IRS Form 5500 is an information only return that must be filled out by 401(k) administrators. Many small business owners are also de facto 401(k) administrators and may be required to fill out this form. I have been recommending that physicians use Individual 401(k)s instead of SEP-IRAs for a long time. That allows them to max out the account ($55K for 2018) at a lower income and doesn't mess up their Backdoor Roth IRA. However, if they are making substantial contributions to the 401(k), or have had it for a long time, they are likely going to have to fill out some version of the 5500 each year. For most of us, that's the 5500-EZ. I just filled mine out in literally 5 minutes. It's not a big deal and in my opinion not worth paying hundreds of dollars to a tax preparer to do. So in this post, I'm going to show you how to fill out IRS Form 5500-EZ for the typical physician using an individual 401(k). First, some helpful links:
- Here's where you find the form: IRS Form 5500-EZ
- Here are the IRS Instructions: 5500-EZ Instructions
- Here is a helpful tutorial from The Finance Buff. However, it's 6 years old and the form has had some changes. My tutorial today is based on the 2017 form.
Do You Have To File Form 5500?
The good news is you don't have to file this form at all if your individual 401(k) has less than $250K in it at the end of the year. If you're only putting a few thousand into the plan each year, it may be decades before you have to do this form. If you're maxing it out each year, it'll probably still be 4-5 years before you have to do it. If you are maxing it out for you and your spouse, however, you may have to start filing after just 3 years or so. We started our plan in 2013 and the first year we had to file the 5500-EZ was for tax year 2016.
Can You Use Form 5500-EZ?
5500-EZ is for a one-participant plan. That means, in the words of the IRS:
A retirement plan (that is, a defined benefit pension plan or a defined contribution profit-sharing or money purchase pension plan), other than an Employee Stock Ownership Plan (ESOP), which:
1. Covers only you (or you and your spouse) and you (or you and your spouse) own the entire business (which may be incorporated or unincorporated); or
2. Covers only one or more partners (or partners and their spouses) in a business partnership; and
3. Does not provide benefits for anyone except you (or you and your spouse) or one or more partners (or partners and their spouses).
As you can see, that means if it only covers you or your spouse, you get to use Form 5500-EZ, which must be filed on paper and sent to Ogden, UT.
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0020
When Does Form 5500-EZ Have To Be Filed?
According to the IRS:
Form 5500-EZ must be filed by the last day of the 7th calendar month after the end of the plan year that began in 2017 (not to exceed 12 months in length).
What does that mean? If you're on the calendar year like most, it means you need to get it in by July 31st of the next year. I make a habit of filling it out the same week Vanguard sends me their little 5500 packet, usually late March.
What Does The Form Look Like?
There are two pages. Here is the complete form for your reference:
How To Fill The Form Out
Let's take it section by section and fill out the form.
Part I
If you're on the calendar year and this isn't the first time you've done this form, then you can probably ignore all of Section I. If this is the first time, check box A1.
Part II
Section II is pretty easy. If this isn't your first year, pull out last year's form and you can probably mostly just copy it. Your plan has a name, be sure to use it. Vanguard sends me paperwork in March each year with the name of my plan. It's “The White Coat Investor, LLC Individual 401K Plan.” Since this is the first plan this business has ever had, it's three-digit number (1b) is 001. It first became effective 1/1/2013. Fill out the name, address, and the EIN of your business. (You do have one, they wouldn't have let you open an individual 401(k) without one.) The “business code” is used on other forms as well. For a business like WCI, it's 519100. The list starts on page 9 of the IRS instructions.
You can probably ignore lines 3 and 4.
Line 5 for us reads: 2, 2, 2, 2, 0. If your spouse isn't in the business, then yours probably reads 1, 1, 1, 1, 0. “Active participants” are basically those who are still working.
