401(k) deposited > 15 days after month end; Q 27e & 27f on Form

[Guest Kelly R]

Is anyone answering "yes" to questions 27e & 27f on Form 5500, attaching a Schedule, filing Form 5330, and paying the prohibited transaction excise tax for 401(k) monies deposited more than 15 business days after the month-end withheld?

[This message has been edited by Kelly R (edited 07-21-99).]

[Guest bswift]

kelley, i don't know about everyone else, but it is a pretty simple question and if the answer is yes, then yes it has to be. the question of whether you then file a 5330 is a good one. technically it really is required if the transfer of money is not made on time. i have treated these types of transactions as "use" transactions, meaning that the tax is calculated on the use of the money during the delinquent period and not the prinicpal amount of the transfer. hope any of this helps.

[Guest gcrechale]

we are answering yes to this question when the deposits are late and preparing the 5330s. the problem we have encountered is the excise tax is generally small, but the time required to calculate the tax is great and we have trouble billing our client for all the time. does anyone have a boiler plate program(or calculator) set up to compute these taxes that would help decrease the time required??? do you know where such a program could be purchased??

[Guest dlm]

We are answering this question yes, only if the client who is signing the form wants to answer yes. WE clearly tell them that the correct way to answer it is yes. However, some of them chose to answer it no.

If they agree to mark "yes", then we calculate the taxes due and prepare 5330.

We do not have a program that calculates the taxes due. We set up the formulas in Excel. You are correct, it is time consuming especially if there's several investment options and the Rates of return on the options are very different.

I think in general it's hard to collect all the fees for work done on 401k plans. Especially if your not selling investments to absorb some of the administration cost!

[Guest Luci]

I'm confused regarding the statements above regarding the complication of calculating the tax. Isn't is 15% without regard to how many days late you are. (I recognize that if you cross tax years, you repeat the tax.)

I'm filling out a Form 5330 now and intended to apply 15% to the amount of the late contribution but wondering now if I am oversimplifying the calculation.