If you have a solo 401(k) or another self-employed retirement plan, you may be exposed to up to $150,000 in IRS penalties for one small—but crucial—filing error. Fortunately, it’s easy to avoid if you understand Form 5500-EZ and your responsibilities as a plan sponsor.

What Is IRS Form 5500-EZ?

Form 5500-EZ is a two-page informational return that must be filed annually with the IRS if your retirement plan assets exceed $250,000 at year-end.

It applies to:

• Solo 401(k) plans — i.e., individual 401(k), or self-employed 401(k) plans
• Money purchase pension plans
• Profit-sharing plans
• Defined benefit pension plans
• Cash balance plans (a type of defined benefit plan)
• Target benefit plans

Important: If you have multiple one-participant plans, the $250,000 threshold applies to the combined total across all plans—not per plan or person.

You must also file a final Form 5500-EZ when the plan terminates and all assets are distributed—even if the account balance is reduced to zero.

Who Is Responsible for Filing?

You, the business owner, are considered the plan administrator or plan sponsor. That means you’re legally responsible for filing the form correctly and on time—even if you use a third-party administrator.

✅ Note: Form 5500-EZ is separate from your income tax return and must be filed independently.

When Is It Due?

• Annually: By July 31 of the year following the end of the plan year
• With an extension: By October 15, if you’ve extended your income tax return
• Final return: Must be filed when the plan ends and all assets are fully distributed—even if the balance is $0

What Happens If You Don’t File?

Failure to file Form 5500-EZ results in a penalty of $250 per day, capped at $150,000 per return.

And here’s the sneaky part:
The IRS may not notify you right away. But the penalty still accumulates—often silently—until they eventually send a CP 403 or CP 406 notice. If ignored, it can escalate to a CP 283 Penalty Notice… even years later.

How to Avoid or Minimize the Penalty

Option 1: IRS Late Filer Penalty Relief Program

If you haven’t been penalized yet, you may qualify for this amnesty program:

• File all missing 5500-EZ forms
• Submit Form 14704
• Pay $500 per return, up to a $1,500 cap per plan
• 📝 Must be filed on paper. Delinquent returns are not accepted electronically.

This is the safest and most cost-effective route if you’re behind but haven’t yet been hit with penalties.

Option 2: Request Reasonable Cause Relief

If you’ve already received a CP 283 penalty notice, your only option is to request that the IRS remove the penalty due to reasonable cause, such as:

• Natural disasters
• Serious illness
• Loss of records
• Unexpected hardship

⚠️ Warning: If your request is denied, you’ll no longer qualify for amnesty and will owe the full penalty. It’s a high-risk, high-reward approach.

Key Takeaways

• File Form 5500-EZ once plan assets exceed $250,000—or when the plan ends.
• The filing deadline is July 31 each year (or October 15 with an extension).
• Penalties can grow up to $150,000 per plan—even without immediate IRS contact.
• Use the IRS Late Filer Penalty Relief Program before it’s too late.
• If penalized, you may request reasonable cause relief, but it comes with risk.

Need Help Navigating This?

Whether you’re unsure if you need to file, or you need help cleaning up past non-compliance, we’re here to help you avoid costly mistakes.

👉 Book a discovery call and let’s make sure your retirement plan doesn’t come with an unexpected IRS bill.