Part III
The form starts to get more interesting here. Your individual 401(k) provider probably sent you a form with the information needed to fill this section out. Vanguard sent me a ten-page form (don't be intimidated, most pages are blank or boilerplate), and page 5 looks like this:
In those ten pages, only four numbers are actually needed to fill out 5500-EZ. Two of those numbers are the assets in the plan on December 31, 2016 and on December 31, 2017, in our case, $293,701 and $471,720. (You can see those at the bottom of the page). Those go on line 6a column 1 and 2 respectively. 6b is zero for us (since we don't have any outstanding 401(k) loans), so 6c just equals 6a.
Line 7 lists this year's contributions. I can get the other two numbers I need from page 7 of what Vanguard sent me:
See those two numbers under the “contributions” section? That's what we're looking for. Line 7a is the employer contribution ($72,000 in our case) and Line 7b is the participant contribution ($36,000 in our case.) If you rolled an IRA into your plan like many docs trying to do Backdoor Roth IRAs, that would go on 7c.
Part IV
This section seems a little bit mysterious. You'll likely need to refer to your instructions to get this one right. It's helpful to look at both the Vanguard and the IRS instructions. The Vanguard instructions say:
Vanguard says enter codes “2E, 3D, and 2J” for individual 401(k)s. If you go to the IRS instructions, you'll see the following list:
Clearly, Vanguard is right about 2E as we have a profit-sharing component, about 3D as we have a pre-approved plan (the standard Vanguard one), and 2J as we have a 401(k) feature. As I scan the rest of the list, the only other one I see that applies to our plan is 3B, since we're self-employed, so I include that one with the three others.
Part V
Part V was very easy for us. Lines 9, 10, and 11 are all “No.” Sign the bottom, drop the mike, and walk off stage.
What do you think? Have you filled out 5500-EZ? Was it as easy as I make it out to be? Have you paid someone to do it for you? What did they charge? Do you have any questions on the form? Comment below!
Didn’t think there was such a thing as a spousal 401(k), but you mention an accelerated schedule if contributing max for yourself and your spouse until this form is required. Thanks for any clarification.
Your spouse has to work to have a 401(k), but not an IRA. Since my wife works in the business, she gets a 401(k) and we get to the point where we have to file a 5500-EZ sooner than we otherwise would.
Implying one 5500-EZ per business not per couple or individual, it seems.
Yes, its a form for the plan/business, not the people in the plan. It’s the business’s problem, not yours.
WCI,
Thank you for providing this detailed step by step summary of when and how to fill out Form 5500 for Individual 401-k plans. Also, thank you for providing your own personal 401-k investment information.
I would like to point out to your readers a few items:
To the best of my knowledge:
1) Vanguard only allows an Individual 401-k participant to invest in Investor mutual fund shares and not invest in its much lower cost Admiral mutual fund shares.
2) Vanguard does not allow Individual 401-k to be set up as brokerage accounts; and therefore, ETFs (with lower expense ratios) or individual stocks can not be purchased.
3) Vanguard SEP-IRA does permit investing in Admiral mutual fund shares as well as being set up as a brokerage account and thus being able to purchase ETFs and individual stocks.
So, it would probably be worthwhile for someone (you?) to do some serious number crunching to calculate the expected cost to a participant in a Vanguard 401-k versus investing in the same investments in a Vanguard SEP-IRA. Currently, the expense ratio for Investor shares in the 500 Index is 0.14% and in the Admiral shares 0.04% so, one could assume currently a 0.1% expense ratio difference. Seems minor; but, over a long period of time and with a large amount of money invested, this would be a significant cost to the individual.
Perhaps, Vanguard can be “encouraged” to change its current policy and allow for Admiral shares and for a brokerage account for its Individual 401-k.
Yes, investing in a SEP-IRA screws up making back door Roth IRA contributions; but, investing in the Vanguard SEP-IRA does offer some tangible financial benefits over the Vanguard 401-k……and does not require Form 5500 to be filed. ????
And finally, even though you have advocated strongly for “bonds” to be held in taxable accounts and “stocks” in retirement accounts, I did note that nearly 40% of your Individual 401-k is held in “bonds”. I am hoping thta you will be willing to elaborate on why you have chosen this investment strategy.
