How to complete form 5500-EZ for 2003 after GUST amendment

[Guest dgoldie]

I've had a Schwab prototype combination Money Purchase/Profit Sharing Keogh since 1987. I am a self-employed, single-owner participant required to file 5500-EZ. Last year I had to amend the plan for GUST. This resulted in Schwab dividing up my single Keogh account into two separate accounts -- one Money Purchase and one Profit Sharing.

Schwab tells me that I should file two 5500-EZ's this year. One for each plan. In the past I have always completed just one 5500-EZ, which I now understand may have been incorrect. If I follow Schwab's advice and return two 5500s for 2003, will that create a problem for me with the IRS? If I do file two forms, should I make one plan number 001 and the other plan number 002? Any suggestions or advice would be much appreciated. Thank you.

[WDIK]

This does not directly answer your questions (as if so often mentioned on these boards, you should get competent counsel to determine the options for your specific situation), but a couple of questions came to my mind that you may also want to consider or address.

1) Your question about number the plans makes me wonder why there were not previously two plan numbers. Does the Schwab prototype combination Money Purchase/Profit Sharing Keogh consist of a single adoption agreement with only one plan number?

2) With the recent law changes, what advantage is there in maintaining both a money purchase plan and a profit sharing plan for someone who is elgible to file Form 5500-EZ? I would recommend that the two plans be merged.

[Blinky the 3-eyed Fish]

I doubt it, but are the assets under $100,000?

If not, then you are in a bind. You should have been filing for 2 plans all along, so there is no good solution for you. If you begin to file EZ's, it very well may trigger questions from the IRS. Even if you merge the plans as WDIK suggests, you will have to file a final 5500-EZ for the MP plan and that may trigger questions.

This is just a lesson is how plans like this, set up through a brokerage, are rife with problems. I would too bet that in years you made contributions to the plan your net earned income was not calculated correctly either.