Form 5500SF to Form 5500EZ

We have a potential client coming to us for help closing their solo 401(k) Plan. He filed a Form 5500SF in 2010 and then an EZ in 2011. Assets never rose above $20k and no further Form 5500s were filed since. It was my understanding that one a Form 5500SF was filed, they would need to file one every year afterwards even with assets under $250k. Therefore we would need to go back and file the missed returns and corrections. I contacted a colleague who differed in opinion that they could switch between Form 5500SF and EZ and would not be required to file if under $250k which would change things in closing his Plan.

1 hour ago, Pensions2020 said:

It was my understanding that one a Form 5500SF was filed, they would need to file one every year afterwards even with assets under $250k. Therefore we would need to go back and file the missed returns and corrections.

I do not have the same understanding.  However, it is likely that an explanation will be requested if the plan is in the system and future filings are not made.

It appears, that if a plan that is eligible to file an EZ, elected to file an SF, then if nothing is filed the next year, they would be delinquent for not filing. However, if in the second year, the plan switched and filed an EZ, then the plan in the second year became an EZ filer. And an EZ filer does not have to file if the assets (of all plans) are below 250K. It's always good to remember, as has been pointed out on this forum by others in the past, that although an EZ filer does not have to file if the assets are below 250k, however, the statute of limitations does not start if the firm was not filed.

Each year stands on its own.

18 hours ago, SSRRS said:

It appears, that if a plan that is eligible to file an EZ, elected to file an SF, then if nothing is filed the next year, they would be delinquent for not filing.

Huh? No.

A plan isn't eligible to file an EZ, it is a requirement.  As a workaround for electronic filing, an EZ filer can file a limited answer SF (which is technically still an EZ filing), but this option will go away next year when the EZ can be electronically filed.  Either way, it has nothing to do with whether a return is delinquent.

If it were me I would file the 2012 5500 late, pay the user fe, but mark it as final.  If its marked as a one-participant plan I think that should get you all cleaned up.  If it were my client I would do that for sure.  IF an IRS letter came, I would just say we never should have filed in the first place, we're exempt, etc.

On 8/31/2020 at 9:40 PM, Mike Preston said:

Each year stands on its own.

This.

You could've filed 10 years worth of EZ's with a balance of $40,000 then just stop.

However, be prepared for the letter from the IRS.  But, you just answer back:  I didn't file b/c I didn't have to.

The only EZ under $250,000 you must file is the Final one, if I'm not mistaken.

6 hours ago, BG5150 said:

This.

You could've filed 10 years worth of EZ's with a balance of $40,000 then just stop.

However, be prepared for the letter from the IRS.  But, you just answer back:  I didn't file b/c I didn't have to.

The only EZ under $250,000 you must file is the Final one, if I'm not mistaken.

You are not.

That works too, but under my method, you won;t get the letter in the first place.  Although, are you saying this is 5500-EZ eligible plan, that stopped filing 10 years ago?  I would let it lie if that is the case.