Thanks for the great good that your blog, podcasts, etc are providing!
Taxpro336
1. True
2. True
3. True
The benefit of a solo 401(k) is you can still do Backdoor Roth IRAs (and if you don’t have another 401(k), can max it out at a lower income.)
If you’re really focused on ERs, open your account at Fidelity, Schwab, or even eTrade and buy Vanguard ETFs. But remember that even $500K in an individual 401(k) using investor shares is only 0.10% * $500K = $500 a year in extra ER expenses. It has to be an awfully big 401(k) to justify giving up a Backdoor Roth IRA by using a SEP-IRA.
But sure I’d love for Vanguard to change.
I currently have bonds both in taxable and tax-protected accounts. It doesn’t matter much at these lower interest rates. As rates rise, the traditional teaching of bonds in tax-protected will become more and more true. There’s a lot of nuance behind the bonds in taxable argument and you really have to read it carefully.
The bonds in our individual 401(k) are TIPS, which are subject to the phantom tax issue in taxable and so a great holding for a tax protected account.
Thanks WCI! This was very helpful. Your step by step instructions helped me to complete the form with confidence. This is the first year that I have had to complete the form and fortunately I am using Vanguard as well. Before your post, it felt like I was the only one who ever had to complete a form 5500. It is not so intimidating now. Thanks again.
Glad to be of service. It’s not too bad, is it?
Thanks for the post. I had read your original article comparing solo 401k to SEP-IRA (https://www.whitecoatinvestor.com/sep-ira-vs-solo-401k/); however, in that article, at the bottom you point out, “Yet I have used a SEP-IRA several times and have never opened a Solo 401K.” It seemed you were inferring the majority of physicians could stick with a SEP-IRA if they weren’t planning on using a Backdoor Roth. Could you elaborate a bit on when you could stick with an SEP-IRA rather than solo 401k? You mentioned the six benefits in the article of 401k contribution, Roth, asset protection, Backdoor, loans, catch up. Thanks.
It’s an old article. I have since opened a solo 401(k). I don’t currently have a SEP-IRA. The one I had I converted to a Roth IRA to facilitate Backdoor Roth IRAs. Few physicians should be using a SEP-IRA, primarily those who can’t or don’t want to do a Backdoor Roth IRA for some reason I can’t fathom.
What about in this scenario: Employed (W-2) income with profit-sharing plan both into the 401(k). If I max out my personal contribution and the employer maxed out the employer portion, then any 1099 self-employed income can’t increase the 401(k) limit. It’s still my $18,500 personal and $36,500 employer. Correct? So my 1099 income can only increase my possible retirement limit above the 2018’s $55,000 limit with a SEP-IRA?
Have you read this post? You don’t seem to have a basic handle on the rules for multiple 401(k)s:
https://www.whitecoatinvestor.com/multiple-401k-rules/
Ah thanks for the link. I was caught up on the Rule #2 “unrelated” as well as the basics of “my accountant doesn’t believe you” haha. So much of the other accounting websites get this wrong. Thank you!
WCI, Thank you very much! This is very timely.
Question about the business code.
I’m a hospitalist, should I choose the business code Hospital (622000)?
Thanks!
You’re not a hospital, so I wouldn’t use that one. I think I’d use the “office of physician” code of 621111. You’re not going to get audited on that code.
Does anybody have any insight as to whether a 5500-EZ for an individual 401k is public information?
I seem to recall that it is.
That might be a reason for some not to pursue it.
See page 3 of the instructions:
Note (3). Information filed on Form 5500-EZ and Form
5500-SF is required to be made available to the public.
However, the information for a one-participant plan or a
foreign plan whether electronically filed with EFAST2
using a Form 5500-SF or filed on paper using a Form
5500-EZ will not be published on the Internet.
So yes, it’s public but not easily accessible. You could close it, roll it somewhere else, and start a new plan every time it got to 5500-EZ required size if you wanted to I suppose.
