Form 5330 is the IRS form used to report and pay excise taxes on prohibited transactions involving retirement plans, including 401(k) plans. This form is required when plan sponsors fail to make the required contributions within the specified timeframes or engage in other prohibited activities that violate ERISA regulations.

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The most common scenarios that trigger Form 5330 excise tax liability include late salary deferral deposits, missed employer matching contributions, delayed profit-sharing contributions, and failures to meet safe harbor contribution deadlines.

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In addition, prohibited transactions between plan fiduciaries and the plan itself can trigger excise tax penalties.

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The standard excise tax rate for 2025 remains 15% of the prohibited transaction amount for first-tier taxes, with potential second-tier taxes of 100% if corrections aren't made promptly. The filing deadline usually falls on the 15th day of the 7th month following the plan year's end, though extensions may be available.

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This article explores the different methods for Form 5330 excise tax filing, including their requirements and benefits.

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Who Must File Form 5330?

Plan sponsors are usually responsible for filing Form 5330 when prohibited transactions occur. This includes:

• Employers who sponsor 401(k), 403(b), or other qualified retirement plans
• Plan administrators acting on behalf of the sponsor
• Disqualified persons who engage in prohibited transactions with plan assets
• Third-party administrators (TPAs) when authorized to file on behalf of plan sponsors

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The filing requirement applies regardless of whether the prohibited transaction was intentional or accidental.

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Current Excise Tax Rates for 2025

The IRS maintains specific excise tax rates for prohibited transactions, including:

• First-tier excise tax: 15% of the amount involved in the prohibited transaction
• Second-tier excise tax: 100% of the amount involved (if uncorrected)

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For late contribution deposits, the tax applies to the missed earnings that would have been generated had contributions been deposited timely, not the contribution amount itself.

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First-tier taxes are imposed immediately when a prohibited transaction occurs. Plan sponsors have until the last day of the tax year to correct the violation and avoid additional penalties.

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Second-tier taxes apply when prohibited transactions remain uncorrected by the correction deadline. This 100% penalty is designed to encourage prompt correction and can result in taxes exceeding the original transaction amount.

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Late 401(k) Contribution Scenarios Requiring Form 5330

The IRS requires Form 5330 filing when plan contributions are not deposited within the required timeframes, thus triggering prohibited transaction rules under IRC Section 4975.

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Missed Salary Deferral Deposits

Salary deferral deposits must be made by the 15th business day of the month following the payroll date. When employers fail to meet this deadline, the delayed deposit becomes a prohibited transaction subject to excise tax.

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Common scenarios include:

• Payroll system failures causing deposit delays
• Cash flow issues preventing timely transfers
• Administrative errors in calculating deferral amounts
• New payroll providers missing deposit deadlines

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The excise tax equals 15% of the amount involved for each year the violation continues. For example, if $10,000 in deferrals are deposited 30 days late, the excise tax would be $1,500 annually until corrected.

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Late Employer Matching Contributions

Employer matching contributions must be deposited by the plan's tax filing deadline, including extensions. However, safe harbor plans and plans with immediate vesting requirements may have stricter deadlines.

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Form 5330 filing is required when:

• Matching contributions are deposited after the tax filing deadline
• Safe harbor matching fails to meet quarterly deposit requirements
• Discretionary matching contributions exceed allowable timeframes
• True-up matching contributions are processed late

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Delayed Profit-Sharing Contributions

Profit-sharing contributions must be made by the employer's tax filing deadline, including extensions. Late deposits trigger excise tax liability even if the delay is only a few days.

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Filing is required for the following situations:

• Employer tax return extensions affecting deposit deadlines
• Year-end profit calculations causing processing delays
• Board approval requirements extending contribution timing
• Allocation formula changes impacting deposit schedules

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Safe Harbor Contribution Timing Failures

Safe harbor 401(k) plans have specific contribution timing requirements that, when violated, result in excise tax liability and potential loss of safe harbor status.

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Important deadlines include:

• Basic safe harbor matching: Last day of the plan year following the year of deferral
• Enhanced safe harbor matching: Each payroll period or quarterly
• Non-elective contributions: 12 months after the plan year end
• Notice requirements: 30-90 days before the plan year begins

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Safe harbor timing failures are serious because they can disqualify the entire plan year from safe harbor protection, potentially requiring additional nondiscrimination testing.

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Filing Requirements and Penalties

When any of these scenarios occur, Form 5330 must be filed by the last day of the seventh month after the end of the tax year in which the prohibited transaction occurred.

