Form 5500 requirements for startup plan with no contributions (Cash Basis)

[Guest JasonElliott]

I've heard some thoughts about this in the past and am resigned to the fact a Form 5500 needs to be filed for the first plan year, even if the only contributions are accruals deposited in the following plan year.

For example, effective date of 401(k) plan is 12/1/2004. No contributions in 2004, however, there is a PS contribution deposited in early 2005.

Would a Form 5500 need to be filed for 2004? My guess is "yes" so that you could report the coverage results on the Schedule T, even though there will be no financial data because of cash basis reporting.

Any thoughts?

[david rigby]

Do it.

[JanetM]

Is this a small plan or a large plan? If large plan then you have to have an audit and those stmts must be GAAP.

Is the PS/Employer going to deduct this contribution on 2004 tax return? For audit trail purposes I would file accrual basis.

[R. Butler]

We always file in the circumstances which you describe.

[wmyer]

In response to Janet's statement, I would add that the audit requirement on the first short plan year can be deferred.

[JanetM]

Yes the audit can be deferred if initial plan year is less than seven months. Going back to JasonElliotts post - PS plan is effective 12/31/04 and all they have is accrued contribution. My guess would be they are using all the 2004 compensation for the contribution and the effective date of the plan is 1/01/04 no 12/31/04. Don't think I can give one cite that says you can use comp for plan prior to becoming a participant.

But in the event the schedule C or 1120 get looked at by the IRS I sure would want a 5500 to back up the tax deduction.