Thanks SO much for writing this! This is the first year I will have to do this, and I have been struggling over the nebulous codes. Thanks for your advice!
Most people don’t realize that they have to file a 5500EZ when assets exceed $250k. It is a straightforward form, but can be tough for some folks. The deadline is July 31st, so it is fast approaching. If you can’t make the deadline make sure to file for an extension using form 5558. The IRS late filing penalty is $25 per day, up to a maximum of $15,000.
We have created the SE401(k), with accounts for me and wife, who assists with the practice. Does anyone know if I need to pay W2 wages to her for SS/FICA purposes. My thought is I do. If I do, then I have to pay her FICA taxes (withheld) and the employer FICA taxes on a quarterly 941, which is then deducted as a business expense.
If not, then I can just pay the schedule C FICA as before, and skip the 941 filing. That is question 1.
Question 2: Do I have to pay the employer profit sharing contribution equally? or can I max out the younger spouse first, then the older me to allow more time for creative down the road in-plan Roth conversions? IE shifting more of the profits to the younger spouse who has a much later RMD date?
You don’t mention whether your practice is a sole proprietorship, partnership or S corporation and whether your wife owns any of it or not. My business (WCI, LLC) files as an S Corp, and has two owners, my wife and myself. So I do pay my wife (and myself) W-2 wages and we pay FICA taxes for both of us and fill out quarterly 941s and deduct it all as a business expense.
Sole proprietors fill out Schedule C and don’t fill out 941. They pay employees, withhold FICA, and submit W-2s and W-3s at year end. But they don’t do so for themselves.
Partnerships fill out a partnership return (1065). They pay employees, withhold FICA, and submit W-2s and W-3s at year end. But they don’t do so for themselves.
Thanks for the answer. I am a sole proprietorship (Schedule C) as a passthrough LLC. The only employee is my wife who does not own any of it. Until I figured out the spouse benefit of the SE 401k (also thanks to you!), I never gave it much thought as it all flowed through me. In the past when I have had employees in Sub-S corps, I’ve always gone the 941 route. Thanks for the insight. This is very helpful. You guys are too cool! What is more helpful, as we are late in the year, that it can all be reconciled at year end for the 4th quarter 1040ES.
I’m surprised that Schedule C filers with employees don’t need a 941. Otherwise, how does the IRS know how to credit the correct SS account for the spouse-employee? The sole proprietorship caps the SS component of FICA, so there will be incremental SS tax to be paid on the spousal deferred wage contribution, but that is a small price to pay for the other benefits, I think.
You wrote: “Part V was very easy for us. Lines 9, 10, and 11 are all ‘No.’”
Can you explain this a bit more? Specifically #11, “Is this a defined contribution plan subject to the minimum funding requirements of section 412 of the code?” What does that mean and how would one know if one had such a plan?
A solo 401(k) doesn’t have minimum funding requirements, but some retirement plans do like my partnership’s defined benefit/cash balance plan. That’s what section 412 is talking about. You can read more here:
https://www.irs.gov/pub/irs-drop/rr-00-20.pdf
Makes complete sense that a defined benefit plan would have a minimum funding requirement. But the question asks if it’s a defined contribution plan with such a requirement. Why would any defined contribution plan need a funding requirement? The funds in the account are the funds in the account.
Left me wondering if maybe it was referring to a plan for which the employer is responsible for making a contribution (e.g. 25% of employee’s earnings) and hasn’t made one yet. If it’s not that, I’ve no idea what it would be.
Thanks for this article WCI.
This will be my first time submitting the 5500 EZ. Since I’m not able to submit the form on Turbo Tax, can I just e-file my taxes and then mail in the 5500ez separately?
Thanks,
James
Yes. Think of them as two totally separate returns.
Hey WCI,
Got a question. My Solo 401k was fluctuating over 250k and below it towards the end of 2018. It ended below it at 244k on 12/31. I then had a 7k contribution for the 2018 tax year that hit the account on 1/1/2019. I won’t need to fill out the 5500-EZ because it was below 250k on the last day of the year, correct?
