Form 5500-EZ Employee Definition

[MarZDoates]

Line 14 asks if the business has any employees other than the owner, spouse, partner, partner's spouse. This sole proprietor does employ one individual that is not a spouse or partner or partner's spouse, so the answer to 14a is yes.

Where it asks for the total number of employees, including the business owner, do you include him in the count since he is a sole-prop and not an "employee"?

Thanks.

[Lori Friedman]

We need more information. Your subject line mentions the "Form 5500-EZ Employee Definition", and you're asking about Form 5500-EZ, Line 14. But, the plan sponsor has one employee -- someone who isn't a sole proprietor, partner, or spouse. Does this employee participate in the plan? I'm uncertain whether Form 5500-EZ is the appropriate return for this plan administrator to file.

[MarZDoates]

I'm uncertain as well. I'm trying to determine if this person ever met the plan's eligibility requirements. If so, we'll definitely need to file the regular 5500.

But I did find in the ERISA outline book that a self-employed individual is considered an employee for qualified plan purposes.

Thanks for the input.

[MarZDoates]

We have determined that the employee was eligible (and has been for several years) even though there have been no contributions. Problem is that they have been filing an EZ the whole time.

We'll go ahead and file a regular 5500 for 2007 (and 2008 final plan year as the plan is terminating).

Any suggestions as to what to do about the prior years? DFVC?

Thanks.

[SheilaD]

Any suggestions as to what to do about the prior years? DFVC?

Thanks.

Absolutly DFVC -- that's what it's there for :-)

[Lori Friedman]

MarZDoates, your client's very fortunate to have the services of someone so conscientious. You've identified, and you're fixing, a problem that would have otherwise grown and become more troublesome with each passing year.

On that note, I wish you a nice weekend!

[Blinky the 3-eyed Fish]

I would not file under DFVC as the first solution. Instead try filing an amended return. If you run into problems, and I doubt you will, then you can file under DFVC.

[jpod]

MarZ: When you said "no contributions," did you mean no contributions for anyone, or did you mean that there were contributions for the owner but none for the eligible employee? If the latter your client may have a problem larger than the 5500 problem.

[MarZDoates]

Jpod, there have no contributions to the plan at all.

Lori, Thank you.

Thanks to all for the input. It is greatly appreciated!