controlled group delinquent 5500 and penalty

[Guest lisasig]

client owns 100% of S corp 1 and he, wife and 2 kids own 100% of S corp 2 , which does minimal business. S corp 1 has 2 plans, money purchase and profit sharing. both now have combined assets of about 120K. he has filed 5500s in prior years, does he still have to file based on the asset value of 120K? I think the answer is yes because of the controlled group situation......any way around this? He filed late last year and I was looking for a way for him to get around the penalty by not actually being required to file. ($775 penalty for each plan x 2).

[Guest Sieve]

I will take as a given that there is a controlled group. On your facts, it conceivably could not be a controlled group (e.g., if kids were >age 21, & client owns <80% of corp 2 & wife is not employee, etc. of corp 1).

What is the significance of the $120K? If you're talking about a 5500-EZ (assuming the corps are eligible for an EZ), the threshhold is now $250,000.

[Guest lisasig]

I will take as a given that there is a controlled group. On your facts, it conceivably could not be a controlled group (e.g., if kids were >age 21, & client owns <80% of corp 2 & wife is not employee, etc. of corp 1).

What is the significance of the $120K? If you're talking about a 5500-EZ (assuming the corps are eligible for an EZ), the threshhold is now $250,000.

it is controlled group, kids are adults but he owns 100% of Corp 1......120K is actual assets, so just showing that it's under 250, so if it wasn't controlled group he wouldn't have to file at all.....do you agree? I'm thinking he should get rid of Corp 2 which doesn't really do any business at all anymore.....

[Guest Sieve]

Does he own more than 50% of corp 2?

If this is controlled group, corp 1 cannot file EZ for either plan (even if he & wife are the only participants). See Instructions.

Can't say whether or not he would be exempt from filing 5500 if there is no controlled group, because I don't know if all requirements are met.