Incorporation of Sponsor

[thepensionmaven]

Client has been self employed and incorporated in 2014 with new corporate name and EIN.

Forms 5500-SF had been file under sole prop as sponsor with the corresponding EIN for 2014-2016.

Amending 2016 is no problem, how would 2014-2015 be handled?

2016 show new sponsor and EIN, enter old information in box 4 from original filing. 

2014-2015 to be done similarly?

I don't see why not, with DOL, but one never knows with IRS.

[Larry Starr]

You actually may not have to do anything, if you did it right when they incorporated.  You didn't tell us how you made the "conversion" from sole prop to corp with regard to the plan documents.

What happened in 2014?  Did the new corporation adopt the existing plan?  How did you make the plan change from sole prop to corporate?

The easiest way when this happens is to have the new corp adopt the existing plan (that's usually what we do).  The sole prop NEVER GOES AWAY until the person dies.  He may not have income, but he is still a sole prop.  That means, if the corp is an additional adopter of the plan, you can continue to use the sole prop as the sponsor. When we do the next required restatement, at that point we change the sponsor in the document to the corp and that is the year we would change the 5500 to reflect the change in sponsor and EIN.  We do treat it differently if it is a corp that went away since that does die an earlier death than the individual.

Now, let's assume that you actually adopted a replacement document for the plan executed by the corp and the sole prop is no longer a party to it.  While you should have changed the sponsor and tax ID on the 5500, no one is ever going to give you a problem if you just make the change with the 2017 form (which I assume has yet to be filed).  And if they ever audited it and found the error, they would say "oh, you corrected it in 2017, so we'll just leave it at that". There is no good reason for them to have you refile 5500s under the new number for those earlier years, so long as you did file the 5500.  This is the practical answer of how the process actually works in real life.

So.... don't worry; be happy!

[thepensionmaven]

Thanks, Larry, that is exactly what I did. 

Technically, then, the EIN for the sole proprietorship never goes away??

[Larry Starr]

9 hours ago, thepensionmaven said:

Thanks, Larry, that is exactly what I did. 

Technically, then, the EIN for the sole proprietorship never goes away??

Technically CORRECT.  If in five years he has some self employment income, he just files a Schedule C that year and uses the same old EIN.  This actually is my situation as I, from year to year, have self-employed income for teaching or doing webcasts and in those years my personal return has a Schedule C attached for that income. In other years, no income, no Schedule C, but I am still alive and the sole prop still exists.