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The standard excise tax rate is 15% of the amount involved, with potential additional penalties for continued violations.

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Correction procedures depend on the contribution type but generally require depositing the late contributions plus lost earnings. The Department of Labor's Voluntary Fiduciary Correction Program (VFCP) may provide penalty relief for certain violations.

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Plan sponsors should implement efficient payroll and contribution monitoring systems to prevent these common scenarios and maintain ongoing compliance with Form 5330 requirements.

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Electronic Filing Method

Electronic filing is the fastest and most secure way to submit your Form 5330 excise tax return in 2025. The IRS recommends e-filing for quicker processing, instant confirmation, and reduced errors compared to paper filing.

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Setting up an IRS e-file account

Before filing Form 5330 electronically, you'll need an IRS e-Services account. Visit the IRS website and select "e-Services" to register.

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You'll need your Employer Identification Number (EIN), business information, and a valid email address. The registration process usually takes 5 to 10 business days for account activation.

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For plan sponsors filing multiple forms, consider applying for Electronic Federal Tax Payment System (EFTPS) access simultaneously, which streamlines future tax payments.

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Accessing Form 5330 in tax software

Most professional tax software platforms support Form 5330 electronic filing, including:

• Drake Tax Software: Comprehensive 5330 support with built-in calculations
• Lacerte Tax: Professional-grade filing with error checking
• ProSeries: User-friendly interface for complex filings
• TaxAct Professional: Cost-effective option for smaller firms

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Free filing options are limited for Form 5330, as most free software doesn't support this specialized form. Ensure your chosen software is IRS-approved for current-year electronic filing.

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Step-by-step electronic filing process

• Launch your tax software and select "New Return" or "Form 5330"
• Enter plan sponsor information including EIN, plan name, and plan number
• Input prohibited transaction details with dates and amounts
• Calculate excise tax liability using the software's built-in calculations
• Review all entries for accuracy before submitting
• Select payment method (bank transfer, credit card, or EFTPS)
• Digitally sign the return using your e-file PIN
• Submit electronically and save the confirmation number

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The software will automatically validate your return and flag any errors before submission, thereby reducing rejection rates.

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Electronic payment options and confirmation

Electronic filing requires immediate payment. Available options include:

• Bank Transfer (ACH): Most cost-effective method with no additional fees. Processing takes 1 to 3 business days.
• Credit/Debit Cards: Accepted through third-party processors with convenience fees typically ranging from $2-$50 depending on payment amount.
• EFTPS: Ideal for businesses already enrolled in the system, offering scheduled payments and detailed records.

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After submitting, you'll receive an immediate electronic acknowledgment with a unique confirmation number. This serves as proof of filing and payment. The IRS usually processes electronic returns within 2-3 weeks compared to 6-8 weeks for paper returns.

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Note: File early in the day (before 2 PM EST) to ensure same-day processing and avoid potential system delays during peak filing periods.

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Vendor-Assisted Filing Process

Partner with qualified professionals when you encounter complex Form 5330 excise tax situations. Doing so will streamline your filing process and ensure compliance. Here's what you must know about vendor-assisted Form 5330 filing.

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Choosing Qualified Tax Preparation Vendors

Not all tax preparers are equipped to handle Form 5330 excise tax filings. Look for vendors with specific ERISA and retirement plan expertise.

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Qualified professionals should hold certifications such as CPA, EA (Enrolled Agent), or specialized credentials like ASPPA (American Society of Pension Professionals and Actuaries) designations.

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Verify the following qualifications:

• Proven Form 5330 filing experience with similar plan types
• Current IRS representation authority for potential audits
• Professional liability insurance covering ERISA work
• References from other plan sponsors who've used their services

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Working with TPA (Third Party Administrator) Services

Many plan sponsors already work with TPAs for routine 401(k) administration. These existing relationships often provide the most efficient path for Form 5330 filing assistance.

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Your TPA likely maintains detailed records of contribution timing and can quickly identify excise tax triggers.

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Benefits of using your current TPA include:

• Access to complete plan transaction history
• Existing knowledge of your plan's operations
• Integrated correction and filing services
• Established communication channels with your team

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If your TPA doesn't offer Form 5330 services, request referrals to specialized ERISA attorneys or pension consultants within their network.

