By Dr. Jim Dahle, WCI Founder
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 they 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 ($69,000 for 2024) 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 likely need to fill out some version of the 5500 each year. For most of us, that's the 5500-EZ.
It's taken me literally just five minutes to fill out. It's not a big deal, and it's not worth paying hundreds of dollars to a tax preparer to do. 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 a few years old. My tutorial today is based on the 2023 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 $250,000 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 three 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.
More information here:
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. If you file it on paper, you send it to:
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0020
You can also file your Form 5500-EZ electronically by using the EFAST2 website.
If you have other employees, you are stuck using the 5500-SF (short-form) or, even worse, the real form 5500—both of which are longer, more complicated, and filed electronically.
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 2023 (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 31 of the next year. That means for tax year 2023, it's due July 31, 2024. I make a habit of filling it out the same week Vanguard sends me its little 5500 packet, usually in late March.
What's the Penalty for Not Filing Form 5500-EZ?
It's a massive penalty, and ignorance of having to fill out the form is no excuse. If you haven't filled Form 5500-EZ and you've had more than $250,000 in your solo 401(k), the penalty is $250 per day up to $150,000 for every late 5500-EZ, plus interest.
Luckily, there's a remedy. If you realize you're delinquent in filling out Form 5500-EZ, you can submit Form 14704. That will drop your penalty to $500 per year for every year that you didn't send in 5500-EZ, and it maxes out after three years. Even if you have missed 20 years of 5500-EZs that you were supposed to complete, you only have to pay $1,500 max if you fill out Form 14704.
Here's what WCI guest writer Steffan Weiner wrote in late 2022:
“If you believe you do have a reasonable cause for the late 5500-EZ filing, the IRS offers guidance to avoid penalties. Your reason must show that ‘you used all ordinary business care and prudence to meet your Federal tax obligations.' Example reasons include fire, casualty, natural disaster, lack of access to records, death, severe illness, and incapacitation. Typically, you will be required to provide supporting documentation and to establish facts substantiating your claim of reasonable cause.
The IRS instructions to apply for a reasonable cause can be found here: Penalty Relief Due to Reasonable Cause
If you make a request to waive the penalty due to a reasonable cause and that request is denied, you are no longer eligible to use form 14704. Being that the worst scenario payout using Form 14704 is $1,500 and late 5500-EZs can result in hundreds of thousands of dollars worth of penalties, you should scrutinize this option carefully.”
More information here:
The 1 (Weird) Tax Trick the IRS Hates
3 Big Tax Deductions for Doctors
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 A(1).
Part II
Section II is pretty easy. If this isn't your first year, pull out last year's form and you can probably just copy most of 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, its three-digit number (1b) is 001. It first became effective January 1, 2013. Fill out the name, address, and the EIN of your business. (You do have one, by the way; you couldn't have opened an individual 401(k) without an EIN.) 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 out this section. Here's one from years past when Vanguard sent me a 10-page form (don't be intimidated, most pages are blank or boilerplate). Page 5 looked like this:
In those 10 pages, only four numbers were actually needed to fill out 5500-EZ. Two of those numbers were the assets in the plan on December 31, 2016, and on December 31, 2017; in our case, that was $293,701 and $471,720. (You can see those at the bottom of the page). Those go on line 6a columns 1 and 2, respectively. 6b was zero for us (since we didn't have any outstanding 401(k) loans), so 6c just equals 6a.
Line 7 listed that year's contributions. I got the other two numbers I needed 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 are trying to do with 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 said:
Vanguard said 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 scanned the rest of the list, the only other one I saw that applied to our plan was 3B since we're self-employed. I included that one with the three others.
Part V
Part V was very easy for us. Lines 9, 10, and 11 are all “No.” In 2023, the IRS added a new requirement for question No. 12 that reads, “If the plan sponsor is an adopter of a pre-approved plan that received a favorable IRS Opinion Letter, enter the date of the Opinion Letter and the Opinion Letter serial number.” Depending on what brokerage you use, the IRS has a list of all those dates and serial numbers.