Thanks for all your hard work on the site. I’ve learned a lot.
Hmmm…..I guess you’re okay. But it’s not like 5500-EZ is particularly difficult to fill out if you’re worried. If your provider sends you the paperwork needed to fill out the 5500 EZ, then you probably should do it.
Ya, they haven’t sent me any paperwork yet. I only got something for my brokerage account. I’ll guess I’ll be on the look out. If they don’t send the form, I won’t file the paperwork.
The form isn’t bad at all. I actually filled it out today to the point where I had to look at my end of the year balances and I realized I wasn’t over 250 like i initially thought.
i cant see why you don’t just use the 5500-SF. As best i can tell, if you qualify to use the EZ form, you have the choice to use the SF if you want to. Its all online and is just as simple to fill out.
I suppose I could. I’d have to sign up for the E-FAST system though. Maybe I’ll try that next year. But it can’t possibly be any faster. I mean, this was literally a 2 minute chore this year.
Hi WCI, thanks for very helpful post. I have read carefully and have some questions in regards to final return filing this form.
I have following situation :
LLC (taxed as S corporation) made in 2018 and open a solo 401 K with TD Ameritrade to do Roth option, made contribution as employer profit sharing ( pretax ) and employee contribution (Roth).
This year 2019, closed the S corp(as switched to w2 job). So I filed final S corp tax for 2018,and dissolved LLC.
-Now since I closed the business I guess I have to close the Solo 401K and distribute money to IRA this year(in 2019)?
-which year 5500EZ I need to fill, 2018 or 2019 or both? since closing account. and whats the deadline for filing that?
Thanks so much for your great work.
Pulmdoc
I don’t think you have to close it for about a year after the business closes. And if you wanted to keep it open, why not keep the business open even if it isn’t making money so you can keep the 401(k) even if you can’t contribute to it.
This year you need to file a 5500EZ for 2018. I think you’ll have to do one for 2019 too, but not until next year.
Alternatively, you can close the business and 401(k) and roll it into your new employer’s 401(k).
But I’d probably just keep the business open in case you do any more self employed work.
Thanks so much for your comments.
Can I keep the 401k even if I have already close the LLC S Corp with final corporate tax return? (I am planning to do this year some locums under my SSN to prevent double taxation on SE tax as S Corp)
Regarding 5500ez, Just to make sure, i get it right, I need to file the 2018 form? Even total was way less than 250k. Is it beacause I am closing it now?
Thanks so much again!
No, you’ll have to close it eventually, but can open a new one for your sole proprietorship and roll it in there. No biggie.
Oh, you don’t have > $250K? Then all you have to file is your final 5500EZ. So if you’re closing the plan in calendar year 2019, then you need to file a 2019 5500-EZ next year. From the instructions:
year for a one-participant plan if the total of the plan’s
assets and the assets of all other one-participant plans
maintained by the employer at the end of the 2018 plan
year does not exceed $250,000, unless 2018 is the final
plan year of the plan.
hello
I am filing the 5500 EZ form assets for solo 401k <250K because I plan to terminate the plan and roll into over into an IRA traditional plan (where I roll over early this year one employer sponsored 401k plans earlier and one thrift savings plans <50k with total between all plans into that IRA plan <250k), do I need to mention that in section 7c the amount rolled from the other plans since I am just filling this form out to roll over the solo 401k to the IRA (traditional not Roth). Plan is at Vanguard.
The only reason I am filing a 5500 EZ is because I am terminating the 401k.
Thank you
I don’t see why you would have to mention OTHER plans rolled into A SEPARATE IRA. The 5500 EZ is all about what’s going on in that 401(k) and that’s it. Before you do these rollovers though, be sure to read this post:
https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/
Hello
Thank you
Finally i plan to end self employment in may or June this year can I terminate 401k a few weeks before I end self employment
That wouldn’t be typical, but I think you technically could. Why do you want to?