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Cost Considerations and Timeline Expectations

Form 5330 filing fees range from $1,500 to $5,000, depending on complexity and correction requirements. Simple late deposit situations cost less than multi-year prohibited transaction cases requiring extensive documentation.

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Timeline expectations include:

• Simple filings: 2-3 weeks from document submission
• Complex cases: 4-6 weeks with correction procedures
• Rush services: Available for additional fees, typically 1-2 weeks

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Plan for longer timelines during peak filing seasons (March-October) when most excise tax returns are submitted.

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Paper Filing Method

While electronic filing is faster and more efficient, many taxpayers still prefer the traditional paper filing method for Form 5330 excise tax returns. This approach requires careful attention to detail and longer processing times, but remains a viable option for those uncomfortable with digital filing.

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Downloading and Printing Form 5330

The current Form 5330 is available for free download from the IRS website. Go to the "Forms and Publications" section and search for "Form 5330." Always verify you're downloading the correct tax year version.

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Print the form using high-quality, white 8.5" x 11" paper. Avoid using colored paper or low-resolution printers, as these can cause scanning issues during IRS processing. Print all required pages, including instructions, even if some sections don't apply to your situation.

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Manual Completion Instructions

Complete Form 5330 using black ink only (blue ink or pencil may not scan properly). Write legibly in capital letters and stay within the designated boxes. If you make errors, don't use correction fluid; instead, cross out mistakes with a single line and write the correction nearby.

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Enter your EIN exactly as it appears on your IRS records. Double-check all calculations before finalizing the form. Mathematical errors are the most common reason for processing delays in paper filings.

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Mailing Addresses for Different Regions

Form 5330 mailing addresses depend on location and payment method. If filing without payment, use the standard processing address for your state. However, if including payment, use the specialized lockbox addresses designed for faster payment processing.

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For most filers, the address is:

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Department of the Treasury

Internal Revenue Service

Ogden, UT 84201-0027

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International filers should use the international processing center address listed in the current Form 5330 instructions. Always verify the correct address in the most recent instructions, as these can change annually.

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Check Payment Requirements and Processing Times

If paying by check, make it payable to "United States Treasury" and write your EIN and "Form 5330" on the memo line. Use a separate check for each tax year if filing multiple years simultaneously.

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Ensure your check includes:

• Current date
• Exact payment amount matching your Form 5330
• Your signature
• Bank routing and account numbers (pre-printed)

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Processing times for paper filings usually range from 6-8 weeks. The IRS processes paper returns in the order received, so early submission is crucial for timely processing.

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Mail your completed Form 5330 via certified mail with return receipt requested. This provides proof of delivery and helps track your submission. Keep copies of all documents for your records.

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Note: Paper filing doesn't extend your payment deadline. Even if your form is in transit, ensure excise tax payments reach the IRS by the original due date to avoid additional penalties and interest charges.

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Step-by-Step Filing Instructions for Form 5330 Excise Tax

Filing Form 5330 correctly requires attention to detail across three main sections. Follow these step-by-step instructions to ensure accurate filing.

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Part I: Filer Information

Completing Plan Sponsor Details

Enter your plan sponsor information in the designated fields at the top of Form 5330. This section identifies who is responsible for the excise tax liability.

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Required information includes:

• Plan sponsor name: Enter the exact legal name of the employer or entity sponsoring the retirement plan
• Address: Provide the complete mailing address where IRS correspondence should be sent
• Plan name: Use the official plan name as stated in your plan document
• Plan year: Specify the plan year during which the prohibited transaction occurred

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EIN and Plan Number Requirements

The EIN is important for Form 5330 processing. Enter your nine-digit EIN in the format XX-XXXXXXX. This number must match the EIN associated with your retirement plan.

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The three-digit plan number identifies your specific plan if you sponsor multiple retirement plans. This number should match what's reported on your Form 5500 annual return. If you only have one plan, you can use "001" as your plan number.

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Part II: Tax Calculation

Reporting Prohibited Transactions

Form 5330 requires detailed reporting of each prohibited transaction that triggered the excise tax liability. Common prohibited transactions for 401(k) plans include:

• Late salary deferral deposits (beyond 15 business days)
• Delayed employer matching contributions
• Missed loan repayments
• Improper plan loans

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For each transaction, provide:

• Transaction description
• Date the transaction occurred
• Amount involved
• Correction date (if applicable)

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Calculating First-Tier Excise Taxes

The first-tier excise tax is usually 15% of the amount involved in the prohibited transaction. For late 401(k) contributions, calculate this as:

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Tax Amount = Contribution Amount × 15% × Number of Days Late

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Enter each calculation on the appropriate lines in Part II. The form provides space for multiple prohibited transactions, so itemize each separately.