Here's what that looks like.
Then, you sign the bottom, drop the mic, and walk off stage.
What do you think? Have you filled out 5500-EZ? Was it as easy as I made it out to be? Have you paid someone to do it for you? What did they charge? Do you have any questions about the form?
[This updated post was originally published in 2018.]
I have had this very helpful article open for weeks (months?) to remind me to file as it is my first time. I just downloaded my Vanguard forms, found the relevant information, fired up the IRS links, and… Oh wait, only $247,900. Whew, done for another year. (Did the account go over 250k in the first week of Jan I wonder?)
What luck! Congrats on being able to put it off another year.
oh man, I went through all the process only to find out the ending balance at 2024 was $245,000 even though the fund went above 250k during December and immediately after in Jan.
Bummer. Sorry to hear that.
As long as I have over 250K in my solo 401K account annually, I will be required to fill out a form 5500 EZ every year, correct?
Yes.
I’ve never commented on your blog before. I just want to thank you for this article; it was the only useful one I found after spending the last few hours searching the internet.
This month (July 2024) Vanguard sold off their self-employed (solo) 401k division to Ascensus. While researching the pros and cons of going to Ascensus vs. opting out and going with someone like Fidelity instead, I came across an article on Fidelity briefly mentioning the IRS 5500-EZ form requirements.
I was blown away. I never even realized this was a thing. I am guessing I was informed of it when I first signed up for my plan many years ago, but at that time, I probably thought that $250k was an unrealistic amount of money.
It just so happens I hit the threshold last year in 2023 and am required to file by the end of the month, just barely making the deadline by a wild coincidence. I never received any kind of notice from Vanguard last year or this year. I still can’t believe how steep the penalty is and why there don’t seem to be more safeguards in place to make sure it’s more well known.
I called Vanguard today, and apparently, they do send it out in March, and they’re not sure why I did not receive it. I have a business mailbox at the post office, so it’s not like I would have missed it among my personal mail.
I called my CPA, and he surprisingly didn’t know much about it and told me Vanguard would file that automatically on my behalf and that it’s nothing for me to worry about—he had never filled one out for his clients. Perhaps it’s time to find a new CPA.
Your website is fantastic; I’ve come across it over the years, but thank you for putting together the best straightforward post on how to actually fill out the damn form.
The added line fits well after explaining the lack of notice from Vanguard, emphasizing the surprising penalty and lack of awareness.
That’s weird. Vanguard sent me a letter every year talking about 5500-EZ when I had a Vanguard solo 401(k). Maybe it’s because this would have been your first year filing and somehow it didn’t happen with the transition to Ascensus.
The link to the IRS’s list of pre-approved plans is only for defined benefit plans. Here is the link to defined contribution plans:
https://www.irs.gov/pub/irs-tege/ppa-listdc3.pdf
Line 6a column 2 – should this include the contribution receivable? Meaning the employer contribution made in 2024 for the 2023 plan year. I know 7a should include it, but wondering if 6a column 2 should also – or if it should be the amount straight off the 12/31 statement. Thank you!
I would guess not. But let’s check the instructions:
Line 6a. “Total plan assets” include rollovers and transfers
received from other plans, unrealized gains and losses such
as appreciation/depreciation in assets. It also includes specific
assets held by the plan at any time during the plan year (for
example, partnership/joint venture interests, employer real
property, real estate (other than employer real property),
employer securities, loans (participant and non-participant loans),
and tangible personal property).
Enter the total amount of plan assets at the beginning of the
plan year in column (1). Do not include contributions designated
for the 2023 plan year in column (1). Enter the total amount of
plan assets at the end of the plan year in column (2).