Hi
I work for a locums company my assignment and my residence will end on May 31, 2019.
I will be moving to a new state. I have finished contributions for the year and will be in an employed position in June 2019 with a W2.
I have finished contributions already.
Solo i401k.
Will be at a new address.
I am still earning $ until the end of May
I want to turn in my i401k termination to Vanguard 2.5 weeks early to convert i401k to ira (will do ira to roth ira when I move to tax free state)
I want to mail out my ez5500 at the exact point I end the assignment.
My wife had an ex-employer 401k. I had a 403b. Both were pretty substantial. When I went to private practice, we talked to a finance guy who really pushed both my wife and I to roll them over into IRAs. My wife, the HR expert absolutely refused. It was a good thing. We had zero balances in IRAs and pretty big balances in 401k accts. We also by then were well above the Roth IRA caps. The finance guy had no clue about the Roth backdoor. Had I rolled, that door would have been forever shut or at least taxed to near uselessness.
Post retirement I picked up a couple of locums gigs and created a 401k-SE account. When I looked into full retirement and what to do with the SE-401k (etrade) we decided not to rollover any of the 401k’s to IRAs. In our former state, there is no protection from creditors, plaintiffs, ex-spouses etc. in IRAs, but they can’t touch the 401k money. Not that it is a problem, but it gives me peace of mind.
Another reason I left things where they are is that a I do a few physicals from time to time and that money goes straight into the 401k. If I need it, I can withdraw it (over 55) and just pay tax when I need it on the 1099R distribution. When I set my 401k up I also included in it a loan provision, and an in-plan 401k-Roth sub account where in lean years (which I hope are coming) I can do a phased rollover from the tax deferred 401k account to the Roth 401k , tax preferred, sub account.
VG may be one of the ones I discarded due to the inability to have a Roth sub acct. But you could roll over to another that a.) will accept rollovers and b.) does permit both Roth and regular 401k subaccounts.
So, I decided to just leave it where it is. The 5500s don’t seem to be a significant added workload.
The final 5500 (I’m new at this), needs to have the final balances in the account, so you might need to check and make sure that you don’t have cap gains and dividends coming with an ex-date before and payable date after you close the account, unless you are able to transfer all property including any reinvestment instructions to your new account.
Why are you doing this? You have six months to close the i401(k) and convert it to a Roth IRA (if you even want to). What’s the big rush? Are you afraid the market will go way up and the Roth conversion will then cost more or something?
Absolutely agree with WCI.
I have solo 401 from last year locums job(s crop structure), I stopped locums dec last year.
-What’s the deadline to close solo 401k…6months/1 year
-when I need to file ez 5500, this year after closing or can to next year?
-does bank provide 1099R or my accountant will do it?
TIA
You don’t have to close it. Why not keep it? Maybe you do some locums this year or next or whatever.
But if you close it this year, I believe your final 5500-EZ gets filed by the 7th month of 2020. More info here:
https://www.irs.gov/pub/irs-pdf/i5500ez.pdf
I can’t locums anymore due to new contract:(. ..so have to close it. T make it complicated I have already done the backdoor Roth for this year to can’t open and rollover to a traditional IRA. So plan I to roll into employer sponsored 401 which doesn’t have good investments options unfortunately.
Also irs website say need to file 1099R upon closing..any information on that? Do I need file it or bank will do it?
thanks!
I still don’t see why you have to close the business and the 401(k). The contract just says you can’t go work locums, not that the business must fold, right?
1099Rs are usually filed by the custodian in my experience.
Shut down S Corp to avoid complicated tax filing as no income on that anymore so no reason to keep it open.
I see.
For conversion to a ROTH IRA, if you are sued even though you have malpractice would a 401k be safer or a Roth IRA or would they offer the same protection
Thanks
Depends on the state but in some states a 401(k) does offer significantly more protection than an IRA.
That said, the risk of being sued above policy limits and not having it reduced on appeal is very, very small.
