014 See page 12 question 6 (I found it faster then I thought I would) http://www.irs.gov/pub/irs-tege/5330_phoneforum_transcript.pdf Link to comment Share on other sites More sharing options...
John Feldt ERPA CPC QPA Posted December 21, 2014 Share Posted December 21, 2014 Recommend they file the 5330 with no tax due. Link to comment Share on other sites More sharing options...
Kevin C Posted December 22, 2014 Share Posted December 22, 2014 Per the 5330 instructions, the late filing penalty with that small of a tax would be the amount of tax due if the filing is over 60 days late. The late payment penalty is a maximum of 25% of the tax due. Interest gets added to both. Would you be willing to pay 125% of zero, plus interest if the IRS decides at some later date that the form should have been filed? Client would like to just deposit the earning and the small excise tax to the employees accounts. (It amounts to less than $10.00 as the amounts involved are so small. That's what I would do. Link to comment Share on other sites More sharing options...
jpod Posted December 22, 2014 Share Posted December 22, 2014 Just curious how the excise tax could be so negligible yet it seems to be a foregone conclusion that the deposits were "late." What are the timeframes involved? My antenna tell me that either there is no need to treat the deposits as "late" or someone is under-counting the number of days they were late. Link to comment Share on other sites More sharing options...
BG5150 Posted December 22, 2014 Share Posted December 22, 2014 Just curious how the excise tax could be so negligible yet it seems to be a foregone conclusion that the deposits were "late." What are the timeframes involved? My antenna tell me that either there is no need to treat the deposits as "late" or someone is under-counting the number of days they were late. $500 Loss date: 12/1/14 Recovery date: 12/10/14 Final Date: 12/10/14 Interest: $0.37 Three months of similar late weekly deposits, total is over $6,000, (total interest about $5) but each individual interest amount rounds to zero. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left. Link to comment Share on other sites More sharing options...
jpod Posted December 22, 2014 Share Posted December 22, 2014 Agreed that the explanation could be that it was only $500 per week being late 9 days, i.e., a very small plan. I was wondering whether it could be a case where the days weren't counted until the 15th day of the following month has passed (which many people still assume is the first day you need to start counting). Link to comment Share on other sites More sharing options...
PFranckowiak Posted December 22, 2014 Author Share Posted December 22, 2014 Very small plan, very small amounts, Under $200.00. Total Interest calculated for the 5 late deposits was 10,00, but then that is spread out over the 5 deposits, with the largest interest amount .49. So, since then don't let you put less than a $1.00 in, Then they all round down to zero, with zero tax due. Link to comment Share on other sites More sharing options...
BG5150 Posted December 23, 2014 Share Posted December 23, 2014 Very small plan, very small amounts, Under $200.00. Total Interest calculated for the 5 late deposits was 10,00, but then that is spread out over the 5 deposits, with the largest interest amount .49. So, since then don't let you put less than a $1.00 in, Then they all round down to zero, with zero tax due. This doesn't add up. if the largest amount is $0.49, the the most it could be over 5 occurrences is $2.45. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left. Link to comment Share on other sites More sharing options...
PFranckowiak Posted December 23, 2014 Author Share Posted December 23, 2014 Buy our system does not let us put in cents on the 5330 form to report interest. It rounds it to zero. The interest is 10, the excise tax on the separate interest is 15% of that. Link to comment Share on other sites More sharing options...
Peter Gulia Posted December 24, 2014 Share Posted December 24, 2014 Does the software allow you to undo or override the rounding rule so you can enter and show the exact amounts? Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
D Lewis Posted December 24, 2014 Share Posted December 24, 2014 See page 12 question 6 (I found it faster then I thought I would) http://www.irs.gov/pub/irs-tege/5330_phoneforum_transcript.pdf Fascinating that this continues to be asked over and over - yet different answers are received. Since this is an IRS pub, it carries more weight. But at the 2011 Mid-Atlantic Benefits Conference in Philadelphia, this question was asked during the "Ask the Experts" session. Someone asked if there was a de minimis amount where one did not need to file the excise tax return. Someone else said that they had heard that if the tax was under $100 it did not need to be filed. George Brim and Michael Sanders of the IRS said there was no set number. But they clearly stated that if the cost to calculate, fill out, and file the 5330, PLUS the cost of the IRS to process it, if that cost was more than the excise tax, they didn't want it filed. Instead they said to calculate the tax, and add it to the lost earnings, and give it to the participants. FWIW, which apparently isn't much. Link to comment Share on other sites More sharing options...
Peter Gulia Posted December 24, 2014 Share Posted December 24, 2014 If the disqualified person doesn't file an excise tax return, what would start the running of a statute of limitations concerning the assessment or collection of the excise tax? Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
ESOP Guy Posted December 24, 2014 Share Posted December 24, 2014 See page 12 question 6 (I found it faster then I thought I would) http://www.irs.gov/pub/irs-tege/5330_phoneforum_transcript.pdf Fascinating that this continues to be asked over and over - yet different answers are received. Since this is an IRS pub, it carries more weight. But at the 2011 Mid-Atlantic Benefits Conference in Philadelphia, this question was asked during the "Ask the Experts" session. Someone asked if there was a de minimis amount where one did not need to file the excise tax return. Someone else said that they had heard that if the tax was under $100 it did not need to be filed. George Brim and Michael Sanders of the IRS said there was no set number. But they clearly stated that if the cost to calculate, fill out, and file the 5330, PLUS the cost of the IRS to process it, if that cost was more than the excise tax, they didn't want it filed. Instead they said to calculate the tax, and add it to the lost earnings, and give it to the participants. FWIW, which apparently isn't much. There reason it keeps getting asked it the problem is very real. A few years ago when I was still working on 401(k) plans I spent nearly $300 worth of time to compute about $12 of lost earnings. Of that 80% of them went to the Dr and most of the rest went to his wife who worked for him. The few nurses who made up the rest just didn't defer much. The tax was a joke. I predicted this would happen to the Dr before I started. He told me he was willing to put $100 of lost earnings in the plan and give none of it to his wife or him as it would be cheaper then my $300 bill. As far as I can tell there simply is no authority to do something like that so my boss wasn't willing to assume the $100 of earnings was really more then enough and so forth. I get it the real solution is to get the deposits in on time. But Dr offices have things like keeping patients healthy to do that are more important then worry about ever deposit. The IRS and DOL really need to come up with a simplified method that make the employer pay enough that they don't want to be late but are grounded in reality in terms of complexity and cost of computing. Off soap box for now. Link to comment Share on other sites More sharing options...
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