De minimus excise tax amount for Form 5330 late deposit?

[Santo Gold]

An employer had a few late deposits of 401(k) contributions. The lost earnings amounted to around $60. The 5330 excise tax adds only about $10 to that. 15% of $70 is $10.50.

I did not see it in the 5330 instructions, but is there a $100 de minimus excise tax when using 5330 for late deposits?

Thanks

[austin3515]

There is not one. But, I've heard through the grapevine (which is not reliable) that it costs the IRS $100 to process a 5330 - therefore, many have suggested that the IRS would not go crazy trying to find these types of returns. I think this lost interest on participant contributions revolution (in the past 5 or 10 years, I mean) has definitely created the need for a de minimis tax threshhold, but no such luck yet.

[401_4_ever]

The "revolution" on lost interest for participant contributions has been created by the DOL. The IRS handles the 5330's so this is probably an unintended consequence of the DOL's actions. I also would expect a de minimis to come out soon.

[JanetM]

But until we have a de minimus threshhold we must keep filing the forms. Our accounting department had hissy fit when we sent check request for $4 last year. We had to get our tax department involved. AP didn't want to issue a check for $4. I was ready to take $4 from petty cash and get a money order when I finally got the check from AP.

[austin3515]

But if you're comfortable paying the interest and penalties that MIGHT be assessed on a $4 excise tax, then proceed at your own "risk..."

[Tom Poje]

it took me awhile to track this down, and hopefully someone can translate how this works.

the $100 issue is an exemption found here:

http://www.dol.gov/ebsa/regs/fedreg/notices/2006003675.pdf

this would seem to say if it is less than $100, you dont have to file 5330, but rather you pay the $100 to the trust.

my question focuses more on the how or when the 180 day rule applies, that is, is this option only available if the payment corrections are less than 180 days late - or if it is after 180 days that you have to file through VFCP (still avoiding the 5330). and then of course under the VFCP program it even says there is no requirement to file for small amounts, but that the filing gives you the relief available under the program.

[R. Butler]

it took me awhile to track this down, and hopefully someone can translate how this works.

the $100 issue is an exemption found here:

http://www.dol.gov/ebsa/regs/fedreg/notices/2006003675.pdf

this would seem to say if it is less than $100, you dont have to file 5330, but rather you pay the $100 to the trust.

my question focuses more on the how or when the 180 day rule applies, that is, is this option only available if the payment corrections are less than 180 days late - or if it is after 180 days that you have to file through VFCP (still avoiding the 5330). and then of course under the VFCP program it even says there is no requirement to file for small amounts, but that the filing gives you the relief available under the program.

What if the contibutions within 180 days, but the lost earnings were remitted outside of that time frame? Can you still submit the excise tax to the trust rather than file the 5330?

Thanks for any guidance.

[ESOP Guy]

As a side comment the IRS still hasn’t agreed to the idea of putting the excise tax in the trust if <$100. So even if you can do the DOL correction method it is possible the IRS could come along and make the client pay the excise tax again with late penalties. There has been at least one IRS phone Q&A session this year where they restated it is their position there is no De minimus amount for this tax and you always have to file the 5330 in their mind.

[R. Butler]

As a side comment the IRS still hasn’t agreed to the idea of putting the excise tax in the trust if <$100. So even if you can do the DOL correction method it is possible the IRS could come along and make the client pay the excise tax again with late penalties. There has been at least one IRS phone Q&A session this year where they restated it is their position there is no De minimus amount for this tax and you always have to file the 5330 in their mind.

You are correct; I didn't state my question correctly. I meant to say submit the exicse tax to the trust rather than give the notice to employees. Plan sponsor is consdidering the VFC Program; thta gets them out of the 5330. Paying the otherwise applicable exise tax to the trust would get them out of the VFC notice requirement.