de minimus excise tax

[Guest Rosemary Raymer]

I have a plan that deposited August 2001 deferrals less than $2000 7 days late (on September 28, 2001). I calculate lost earnings at $1.42 therefore the excise tax is about 23 cents. I have to put on the 5500 that the deposit was late. Is there ANYWAY I can get out of a 5330 since the excise tax on there would round down to zero? Anyone know of a "loophole" for me?

[Steve72]

I don't know of a de minimus exception, but you should keep in mind that calculating the delinquency from 15 business days after the end of the month will probably not be sufficient. I don't know the set up of your company, but it may be advisable to calculate the interest using an earlier date.

There is a thread from earlier this month that discussed this issue in great detail:

http://benefitslink.com/boards/index.php?showtopic=14389

[Guest Rosemary Raymer]

Deposits for each month were made within 2 business days of the 15th business day. If I don't use the 15th on this one late deposit it would suggest that all of the others could have been made earlier and open up a big can of worms on additional interest and penalties. Don't you agree?

Anyway, I am holding the 5330 to see if someone can come up with a loophole for me. When I put in the numbers with the form's rounding, it shows $1 in a prohibited transaction and $0 in excise taxes.

[Steve72]

I guess I think the can has already opened up. I'm not sure I'm sold on the idea that the fact that deposits were made "late" in the past means they can be made "late" now. In my experience, the DOL has used the past history as one indicator, but has tended to be stricter than what the employer would like. asserting that 15 business days is the earliest the deposits could be made would not fly at all, IMHO.

I know that the DOL and IRS have an arrangement whereby 5330s are forwarded to the DOL for investigation. Whether that always happens is another matter. If you want to be safe, but conservative, VFC for all past deposits may be a better option than filing the 5330 and potentially alerting the DOL to the delinquency (and setting yourself up for 502(l).) Like I said, very (maybe overly) conservative, but safe.

Sorry, I know it's not the question you're asking, so I'll shut up now.