Form 5330 - Aug 2004

Form 5330: What it is, who files it and how to complete it

What is IRS Form 5330 used for?

IRS Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, is used to report and pay excise taxes tied to retirement and welfare benefit plans. These taxes apply when a plan is misused or falls short of operational rules set by the Internal Revenue Code.

The form covers more than 20 distinct excise taxes, each linked to a different code section. The most common reasons employers and plan administrators file include:

• Late deposits of employee salary deferrals, treated as a prohibited transaction under section 4975
• Other prohibited transactions involving disqualified persons
• Minimum funding deficiencies in pension plans under section 4971
• Nondeductible contributions to qualified plans under section 4972
• Reversions of qualified plan assets back to an employer under section 4980

Who is responsible for filing Form 5330?

Not everyone connected to a benefit plan has to file. The form is only required from those who actually owe one of the listed excise taxes, so the responsible party depends on what triggered the tax. Common filers include:

• Employers who missed required pension contributions or deposited 401(k) deferrals late
• Plan sponsors and entity managers involved in prohibited tax shelter transactions
• Disqualified persons, such as fiduciaries or related parties, who engaged in a prohibited transaction
• Financial institutions that engaged in a prohibited transaction across multiple IRAs or plans

A third party administrator or paid preparer can complete the form, but the legal responsibility for the tax stays with the filer. If a paid preparer signs the form, they must include their preparer tax identification number.

How do you complete Form 5330 for late contributions?

Late salary deferral deposits are one of the most frequent reasons for filing. When deferrals are not deposited on time, the delay counts as a prohibited transaction under section 4975, and a 15% excise tax applies to the amount involved for each year the issue is uncorrected.

To report this on Form 5330:

• Enter the plan sponsor and plan details in the identification section at the top of the form.
• Calculate the lost earnings on the late deposits, which represents the amount involved.
• Apply the 15% rate to that amount to find the excise tax due.
• Complete the section 4975 line in Part I and carry the total through to the payment lines.

Correcting the underlying deposit and depositing lost earnings does not remove the filing duty. You still report the prohibited transaction and pay the excise tax for the period the funds were late.

What is the penalty for filing Form 5330 late?

Missing the deadline can be costly because penalties stack on top of the excise tax itself. The IRS charges a failure-to-file penalty and a separate failure-to-pay penalty, and interest accrues from the original due date. The penalties break down as follows:

• Failure to file: 5% of the unpaid tax for each month or part of a month the return is late, up to 25% of the unpaid tax
• Failure to pay: 0.5% of the unpaid tax for each month or part of a month the tax goes unpaid, up to 25%
• Interest charged on any tax not paid by the due date, even if you received a filing extension

Both penalties can be waived if you show reasonable cause for the delay. You can attach a statement to Form 5330 explaining the circumstances, though simply not knowing the tax was owed rarely qualifies.

Can you file Form 5330 electronically?

Yes. Form 5330 can be filed through the IRS Modernized e-File system using an authorized e-filing provider. Electronic filing gives you an immediate record that the return was received, and the IRS encourages it for all filers.

For tax years ending on or after December 31, 2023, e-filing is mandatory if the filer must submit at least 10 returns of any type during the calendar year the Form 5330 is due. For the tax year ending December 31, 2025, the IRS waived this requirement for all filers, so paper filing is allowed that year regardless of the return count. Whether the waiver extends to 2026 has not been announced, so filers above the 10-return threshold should plan to e-file unless a new waiver is issued.

Need to file Form 5330?

If you ever need to complete Form 5330, use Lumin's free, fillable template to enter your plan and excise tax details online. Once finished, download, print, and sign your completed form, ready for filing or mailing.