For any business, reporting to the Internal Revenue Service can be a cause for concern, to say the least. Add the Department of Labor to the mix, not to mention the Employee Retirement Income Security Act of 1974 and a host of tax regulations, and the situation can get downright alarming. A company auditing its 401(k) plan can face all of this; knowing what forms to submit and when to submit them can save thousands of dollars and one whopping headache. The Sacramento and Roseville tax accountants at Cook CPA Group are here to help with your 401(k) audit filing in California.
Form 5500 Series for 401(k) Filings
Forms related to employee benefit reporting belong to the Form 5500 series, developed jointly by the IRS, Department of Labor and Pension Benefit Guaranty Corporation. Three versions of the form exist: the standard version, Form 5500, which “large” companies use; the shorter version, Form 5500-SF, which “small” companies use; and Form 5500-EZ, which is used by “one-participant” plans. Additional information on each can be found on both the IRS and Department of Labor websites.
401k Audit Filing Deadline in California
The timeline for a 401(k) audit can vary from business to business. The size of the company, the complexity of the audit and the extent to which the proper records and forms have been prepared can all affect the amount time required. For instance, companies with less than 100 employees are usually deemed “small,” and have a unique form to fill out. For a small business tax audit, their needs for an audit are correspondingly divergent from those of larger companies. However, the deadline to file the proper paperwork is fairly consistent across the spectrum.
When sending a report on employee benefit plans, such as a 401(k), the necessary paperwork must be submitted by the last day of the seventh month after the plan year ends. If a company has a calendar-year plan, as many do, the deadline for that company would be July 31. For those who like to procrastinate — not a recommended strategy when dealing with the IRS, by the way — filings can be completed up until midnight local time, which buys Californians a few extra hours. Beyond that point, filings will be considered late.
If a company operates on a fiscal-year schedule, the same principle applies, although of course the deadline would not be July 31. Fiscal Year 2018, for example, ran from October 1, 2017, to September 30, 2018; the deadline to file Form 5500 for Fiscal Year 2018 is April 30, 2019, exactly seven months after the plan ended.
In some cases, a company may be granted an extension to file its forms past the deadline without penalty. To apply for one of these extensions, a company must submit Form 5558 for each plan for which an extension is desired. These forms must be mailed to the IRS office in Ogden, Utah, and approved before an extension is granted, so the process can take some time. Any company seeking an extension should make sure to submit the form well before the deadline.
What Happens If I Miss the 401k Deadline?
In the event that a form is incomplete, submitted incorrectly or missing altogether once the deadline has passed, fees begin to accrue on a per-day basis, assuming no extension has been granted. These fees can add up to tens of thousands of dollars over time, so delay can be costly for a company. Fortunately, it is sometimes possible to mitigate these costs through programs like the Department of Labor’s Delinquent Filer Voluntary Compliance Program, which allows qualifying companies to voluntarily submit missing forms and pay a reduced fine to bring their documentation up to date.
If a return is submitted late due to extenuating circumstances, companies can throw themselves on the tender mercies of the IRS and can submit delinquent returns with an attached statement, signed by an executive or other authorized representative, stating a reasonable cause for the late submission. It should be noted, however, that if a company’s cause is deemed insufficient by the IRS, that company is no longer eligible to have its late fees reduced under the penalty relief program.
California Tax Accountants Offering Free Consultations
If you need help filing your 401(k) audit in California, contact our Roseville and Sacramento tax accountants at Cook CPA Group for a free consultation. Call (916) 910-0323 today for more information about the services we provide, or schedule an appointment online.