Based on “Do not include contributions designated
for the 2023 plan year in column (1)”
now I think my initial impulse is wrong, that contributions for that year are included in column 2. But honestly, I’m not sure anyone cares too much. The requirement is to file the form as best you can. The big penalties are for not filing it, not making an innocent error on it.
Really helpful and informative post. Thank you! My question is do we need to fill out the 5500 EZ if we have a small individual 401k but it was transitioned from Vanguard to Ascensus. Technically, the vanguard account could be considered “closed” and so even if one only had a few thousand bucks in it currently, this may constituted needing to file the form.
In addition could you recommend some resources for basic tax information for someone that has never before this head had an individual 401k.
If you’re closing it or it has more than $250K in it then yes, you have to file. Better to err on the side of filing this informational return. The penalty isn’t even for screwing it up, it’s for not filing it at all.
I’m not sure why it still has money in it though. That sounds screwy.
My mistake, the question did not come out clearly. Here is a more clear timeline:
Earlier this year started making some 1099 income for side gig, opened a Vanguard individual/solo 401k iun early 2024. Had a few thousand bucks in it (maybe 5-10K, much less than the 250K limit you mention). This was transitioned to Ascensus when vanguard closed their solo 401k plan administration. The vanguard account is completely closed and I only have my one solo 401k account through ascensus. Therefore, I did not have either the vanguard or ascensus account for more than a year total. Not sure if the vanguard to ascensus transition counts as a “closed account” that would trigger the need to file a 5500 EZ.
I’m not 100% sure. I’d guess yes you do need to do a 5500 EZ though as I suspect it’s a new solo 401(k), not the same one.
I accidentally never filed this form, from 2020-2023. I looked into 3rd party administrators who wanted$1000-1200 per year so 4800$ to do 1 hour of work. I was careful and spent 2 hours and watched another video but easy to do. Don’t hire anyone to do it
Did you get nailed with penalties?
In Line 12, I forgot to mention the date and serial number, that the plan sponsor is an adopter of a pre-approved plan that received a favorable IRS opinion letter. Would you recommend to amend/correct form 5500 EZ from 2023 and add the missing information, or not to worry about it? I will definitely mention it this year for 2024.
Thank you for your answer.
The big penalty is for not filing this form, not filing it wrong. I’m not sure I’d bother doing little corrections on it.
I will make an amendment for my 2023 filling. Better be safe than sorry!
Thanks, much appreciated!
Just adding a 2025 comment here to this helpful and frequently-referenced post and site. For anyone using the 3D code, the EFAST will now throw an error (just introduced this year) if you don’t list the IRS opinion letter and date it that asks for in Line 12.
Many providers list the necessary info in their plan docs. Other readers have already posted the IRS PDF link here on this thread too (though many providers have multiple letters listed, so it’s not clear which to use – probably safest to refer back to your provider’s plan docs).
In my case, I was with Vanguard when they sold to Ascensus. I was able to look back at some of the first emails I got from Ascensus with plan docs, and the “Ascensus IRS Approval Letter” was one of the attachments.
I am filing this for the first time as assets went above threshold in 2024. For 1c “Date plan first became effective” should I use the date I opened account with Vanguard, or when it switched to Ascensus? Does it matter?
Thanks for the helpful post!
Is your Ascensus plan the same as the Vanguard plan, or a new plan? I don’t know but that’s what you need to find out to answer this question. Try reading the comments on this post:
https://www.whitecoatinvestor.com/ascensus-buys-vanguard-small-business-division/
The account was automatically migrated to Ascensus in 2024 and I when I called Ascensus they said it is the same plan and to use the date it was started at Vanguard. They pointed me to the “date of hire” field for the employee (me).
Thank you!
