Form 5330 MS 2022-2024

Form 5330 MS: What You Should Know

That's pretty darn risky, especially for individuals with small plans. For example, let's say that you deposit a 500 after tax lump sum in an 403(b) plan. The plan administrator finds out about it four years later and pays you a 10 percent excise tax. The IRS may deem those three years of missed deposits to be  periods of reasonable notice. The rule of “reasonable notice” is an important tax aspect that may vary on each  tax return filed. The  IRS may deem the deposits to be “reasonable notice” during three additional years, based on the circumstances. Therefore, if you deposit a new cash bonus to an after-tax plan in 2018, the first year of notice,  your plan will pay you only the 15 percent excise tax—unless you deposit another 100 of the same 500 bonuses the year after  you received it. If the second 100 were a 4,000 tax credit for the first year, that would be considered notice for an additional  three years in the same situation. As an example of how this can all add up, suppose that you have been a member of an  401(k) plan for 10 years. You now have one of those super-sized IRAs that pays out at 6.8 percent per year.  You deposit your first 1 in each of the two years you have been a member. In 2019, the plan administrator finds out you have 150,000 in the plan.  In 2020, your plan administers a 300,000 bonus and deposits 1,000 at the beginning of each of two years you have been  a member — again. In 2021, the plan administrator decides to increase your pay. You could then have a 1,000 tax  deduction for 150,000 in that year. If you get a notice of the tax owed in 2024 even after all the bonus amounts and withholding are deposited, the  plan administers the additional bonus in 2020, which triggers another 300,000 annual excise tax for the following  year.  Thus, the tax owes in 2019—and is the same whether notice is sent—will result in 1,160,000 in tax withholding for  the remaining years.

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