Everything You Need to Know About IRS Form 5500
Many companies with more than one employee (or owner) are required to file an IRS Form 5500 with the Department of Labor if they want to make sure they’re not paying their employees too much. But what exactly is an IRS Form 5500, and how do you fill it out? This guide will tell you everything you need to know about IRS Form 5500 and how to fill it out correctly, so you can be sure your company stays in compliance with federal tax law.
Why Does the IRS Want My Nonprofit’s Information?
The IRS relies on the data from Form 5500 to measure compliance with its rules.
All nonprofit organizations filing for tax-exempt status are required to file a form as part of the application process. If your organization does not have an annual gross income over $250,000 you will file a 501(c)(3) form. Organizations with incomes over this amount will file one of the other three forms; most organizations will use 501(c)(4) or 501(c)(6). For example, if you receive donations and bequests, but do not have any payroll expenses (e.g., as may be true for many religious organizations), then you would file either a Schedule A or D in accordance with what type of contributions you receive.
Why Do I Have to File a Form 5500?
You are required to file a Form 5500 when you have either one of two situations: you’re in an industry where annual receipts exceed $1,000,000 and more than 200 employees, or where the plan is funded fully by assets other than safe harbor funds. This form requires information on the retirement plan’s total assets and current liabilities at the end of the year. It also includes details about any defined benefit plans (DBPs) or any non-fiduciary administrative costs that were reimbursed by the retirement plan.
An excerpt from this form reads as follows: To assist with determining whether a trust meets one of these requirements and/or to determine what types of reports must be filed, all questions below refer only to qualified plans that terminate in 2016.
When Do I Need to File?
IRS Form 5500 is typically filed by the end of the calendar year. However, you may be required to file this form earlier if your organization has: 1) more than one type of retirement plan; 2) assets in excess of $250,000 or sponsors more than 100 participants; 3) partners that are not self-employed; 4) is a section 501(c)(3); or 5) covers employees who are nonresident aliens. Who Needs to File?: If any of these apply to your organization, then you need to fill out and submit IRS Form 5500.
What if I Can’t Afford an Accountant
Don’t be afraid of the responsibility. It’s just like filling out your taxes and can be done with some help from a quick Google search or even just asking an accountant for advice about what information should go where. Another great place to get all the latest updates is by following the Employee Benefits Security Administration on Facebook. They are constantly providing tips and reminders about what needs to be done in regard to paperwork and other forms. There are also many different tax preparation services that offer this service as well if you don’t have time to do it yourself. But don’t worry! The process doesn’t have to be difficult at all!
Where Do I Get Help Filling out the Form?
Filling out an IRS form doesn’t have to be a long, daunting process. First off, you can save yourself some time by checking your existing retirement account’s website for the forms you need. If you don’t see them there, it’s probably best if you talk with a tax professional or reach out to your plan administrator for help. And always check with the company that holds your retirement account for any other paperwork that may need to be submitted – especially if you’re required to file annual disclosures on IRS form 5500.
What Are Some Common Issues Found in Your Review of This Year’s filings?
Each year, the Affordable Care Act requires sponsors of retirement plans to file a return with the U.S. Department of Labor (DOL) and/or the Internal Revenue Service (IRS). We know that each filing can seem daunting and complex, but we want to take a moment to point out some common issues on IRS form 5500 filings for 2016. These will not be exhaustive, but we hope they will help you in your review of this year’s filings.
Quick Tips From Our CPAs on Avoiding Common Mistakes
1. Understand your organization’s type. If you have questions, contact the IRS.
2. Schedule your filing by making a contribution estimate and then adjust as necessary by filing an amended return using Form 5500-X.
3. Keep in mind that an employer with 250 or more employees must file at the end of March each year, while employers with fewer than 250 employees must file at the end of May (or later if required).
4. Determine which schedules are applicable to your company by looking for the schedule numbers in Box 12 and Column A on your most recent Form 990 or 990-EZ.
Final Thoughts on Getting this done right!
The form is relatively easy to fill out, and you should have your CPA take a look before submitting it. Getting your accountant involved early in the process could save time and headaches later on. After you’ve answered all of the questions, sign, and date at the bottom of the form (all capital letters please!), then mail it off with a copy of your latest financial statement enclosed. Remember, even if you hire someone else to complete this form for you, YOU are ultimately responsible for any errors on the final report. If you’re unsure about something, ask an expert!