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When Second-Tier Taxes Apply

Second-tier excise taxes (100% of the transaction amount) apply when prohibited transactions aren't corrected within the taxable period. This severe penalty usually occurs when:

• The prohibited transaction remains uncorrected after the IRS notice
• More than 90 days pass without proper correction
• The transaction continues beyond the initial correction period

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Part III: Payment and Signatures

Payment Method Selection

Form 5330 offers several payment options:

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Electronic Payment (Recommended)

• EFTPS (Electronic Federal Tax Payment System): Most efficient for business filers
• Direct debit: Available when e-filing through tax software
• Credit/debit card: Convenient but includes processing fees

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Paper Filing Payment:

• Check or money order (mMade payable to "United States Treasury")
• Include your EIN and "Form 5330" on the memo line
• Attach payment to your paper return

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Required Signatures and Dates

The plan sponsor or authorized representative must sign Form 5330 under penalties of perjury. Required signature elements include:

• Handwritten signature: Electronic signatures accepted for e-filed returns
• Printed name and title: Must match the signing authority
• Date signed: Should be the actual date of signing, not the transaction date

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Unsigned returns are considered incomplete and may result in processing delays or penalties.

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2025 Updates and Changes

Below are the updates that the 2025 tax year brings to Form 5330 excise tax filing:

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New IRS Guidance for 2025

The IRS has implemented mandatory electronic filing requirements for certain Form 5330 filers for taxable years ending on or after December 31, 2023. This requirement applies to filers who must file at least 10 returns of any type during the calendar year that Form 5330 is due.

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However, the IRS has provided electronic filing relief for 2024, acknowledging that there is currently only one authorized e-filing provider.

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Updated Penalty Amounts

While the main excise tax rates remain unchanged for 2025, penalty structures continue to impact late filers significantly.

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Late filing penalties remain at 1/2 of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. In addition, the penalty for late filing is 5% per month, up to 25% of the total due tax.

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Changes to Electronic Filing Requirements

Taxpayers must file Form 5330 electronically for taxable years ending on or after December 31, 2023, if required to file at least 10 returns of any type during the calendar year.

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However, Form 5330 can still be filed on paper for the 2024 taxable year under certain circumstances, thereby providing temporary relief while the electronic filing infrastructure develops.

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Optimize Form 5330 Compliance with Chore’s Expert Back-Office Support

Form 5330 can be challenging when your startup faces excise tax issues (such as late 401(k) contributions or other prohibited transactions under ERISA). Here’s where Chore comes in.

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Chore assigns you a fractional 'Chore CEO' to manage your Form 5330 workflow, including:

• Automated calendar alerts for important deadlines (e.g., 7th/10th-month due dates, correction windows) so you never miss filing or payment timelines
• Accurate tracking of late salary deferrals, employer match timing, and profit-sharing deposits to flag and correct prohibited transactions early 
• End-to-end support. From calculating excise taxes and generating Form 5330 entries, to submitting electronically or mailing it on time, including guidance on lost-earnings correction via DOL or IRS relief channels

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Get started with Chore today and take IRS Form 5330 off your startup’s to-do list.

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FAQs

What is the penalty for filing Form 5330 late?

The penalty for filing Form 5330 late is 5% of the unpaid tax per month (max 25%).

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What if I can't pay the full excise tax amount?

If you cannot pay your full Form 5330 excise tax liability, you have several options to avoid additional penalties:

• Payment Plans: Request an installment agreement using Form 9465 or the IRS online payment tool
• Partial Payment: Pay what you can to reduce penalties and show good faith
• Online Setup: Amounts under $25,000 qualify for long-term payment plans; over $10,000 requires direct debit

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How long should I keep Form 5330 records?

Here’s how long you should keep Form 5330 records:

• IRS Rule: Keep records as long as they may be relevant to any tax law.
• General Guidance: While most tax records are kept for 3 years, Form 5330 may require longer due to its link to employee benefit plans.
• Minimum Recommended: Retain Form 5330 and related documents for at least 7 years.
• Records of ongoing prohibited transactions, correction documentation, and any material that affects future compliance must be kept indefinitely.

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Due to audit risk and ERISA rules, keep Form 5330 records indefinitely as part of your permanent plan files.

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