Form 5500 prep fee

[BOB W]

Your client may have a 1 person 401k plan that now has assets over $100,000 for the first time, thus requiring a 5500. There is no assigned administrator for this type of plan. A 5500EZ will probably work for this and is basically simple when you get the info required. Review the 5500EZ so that a starting point is established for info needed.

[JoshinNC]

That's a heck of a penalty

When I quit doing them, I believe the penalty was $500/day late with a maximum of some
$100,000. The big problem with the filing late was the various employers would not get their information to you in time, and then it is YOU that's stuck in the middle.

I'll need to make sure I want to tackle this. I don't know why his 401k provider isn't handling this. He is living in Denmark (Swedish National) on a contract job for his new employer, so the time/distance thing makes communication a little more difficult.

[Snaggletooth]

Penalty

Thanks for the dissertation on the difference between defined benefit and defined contribution too..

When I quit doing them, I believe the penalty was $500/day late with a maximum of some
$100,000. The big problem with the filing late was the various employers would not get their information to you in time, and then it is YOU that's stuck in the middle.

[JoshinNC]

Not sure Kram

Are you truely talking about a 5500 Form or a 5500EZ?
My fee for a 5500 form is usually $40- $50. So based on your fee structure I would say $70-$80 for you. I have never done a 5500 since the EZ form went into effect so no idea how much to charge for that.

I'll need to read through the instructions to figure out if it's an EZ or full form. I was thinking of charging $150 (1 hours time). Is that about right as far as the time to fill out the form (I'll have to do it the old fashioned way on a typewriter if irs.gov doesn't have a pdf fillable version).

[Kram BergGold]

Back to the questiom

Are you truely talking about a 5500 Form or a 5500EZ?
My fee for a 5500 form is usually $40- $50. So based on your fee structure I would say $70-$80 for you. I have never done a 5500 since the EZ form went into effect so no idea how much to charge for that.

[BOB W]

I don't know, these are usually handled by the 401K administrator and never passed on to the employer to do.

If your client has no employees, there is a new (couple of years) 401k "no paper work" plan that is handled just like a "Simple" Plan. Check into it. It has a much higher top end limit, I think $40,000. This type of 401k does not require a 5500 if plan assets are under $100,000. Check the article below for details.

ADDED: http://401kpsp.com/unik401k.php

[JoshinNC]

Eu Contrair

Yes and No> A Defined Contribution Plan that this thread is referring to is not a 401K. A Defined Contribution Pension Plan is different and is usually funded 100% by the employer.

I started the thread and I am most definately talking about a 401k. My client, the Sole Shareholder of the C-Corp and only participant in the 401k, was informed that he (the company) needs to prepare a Form 5500. Do 401k's not do Form 5500's? Maybe I'm confusing terminology?

[BOB W]

A 401k is a "defined contribution" plan. Yes, the employer contributes, in the form of a match, but the employee is the primary funder in the form of their deferred contributions. I guess it's semantics, but I look at a 401k as ee funded, at least primarily.

Yes and No> A Defined Contribution Plan that this thread is referring to is not a 401K. A Defined Contribution Pension Plan is different and is usually funded 100% by the employer.

Edited with additional info:

Depending on the motives of the employer and the age of the employees usually establishes what type of Pension Plan is used. A Defined contribution plan is used when the employer has older employees and wants to minumize their contribution in relation to his/hers.

A Defined Benefit Plan is used either when the employer has no employees or very young employees. Assuming the employer is age 50 or higher he can contribute 100% of his wages while the younger employees may only get 5% of their wages put into the pension plan. This is 100% funded by the employer.

[JoshinNC]

Huh??

Both types of plans are EMPLOYER FUNDED.............An employee can contribute but basically all is done by the employer.

A 401k is a "defined contribution" plan. Yes, the employer contributes, in the form of a match, but the employee is the primary funder in the form of their deferred contributions. I guess it's semantics, but I look at a 401k as ee funded, at least primarily.

[BOB W]

I can tell you that one is employer funded and one is employee funded, but I'm lost after that. I'll definately need to bone up on that stuff for the CPA exam next year.

Both types of plans are EMPLOYER FUNDED.............An employee can contribute but basically all is done by the employer.

[JoshinNC]

What kind of penalties Snag?

Josh, I quit filling out 5500s years ago because of the steep penalties associated with it.

For the most part, they are not really "tax" forms, but since they are IRS forms, various clients think they should be filled out by a tax preparer.

Thanks for the dissertation on the difference between defined benefit and defined contribution too. I can tell you that one is employer funded and one is employee funded, but I'm lost after that. I'll definately need to bone up on that stuff for the CPA exam next year.

[Snaggletooth]

Defined Benefit

Distinction is made between a "defined benefit" plan and a "defined contribution" plan.

The defined contribution means an employer's pension plan contributes a static or fixed percent to the plan for each covered employee. The performance of funds within the plan are not subject to corporate control or responsibility. A defined contribution plan does not require a statement from an actuary.

The defined benefit plan means that an employer is obligated to provide a level of future benefits for their workforce after they attain retirement age. The obligation means that there is a liability on the books of the employer. The function of the actuary is to use the ages of the existing workforce, project an estimated performance of the funds within the plan, and in so doing establish a liability using present value. Far more complex than the defined contribution plan.

In general, I abhor the science involved. A company with a sick bottom line can go into this above-mentioned liability, increase their "expected" performance over the next 30 years from 5 percent to 7 percent, and put pressure on the actuary to sign off on this. The result is [poof!!] instant reduction in the liability and adds millions of dollars onto the bottom line.

You might wonder how an actuary would sign off on such a thing? First-place the actuary is endowed with caveats which prevent him from being responsible for the performance of the fund. He is responsible only for the mathematics. Secondly, how on earth could the actuary ever hope to predict the general economy or the status of investments in the plan anyway? Not to reflect on the professionalism of actuarial science (they are not to blame), but I have seen this happen, with a notation in the footnotes of audited financial statements.

[erchess]

Enrolled Actuary

When does one need an Enrolled Actuary to sign one of these forms??

[JSLATER]

I guess the charge for a 1040 and sch A depends on your market. Mine average $160 and I am low for my area. The average is about $200, but I have a small practice aimed at covering my expenses and some GOOD beer!

[zeros]

Rate? 1040 w/schedule A=$195.00

You mentioned $195 for 1040 w/schedule A. This seems high but maybe I should raise my rates.