I think it depends on the state law for IRAs (Roth or trad). They are not covered by ERISA. 401(k) plans are considered “qualified retirement plans” and are protected by ERISA. There are some rules to be followed which include regular written information. Accounts for participants and accumulation of benefits, allow employees to participate, create a fiduciary by the plan administrator, and have a provision for providing benefits at retirement, termination of the plan or employment, and a prohibition on involuntary transfer (anti-alienation clause). Basically what most plan documents say.
The anti-alienation clause prohibits the employee (you) from freely giving, selling, transferring your rights and those benefits cannot be taken away. That is the protection that 401k’s offer at the federal level and what makes them judgement creditor proof and why you have to fill out the spousal stuff. (qualified domestic relation orders). The IRS (of course) can grab it. But the fingers that can get it I think are pretty limited. The distributions you take are not protected, but it could be a long wait for a judgement creditor.
IRAs do not have this clause. The protections there are a function of state law. Roths, traditionals, SEP and SIMPLEs are in this class, and my 403b university plan is too which surprised me. In my state my IRAs both Roth and regular are completely protected. In my former state, the first 69k is protected, but not the rest. The states that don’t protect much are the usual suspects.
I spoke to Schwab today, where I hold my i401k, and was told I needed a separate EIN for my i401k and should not use my business EIN when filling out line 2b. Your thoughts? Also, I got two different answers about how to fill out line 3a, when I ‘ve spoken to Schwab before- first answer: I am the plan administrator, Schwab is the custodian of the account; today’s answer, Schwab is the plan administrator. Your thoughts?
Thanks so much!
No, the business that owns the 401(k) has an EIN. That’s the one the 401(k) should use. It shouldn’t be a separate EIN.
Schwab is custodian. You are administrator.
Thanks very much!
Years ago, my financial advisor opened the solo 401(k) for me using my SS# at Oppenheimer Funds. I didn’t know much about retirement account and still don’t, so I keep depending on her. I have to file Form 5500 for the first time and my financial advisor is recommending me hire a third-party administrator. I just found your book and website, and I want to do an overhaul of my retirement account and make it more simple to understand than my managed acount.
So now, they are suggesting I apply for EIN and TrustID number. Is this something I can do on my own? How about rolling it over to another financial institution?
You probably already have an EIN. Not sure what TrustID is. But yes, you can certainly get an EIN on you rown. It takes 30 seconds. Yes, you can open one elsewhere (etrade, Vanguard etc) and roll it over.
I just opened a solo 401k at TD Ameritrade. Like the previous comment, I did so using my own SS# and not an EIN. Having seen the 5500ez form it is apparent that at some point I will need an EIN. Is there any reason to get it before I have to file a 5500ez (probably many years down the road)?
I’m surprised TDA let you open it without an EIN. Neither of the two places I’ve opened an individual 401(k) at would have allowed me to use a SSN. I’d correct ASAP.
Sorry if I missed it, but it wasn’t clear to me – is the filing the 5500-EZ is due by July of the calendar year AFTER the plan balance crosses $250k in assets? My spouse’s Solo 401k is around $200k this year, and we expect to cross $250k in 2020 unless the market tanks. So our first 5500-EZ will be due by July of 2021?
Also, is anyone willing to share experience with ETrade’s Solo 401k? So far we have not received any of the “5500EZ assist” forms that WCI posted from Vanguard. Do they start sending these once the balance exceeds $250k?
I think it’s based on the year end value, not the year beginning value. So if you hit $250K during 2020, you’ll need to have a 5500-EZ filled out by mid year 2021.
I don’t know the answer to your second question. Why not call eTrade and ask and post the answer here?
Thanks for the clarification. I think the tax year on the top of the form threw me off. If/when we file in calendar year 2021, it will be a tax year 2020 form with the big “2020” at the top.