I think the date the Plan first became effective is the original date you started the plan and first executed the Adoption agreements. I have moved my plan from Etrade and its plan prototype letter to an independent plan using the Ascensus Prototype Plan. Ascensus is the holder of my IRS prototype plan and is not the custodian as Etrade was. The date the plan was established was the date I originally established it with Etrade. My plan was a continuation of the original plan but with a new custodian/trustee. The date of the plan, according to Ascensus was the original establishment date, which in my case was 1/1/2017, I left Etrade isn 2020, with a restatement of the plan. The Ascensus Adoption agreement was signed in in 2020. The inception date of the plan was the original 1/1/2016, not the date the plan was restated to a new IRS prototype letter or a Restatement Adoption Letter. The way Ascensus works, at least with my independent plan, is that each year of the 3 year IRS revision cycle that there are significant changes requiring restatement to meet changing rules, you will repeat this process. At Etrade, in the final year of the cycle, before Etrade acknowledged that I had transferred my assets out of their custody, they sent new documents which were the same that Ascensus sent me in 2021. I used the original inception date. The assets moved from my former employer/group plan were rolled over into the new accounts covered by the Ascensus provided Plan and IRS prototype letter. The assets themselves are held in segregated accounts at Fidelity, Vanguard and Schwab. The LLC EIN is used for the Plan.
First time filer! Re: question 12. I noticed that Vanguard and Fidelity are not listed under the IRS codes for Pre-approved plans. Should I just leave question 12 blank? (Fidelity Solo 401K)
Sure.
Hi, this is a very helpful post. Thank you very much for all that you do in helping people. I have a question about the $250k threshold.
If I have a solo 401K with $200k and a Roth solo 401k with $60k, do I…
A) File two 5500EZ forms, one for each plan
B) File one 5500EZ form for both plans combined
or C) Don’t need to file a form 5500EZ yet as neither are up to $250k yet
Thank you
B. It’s all one plan, just two subaccounts.
The “IRS has a list” link takes you to the IRS list of Pre Approved Plans Defined Benefits serial numbers and dates. Is this also the list of solo 401K plan letters and serial numbers? I ask because my Schwab solo 401K opinion letter has a different serial number and date than the list in the link.
Not sure why your number is different. It’s been a while since this post was written and maybe a while since that list was made. Maybe check with Schwab as to why the numbers are different.
I called Schwab retirement services, the list attached to this link is for defined benefit plans, not solo 401 K plans (maybe they changed the IRS link). So the serial number and date for the Schwab solo 401K are different than the ones in the link (FWIW, it’s also different than the ones provided on the plan documents on the Schwab website). Not a big deal, obviously someone completing the 5500EZ should call Schwab or their broker to double check.
Thank you for sharing the research you did. I guess there’s no link for 401(k)s huh?
I believe this is the current and correct link. It lists 3 different Schwab serial numbers and dates and the non-standardized one corresponds with the serial number and date on the origination letter in the Schwab individual 401K documents, so I believe this is accurate.
https://www.irs.gov/pub/irs-tege/dc-ppa-listdc3.pdf
Thank you!
I haven’t found a 401K link yet but if I do I’ll post it here. The Schwab rep said origination letters are occasionally updated and resubmitted so dates and serial numbers may change. The origination letter on the Schwab website is old and out of date according to the rep, so she gave me the updated info. I guess it’s not that big of a deal if they haven’t even bothered to update the origination letter on their website.
My plan is different since I have a “checkbook” 401k arrangement, directly through Asensus who provides most of the IRS letters for the brokerage houses as well as individuals. The Plan documents you signed when you set up the 401(k) Plan will have this somewhere.
I’m not sure if they are in a standard location, but mine was on the very last pages of the Basic Plan Document, the 170 or so page missive the IRS requires. These were the last three pages of the document after the Prototype plan document page, You can find this letter by searching the PDF of the BPD for the IRS catalog number or Letter number.
For mine these numbers are 6186 (letter number) and 72434.
NOTE: These numbers are not the SERIAL number, but possibly a quick way to find it with your particular custodian/record custodian. But it’s worth a look to see if you can find it. After that, it’s just copy it from year to year on the form.