5500 or 5500EZ

[Guest sueczer]

Should be a simple question. We were asked if there is an owner and his daughter in the plan ,do we file a 5500 or 5500EZ. The daughter owns 5%. We weren't told whether or not this is incorporated or a partnership. My thought is we do a 5500EZ since it covers only owners. Any other opinions?

[Belgarath]

Not eligible for EZ. See page 3 of the 2005 5500 instructions.

[R. Butler]

Not eligible for EZ. See page 3 of the 2005 5500 instructions.

If the business is a partnership & not a member of a controlled group why wouldn't it be eligible to file a 5500-EZ?

[JanetM]

Rules are

Partnership (and their spouses) file EZ

If there are any employees the filing is 5500

[Belgarath]

Sorry, I was in a hurry, and was assuming this was a corporation. I just saw the 95/5 and thought "corporation."

[Guest Dolores]

I assume that an SCorp with two owners who are unrelated and have no employees would have to file a 5500 and would not be eligible to file Form 5500 EZ?

What if they received advice from their "solo K" recordkeeper telling them that they were EZ filers and would not have to file until assets hit $100,000? The plan was effective in 2003 and end of year assets on a cash basis did not hit $100,000 until the end of 2005.

[Sully]

I agree, they are not eligible to file a 5500-EZ.

I would recommend a DFVC submission for the 2003 and 2004 plan years. Penalty would be $1,500.

[Earl]

It seems S-Corp would be EZ eligible, if no employees. C-corp would not.

SECTION 1103 of PPA see below;

. 1103. REPORTING SIMPLIFICATION.

(a) Simplified Annual Filing Requirement for Owners and Their Spouses-

(1) IN GENERAL- The Secretary of the Treasury shall modify the requirements for filing annual returns with respect to one-participant retirement plans to ensure that such plans with assets of $250,000 or less as of the close of the plan year need not file a return for that year.

(2) ONE-PARTICIPANT RETIREMENT PLAN DEFINED- For purposes of this subsection, the term 'one-participant retirement plan’ means a retirement plan with respect to which the following requirements are met:

(A) on the first day of the plan year--

(i) the plan covered only one individual (or the individual and the individual's spouse) and the individual owned 100 percent of the plan sponsor (whether or not incorporated), or

(ii) the plan covered only one or more partners (or partners and their spouses) in the plan sponsor;

(B) the plan meets the minimum coverage requirements of section 410(b) of the Internal Revenue Code of 1986 without being combined with any other plan of the business that covers the employees of the business;

© the plan does not provide benefits to anyone except the individual (and the individual's spouse) or the partners (and their spouses);

(D) the plan does not cover a business that is a member of an affiliated service group, a controlled group of corporations, or a group of businesses under common control; and

(E) the plan does not cover a business that uses the services of leased employees (within the meaning of section 414(n) of such Code).

For purposes of this paragraph, the term 'partner’ includes a 2-percent shareholder (as defined in section 1372(b) of such Code) of an S corporation.

[Lori Friedman]

My thought is we do a 5500EZ since it covers only owners.

If I'm understanding correctly, the father and daughter own the business, but you don't know whether the business is a partnership or corporation.

Partnership - The plan can file a Form 5500-EZ.

Corporation - The plan must use Form 5500. A corporation's plan can file Form 5500-EZ if it covers only the sole owner and his/her spouse. If the corporation has more than one shareholder, it can't use the short form.

[Guest LSH CPA]

Anyone else still doing 07 returns? Hope I'm not the last one.

I have a question on this topic.

Has anyone filed a 5500ez for an LLC when the only participants are the members ("partners") of the company?

I read something that the IRS never clarified if an LLC was considered a Partnership for this test. I sure want to do a 5500 ez if I can...

Thanks!

[jpod]

Forgive me if I've missed some guidance from IRS or DOL, but I don't think I have. The EZ instructions, as well as the Form itself, could not be any clearer, in my mind. The EZ can be used if the plan covers only partners in a partnership. However, neither the instructions nor the form itself suggest that it can be used in a non-partnership situation simply becuase the entity is treated as a partnership for tax purposes. Also, there is a pointed question on the Form asking to check the block to identify the reason for EZ eligibility. Absent guidance from IRS or DOL, are you willing to advise your client to declare under penalty of perjury that it is a partnership?

[Guest lvasikarla]

I submitted a question to DOL and they verified that 2% shareholders of a S coporation are considered partners.

Here is the text I got in the email.

This is in response to your web-based inquiry with respect to the Form 5500 EZ.

To be eligible for the EZ filing status, the plan must satisfy the definition of a "one-participant plan" as prescribed by the instructions to the Form 5500-EZ. For this purpose, a plan is a one-participant plan if on the first day of the plan year, the plan covers only: (1) one individual (or the individual and such individual's spouse) provided that the individual (or the individual and such individual's spouse) own 100% of the plan sponsor (whether or not incorporated), or (2) one or more partners (or partners and their spouses) in the plan sponsor (treating 2% shareholder of an S corporation, as defined in IRC §1372(b), as a partner). The plan may not provide benefits to anyone other than such individual (and the individual's spouse) or such partners (and their spouses). In essence then, the only participant or participants in the plan must be individuals who are not employees.