Filing a 5500-SF rather than a 5500-EZ

[Belgarath]

Suppose you have a 1-person plan with over 250k in assets, so subject to filing a 5500-EZ. Suppose a 5500-SF is filed instead. Is there a PENALTY for filing the SF? Are you considered to have not filed? I'm not 100% sure on this.

[Paul I]

Technically, there could be a penalty.  If you file the wrong form, it can be treated as if no form was filed.  The suggested course of action is to file the correct form ASAP to show the plan did file the correct form.  If the filing past its due date, then follow the late-filing procedures.

The 5500-SF instructions say:

"Plans required to file an annual return/report that are not eligible to file the Form 5500-SF must file a Form 5500, Annual Return/Report of Employee Benefit Plan, with all required schedules and attachments (Form 5500), or Form 5500-EZ, Annual Return of A One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan."

AND, elsewhere in the instructions:

"Do not file a Form 5500-SF for an employee benefit plan that is any of the following:  .... 9. A “one-participant plan.”

It is worth noting that in the relatively recent past, there have been many instances where the 5500-SF and 5500-EZ filings have been mixed up.  When the 5500-SF could be filed on EFAST2 and the 5500-EZ had to be filed on paper, some practitioners were filing one-person plans using the 5500-SF.  Then, the box was added on the 5500-SF to indicate that the filing was for a one-person plan so the plan's data would not be made available to the public. When the 5500-EZ was able to be filed using EFAST2, it seemed to have created a brighter line between the two forms, and in the first year when electronic filing was available plans that had used the 5500-SF in the prior year were told to use the 5500-EZ in that first year.

Adding to the overall confusion over the years is plans that do not file a 5500-EZ when the assets had been above $250,000 and then they dropped below this threshold.

When things got mixed up, some plans received penalty notices and some did not.  Among those receiving the notices, all were required to file the correct form.  Some were able to argue successfully that filing the wrong form proved the intent of the plan was to file timely and the plan should not be penalized for having a late filing.

Bottom line... file the correct form now and avoid anxiety of waiting to see if a letter from the IRS shows up in the mail.

[Belgarath]

23 minutes ago, Paul I said:

Bottom line... file the correct form now and avoid anxiety of waiting to see if a letter from the IRS shows up in the mail.

Thanks, and agreed. I was thinking more of a 2022 form which was already filed (timely) on the SF...I suppose a client could avail themselves of the IRS late submission penalty relief procedure, and file an EZ now.