H owns 100% of corp. H is only EE of corp. Corp sets up a 401k plan. W is independent contractor providing medical transcription services to an unrelated medical practice. W reports the income on a Schedule C to Form 1040, but W has no employees.

One of the requirements for filing 5500-EZ is that the ER sponsoring the plan not be part of an affiliated service group or control group.

Does anyone know if the Service accepts a 5500-EZ in this situation?

Since it fails one of the requirements, I have to assume the answer is no. But I cannot honestly say, since I would never attempt an EZ filing in this situation. If you are trying to avoid filing if below the $250k threshhold by considering this EZ eligible, I sure wouldn't recommend it.