I will try calling Etrade and post any useful information here as you suggest. It’s not quite so simple though- I’m not an authorized user on the account, so for security reasons there are big limits on what they can share over the phone. Calling together will work, but that requires both my spouse and me to be free during business hours with nothing better to do. That’s been rare as of late.
We use eTrade 401k/Roth401k solo.
Etrade did not give us 5500 paperwork or information directly. What they do in early-mid January is enter a transaction into their journal which is dated the day they enter it and carries the description $$$$$$$$$.$$ Fair Market Value – 12/31/yyyy.
In our case, there is a separate journal entry for the Roth401k and the pre-tax 401k solos, as there is for the spouse. That transaction entry gives you the YE balance for the 5500. You can also select the contribution components from the transaction register to get those.
I keep meticulous records on a spreadsheet which has grown too massive of fund shares and prices and have written some code to go to the internet and fetch the daily fund prices and enter them in the spread sheet. It’s messy and was a quick/dirty replacement for finance.yahoo.com when that went away. These eTrade values matched my records to the cent.
Thanks. Besides year-end balances, what about all the codes? Do you just use your own judgment and/or what Vanguard recommends from above?
Codes: I used the ones that made sense from my old employer’s 401k/Roth401k. I think one didn’t fit, but I’m not sure which one. You could use VG’s and read the instructions for the codes to be sure. I just picked the ones from the old 401k that fit, then read the instructions to see if I needed any others.
I use :
2E – Profit sharing
2J – Qualified 401k feature — cash or deferred compensation feature part of a defined contribution plan
3B – (I added this as it wasn’t in the big partnership plan) Solo 401k covering self-employed individuals
3D – Covered by favorable IRS opinion letter preapproved plan (eTrade is one of these and you should have seen the favorable letter or its on their web site).
The industry code for me is slightly different as I have an R&D firm as well as a medical practice I can choose 62111 which is where the revenue comes from as a medical practice office (non-mental health) which is probably what most physicians would use. My R&D component (which eats up all the money) is 541700 Scientific Research and Development Services. I called the IRS and the agent said I could use either code.
Thanks, super helpful!
etrade’s reply to my query about the transaction confirms what I thought and covers why they don’t do more:
xxxxx
e*Trade:
Thank you for your message regarding your adjustment transaction.
Upon review of your account I was able to check the adjustment on 01/16/2020. That was a note in transactions simply for bookkeeping. This figure for your FMV on 12/31/2019 can also be located in your December statement. Both the adjustment and the statement reflect the FMV as $xxx on 12/31/2019. The transaction note of the adjustment did not change any information in your account, and is simply used as a helpful note for your convenience.
Unfortunately, we are not licensed to provide tax advice or to provide instructions in filing your taxes. For all questions regarding how to fill out and submit the 5500 form, you would need to speak to a licensed tax advisor or CPA, as they should be able to answer your question regarding filing requirements.
We are committed to helping you make the most of your finances. If you have questions, please call us anytime at 1-800-ETRADE-1 (1-800-387-2331). From outside the U.S. and Canada, call 1-678-624-6210. We are available 24 hours a day, 7 days a week.
As always, it is our privilege to serve you!
Sincerely,
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To get to the etrade transactions after you log in, you can click on transactions at the main page, then go to the reports tab and select transactions by type. The first lines are contributions, followed by dividends, then there is a line called Adjustment which gives the YE balances..
I didn’t find it at first and there may be a better way to find it, but if there is, I’ve forgotten.
I use Etrade’s 401k. They don’t issue any specific documents for 5500EZ, but what they do do is enter a transaction record which they call an “Adjustment” in the transaction reports in mid January and with a date of 12/31/yyyy which details the year end closing balance.
I keep pretty meticulous records of the balances and record them with some software that fetches the funds and stock prices and records them in my database and on a spread sheet. I wrote some code to go fetch the market prices on the funds and enter them in the spreadsheet to automate the updates, so the spreadsheet is 100% current.
The etrade “adjustment” transactions matched to the cent what I got independently from the markets and my records as of the close on December 31, for both my pre-tax and Roth 401k.
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