late deferral contribution

Hoping for some help.

Client had a late deposit for the 12/23/2022 pay date.  The total deferral was $1,400

It was discovered, deposited and the lost earning were calculated and deposited into the plan in Feb 2023.

 

Since the payroll was 12/23/2022 , is it considered late for 2022?   Do we need to put on the 2022 5500 and complete the 5330 for 2022?

Could this be corrected with self-correction and no need to report?

Your help is appreciated.

 

You are self-correcting but you need to report.

It is reported on the 2022 Form 5500, and since it was outstanding (not yet funded) during part of 2023, reported on the 2023 Form 5500.

The 5330 can now be filed electronically although there is a threshold count of number of tax forms the filer submits that triggers when electronic filing is mandatory.  I believe the threshold is 250 for 2023.

The tax year and year of the late deposit information is reported on the form.

https://www.govinfo.gov/content/pkg/FR-2023-02-23/pdf/2023-03710.pdf

Thanks Paul!

I was going to suggest there was Schrödinger's prohibited transaction in play. 

As of 12/31, they are still within the 7-business-day safe harbor to make the deposit.  But once January comes with that 7th day, it then becomes a prohibited transaction back to the regularly-scheduled deposit date (since you don't count late earnings only back to the end of the safe harbor period).

The IRS does not want to process a 5330 for <$100, also since your timeframe from withholding to correction is less than 6 months you should deposit the excise tax monies as part of the lost earnings.  At most, keep a copy of the 5330s for illustrative purposes.

5 hours ago, Nate S said:

The IRS does not want to process a 5330 for <$100, also since your timeframe from withholding to correction is less than 6 months you should deposit the excise tax monies as part of the lost earnings.  At most, keep a copy of the 5330s for illustrative purposes.

If you could get them to publish this guidance, it would be appreciated.

And might a disqualified person prefer to file an excise tax return to start the statute-of-limitations period?

@Bill Presson @Peter Gulia

Previous discussion including cites and known guidance can be found here: