7 Common Questions About 5500-EZ Filings
When you operate a Solo 401(k) plan that is truly self-directed, you act as the plan administrator. In that role, it is your responsibility to manage IRS filings, including Form 5500-EZ, Annual Return of a One-Participant Retirement Plan.
With a little preparation and know how, filing form 5500-EZ can be quite simple. Some Solo 401(k) holders perform their own filing, while others will ask their CPA for assistance.
Following are some of the most common questions surrounding form 5500-EZ.
1 – What is Form 5500-EZ?
The 5500 series of forms are informational returns designed by the Department of Labor to collect general information about retirement plans. This information is used to monitor the state of the retirement savings system and provide data that can be used to shape government policy.
The 5500-EZ is a simplified version of the form designed for owner-only businesses.
2 – Who Must File?
Employers who operate what the IRS refers to as a “one-participant” plan must file using form 5500-EZ.
A one-participant plan may provide benefits to an owner, the owner’s spouse, one or more business partners, and the spouse of a business partner.
A one-participant plan may not provide benefits to any non-owner employees.
A filing is not required unless the total plan assets during the plan year are $250,000 or more. For most all Solo 401(k) plan sponsors, the plan year and the calendar year are the same, with the plan year ending on December 31st.
A 5500-EZ must be filed for a final plan year when a plan is terminated.
3 – When to File?
The filing of form 5500-EZ is due on the last day of the 7th month from the end of the plan year.
Since most all Solo 401(k) sponsoring businesses operate on a calendar year, that means the filing is due the last day of July in the following year.
If the last day of July falls on a weekend or holiday, the next business day becomes the filing deadline in that year.
When a plan is terminated, the end of the plan year is the last day of the month of termination. Form 5500-EZ must be filed by the end of the 7th month from that time.
For example, if you terminate your plan in August, you will need to file a final 5500-EZ by the last day of March in the following year. You can, of course, file at any time between August and March.
4 – How to File?
Form 5500-EZ can be filed by paper or electronically.
Use the fillable PDF available on the IRS website to file by mail.
The form can change from year-to-year, so be sure the form you access is for the appropriate tax year.
Use the EFAST2 system to file electronically. It can take a little while to get setup and verified on the EFAST2 system, so do not wait until the last minute.
5 – What Are the Plan Characteristic Codes for a Solo 401(k)?
The following plan characteristic codes apply to a standardized Solo 401(k):
2E – Profit Sharing
2J – 401(k) Feature
3B – Self-employed
3D – Pre-approved plan
If you have separate brokerage accounts for individual participants at a firm like Fidelity or Schwab, code 2R applies. If you are a single participant with a “trustee directed” brokerage account, or do not have a brokerage account, this code does not apply.
6 – How Do I Determine Plan Value?
Add up all the holdings of your Solo 401(k) plan, including cash, stocks, real estate, private placements, cryptocurrency, etc.
The value should reflect the current value of the asset as of the end of the plan year.
For assets like cash, stocks, and cryptocurrency, you can easily look up the value on a statement or exchange.
With real estate, realtor comps are usually sufficient. An appraisal may be necessary if you plan a taxable event such as a Roth conversion or distribution of an asset in-kind from your plan.
The value of a note is the open principal balance plus any accrued but unpaid interest.
With most private placements like multifamily real estate syndications, the asset value is the amount invested unless the investment sponsor provides you with an updated value. If you have received cash distributions, that would increase your plan’s cash balance while not impacting the value of the asset itself.
If you have taken a participant loan from your plan, that note balance is included in the plan value.
If you expect to file form 5500-EZ, be sure to perform a valuation at year end. You don’t want to be filing in July and trying to guess what values were 7 months ago.
7 – What is the Penalty for Failure to File?
Failure to file form 5500-EZ results in severe penalties. A fine of $250 per day, up to $150,000 per plan year is assessed.
A late-filing one-participant plan administrator with a Solo 401(k) may be eligible for relief per Revenue Procedure 2015-32.
We strongly recommend you work with your CPA when seeking such relief.
8 – Where Can I Get Help?
Most any CPA who works with small businesses should be familiar with the 5500-EZ filing. If your CPA is not able to help you, they should know someone in your community who can provide assistance.
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Quick answers to common questions
We’ll take you through a simple, step by step process designed to put your investment future into your own hands…immediately. Everything is handled on a turn-key basis. You take 100% control of your Retirement funds legally and without a taxable distribution.
YES! In 1974, Congress passed the Employee Retirement Income Security Act (ERISA) making IRA, 401(k) and other retirement plans possible. Only two types of investments are excluded under ERISA and IRS Codes: Life Insurance Contracts and Collectibles (art, jewelry, etc.). Everything else is fair game. IRS CodeSec. 401 IRC 408(a) (3)
It’s actually pretty simple. Early on, regulators let the securities industry take the lead in educating the public about retirement accounts. Naturally, brokers and banks promoted stocks, bonds, and mutual funds—giving the impression that those were the only allowed investments. That was never true... and still isn’t. You can probably guess why they kept the rest under wraps.
It is possible to use funds from most types of retirement accounts:
- Traditional IRA
- Roth IRA
- SEP IRA
- SIMPLE IRA
- Keogh
- 401(k)
- 403(b)
- Profit Sharing Plans
- Qualified Annuities
- Money Purchase Plans
- and many more.
It must be noted that most employer sponsored plans such as a 401(k) will not allow you to roll youraccount into a new Self-Directed IRA plan while you are still employed. However, some employers will allow you to roll a portion of your funds. The only way to be completely sure whether your funds are eligible for a rollover is by contacting your current 401(k) provider.
A Solo 401(k) requires a sponsoring employer in the format of an owner-only business. If you have a for-profit business activity – whether as your main income or as a side venture – and have no full-time employees other than potentially your spouse, your business may qualify. The business may be a sole-proprietorship, LLC, corporation or other entity type.
A self-directed retirement plan is a type of IRA or 401(k) that gives you greater control over how your retirement funds are invested. Unlike traditional accounts held at banks or brokerage firms that limit you to stocks, bonds, and mutual funds, self-directed plans allow you to invest in a wide range of alternative assets including real estate, private businesses, precious metals, cryptocurrency, and more.
These plans still follow the same IRS rules and maintain the same tax-deferred or tax-free benefits as conventional retirement accounts. The difference is simply in how and where you choose to invest.
No. Moving to a self-directed IRA or Solo 401(k) does not trigger any taxes, as long as your funds are eligible for rollover.
Self-directed retirement plans maintain the same tax-advantaged status as traditional plans offered by banks or brokerage firms. The key difference is flexibility—our plans are designed to give you greater control and allow for a wider range of alternative investments beyond stocks, bonds, and mutual funds.
A prohibited transaction is any action between your retirement plan and a disqualified person that violates IRS rules and can lead to serious tax consequences. Under IRS Code 4975(c)(1), prohibited transactions include:
- Selling or leasing property between your plan and a disqualified person Example: Your IRA cannot purchase a property you already own.
- Lending money or extending credit between the plan and a disqualified person Example: You cannot personally guarantee a loan your IRA uses to buy real estate.
- Providing goods or services between your plan and a disqualified person Example: You can’t use your personal furniture to furnish a rental property owned by your IRA.
- Using plan income or assets for the benefit of a disqualified person Example: Your IRA cannot buy a vacation home that you or your family use.
- Self-dealing by a fiduciary (using plan assets for their own benefit) Example: Your CPA shouldn't loan your IRA money if they’re advising the plan.
- Receiving personal benefit from a deal involving your IRA's assets Example: You can’t pay yourself from profits your IRA earns on a rental.
If a transaction doesn’t clearly fall within the allowed guidelines, the IRS or Department of Labor may review the situation to determine if it qualifies as a prohibited transaction.
Disqualified persons are individuals or entities that are prohibited from engaging in certain transactions with your IRA or 401(k). Doing so could trigger a prohibited transaction, which may result in taxes and penalties.
Here’s who is considered a disqualified person:
- You (the account holder)
- Your spouse
- Your parents, grandparents, and other ancestors
- Your children, grandchildren, and their spouses
- Any advisor or fiduciary to the plan
- Any business or entity owned 50% or more by you or another disqualified person, or where you have decision-making authority
These rules exist to prevent self-dealing and ensure your retirement plan remains in compliance with IRS regulations.
(Reference: IRC 4975)
Understanding and following these rules can be tricky, but it’s very doable. The best way to stay compliant is to work with professionals who specialize in self-directed retirement plans. They can help you navigate IRS guidelines and avoid prohibited transactions.
