We have a client that made late contributions 4/06 and 10/06. The contributions were made but they did not include the earnings missed. The missed earnings are $20.52 and $112.55 and have been added to accounts this week.
I understand that they need to file a 5330. I believe that they only need to complete line 3a and schedule C.
It is my understanding that they will need to file a 5330 for 2006, 2007, 2008 and 2009. Would you agree?
Now the big question. How should I calculate the tax? I think it should be 15% of the prohibited amount. (20.52 plus 112.55 times 15%.) Would it be the same calculation for all years?
Also, what description should I use under the "Description Of Prohibited Transaction"?
Any guidance would be appreciated. As you can probably tell, I have never completed a 5330.
Thanks in advance!
Full Version: 5330 - Late earnings contribution
I believe you are correct in that you are looking at a Form 5330 for 06, 07, 08 & 09 and the initial tax will be 15% of the "amount involved oe "interest" calculated.
What I'm comfused about is the second tier tax of 100% - item 3b on the Form 5330. I your case the initial tax under 4973a is 15% of 133.07 (20.52 plus 112.55) or 19.96. Under 4973(b), there is a second tier tax of 100% of the amount involved for failure to correct. So, I'm thinking that in 06, you'd have the $19.96 but then in 07, you'd have 19.96 for item 3a and 133.07 for item 3b. However, I am totaly confused by this so I'm not sure if this is correct.
Can anyone think of a reason why the second tier tax does not apply?
What I'm comfused about is the second tier tax of 100% - item 3b on the Form 5330. I your case the initial tax under 4973a is 15% of 133.07 (20.52 plus 112.55) or 19.96. Under 4973(b), there is a second tier tax of 100% of the amount involved for failure to correct. So, I'm thinking that in 06, you'd have the $19.96 but then in 07, you'd have 19.96 for item 3a and 133.07 for item 3b. However, I am totaly confused by this so I'm not sure if this is correct.
Can anyone think of a reason why the second tier tax does not apply?
QUOTE (PAL @ Jul 20 2009, 11:45 AM) 
I believe you are correct in that you are looking at a Form 5330 for 06, 07, 08 & 09 and the initial tax will be 15% of the "amount involved oe "interest" calculated.
What I'm comfused about is the second tier tax of 100% - item 3b on the Form 5330. I your case the initial tax under 4973a is 15% of 133.07 (20.52 plus 112.55) or 19.96. Under 4973(b), there is a second tier tax of 100% of the amount involved for failure to correct. So, I'm thinking that in 06, you'd have the $19.96 but then in 07, you'd have 19.96 for item 3a and 133.07 for item 3b. However, I am totaly confused by this so I'm not sure if this is correct.
Can anyone think of a reason why the second tier tax does not apply?
What I'm comfused about is the second tier tax of 100% - item 3b on the Form 5330. I your case the initial tax under 4973a is 15% of 133.07 (20.52 plus 112.55) or 19.96. Under 4973(b), there is a second tier tax of 100% of the amount involved for failure to correct. So, I'm thinking that in 06, you'd have the $19.96 but then in 07, you'd have 19.96 for item 3a and 133.07 for item 3b. However, I am totaly confused by this so I'm not sure if this is correct.
Can anyone think of a reason why the second tier tax does not apply?
Thanks for your reply. I guess this is something else I should investigate.
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