Late Deferrals -Form 5330

[amcorson]

Working on a 5330 for late deposits and not getting any help from IRS rep. Scenario:

Deposit 1 - considered late on 10/24/05, deposited 12/16/2005. Per DOL calculator lost earnings are $520.29 assuming final payment date (lost earnings restored) is now.

Deposit 2 - considered late on 11/16/05, deposited 12/16/2005. Per DOL calculator lost earnings are $271.07 assuming final payment date is now.

This is my understanding of the 5330: 2005 5330 (which is late) - For both deposits - report interest from 10/24/05 - 12/31/05, which is $490.36 and $255.47.

For 2006 5330 - report the $490.36,$255.47 AND report the interest from 1/1/06 - current ($29.93 & $15.60). This is basically the interest on the interest.

I guess my question has to do with the 12/16/05 date that the contributions were deposited, and thus corrected. It sounds like the prohibited trans continues until the lost earnings are restored, which is reflected in the example above, and does not end when the contributions are deposited?

Any help would be appreciated. Thanks.

[JanetM]

Correct, you have prohibited transaction until you make up the lost earnings on original contribution. So now you are filing the 2005 5300 to calculate the 15% excise tax on the lost earnings that should have accrued between 110/16/05 and 12/31/05 and then filing a 2006 5300 to calculate the 15% excise tax on the lost earnings between 1/01/06 and the date you funded the lost earnings.

[amcorson]

Thanks!