If an IRA holder is found to have engaged in a prohibited transaction with IRA funds, it will result in a distribution of the IRA. The taxes and penalties are severe and are applicable to all of the IRA’s assets on the first day of the year in which the prohibited transaction occurred.
Yes. While self-directed retirement plans allow for a wide range of investments, there are a few important restrictions.
You cannot invest in collectibles or life insurance contracts, and you must avoid prohibited transactions—activities that benefit you personally rather than the retirement plan. These include things like buying or selling property to yourself or family members, using plan assets for personal gain, or self-dealing in any way.
Violating these rules could cause your entire IRA to lose its tax-advantaged status. To protect your account, it’s essential to work with professionals who understand IRS regulations and can help you stay compliant.
This is a common misconception. In many cases, professionals may simply be unfamiliar with self-directed retirement plans, as they fall outside their usual scope of work. CPAs and tax preparers are trained to file taxes, not necessarily to advise on alternative retirement strategies. Financial advisors and brokers often work for firms that focus on traditional investments like stocks and mutual funds—and may not benefit from or support alternative options like real estate or private lending.
Self-directed retirement investing is legal under IRS rules—but like any specialized area, it requires working with professionals who understand how it works.
The IRS has rules in place to make sure your IRA is used only for the exclusive benefit of the retirement account—not for personal gain or to help family members. These rules can get complicated because there are many ways a conflict of interest can occur, even unintentionally.
For example, if your IRA buys a house and rents it to your mother, you might be reluctant to evict her if she stops paying rent. That emotional connection creates a conflict between what’s best for your IRA and your personal relationships, something the IRS aims to prevent.
These rules help ensure your retirement account stays compliant and protected. (See IRC 408)
Yes. Most tax-deferred retirement accounts—such as Traditional IRAs, old 401(k)s, 403(b)s, and TSPs—can be rolled over into a self-directed IRA or Solo 401(k), depending on your eligibility. Roth IRAs cannot be rolled into these accounts.
You can contribute directly from earned income, subject to annual IRS contribution limits. The method and amount depend on the type of plan you have (e.g., Solo 401(k) vs. IRA).
To take a distribution, you'll request funds through your custodian or plan administrator. Distributions may be taxable depending on your account type and age. Early withdrawals may be subject to penalties.
For 2025, the Solo 401(k) max contribution limit is $81,250 if age 60-63, $77,500 if age 50-59 or 69+, and $70,000 if under 50. Traditional and Roth IRAs have a limit of $7,000 ($8,000 if age 50+). Limits are subject to IRS adjustments.
Yes. IRA contributions are typically due by your personal tax filing deadline (e.g., April 15). Solo 401(k) contributions follow your business tax filing deadline, including extensions.
IRS reporting requirements vary depending on the type of self-directed retirement plan you have. Here’s a quick breakdown of what you need to know
Please note: Our team can help you understand what’s required for your specific account, but we don’t provide tax or legal advice. We always recommend working with a qualified tax professional to ensure full IRS compliance.
Self-Directed IRA (Traditional or Roth)
- Form 5498 – Filed by your custodian each year to report contributions, rollovers, and the fair market value (FMV) of your account.
- Form 1099-R – Issued if you take a distribution or move funds out of your IRA.
- Annual Valuation – You'll need to provide updated FMV for any alternative assets held in the account, such as real estate or private placements.
Solo 401(k)
- Form 5500-EZ – Required if your plan assets exceed $250,000 as of year-end. Must be filed annually by the plan participant.
- Form 1099-R – Required if you take a distribution or roll funds out of the plan.
- Contribution Tracking – Keep records of employee and employer contributions. These are not filed with the IRS but may be needed for tax reporting or audits.
SEP IRA
- Form 5498 – Filed by your custodian to report contributions and FMV.
- Form 1099-R – Filed by your custodian. Issued for any distributions.
- Employer Contributions – Must be reported on your business tax return (and on employee W-2s, if applicable).
Health Savings Account (HSA)
- Form 5498-SA – Filed by your HSA custodian to report contributions.
- Form 1099-SA – Filed by your HAS custodian. Issued for any distributions.
- Form 8889 – Must be included with your personal tax return to report contributions, distributions, and how funds were used.
