Instructions for Form 5330 (01/2008)

IRS Resources

Instructions for Form 5330 - Main Contents

Table of Contents

General Instructions

What's New

Section 4971(g), Multiemployer Plans in Endangered or Critical Status. For years beginning after 2007, the Pension Protection Act of 2006 states that a failure to comply with a funding improvement or rehabilitation plan, a failure to meet requirements for plans in endangered or critical status, or a failure to adopt a rehabilitation plan may be subject to an excise tax.

Reminders

Section 4965, Prohibited Tax Shelter Transactions. For tax years beginning after May 17, 2006, the Tax Increase Prevention and Reconciliation Act of 2005 provides that an entity manager of a tax-exempt organization may be subject to an excise tax on prohibited tax shelter transactions under section 4965. In the case of a plan entity, an entity manager is any person that approves or otherwise causes the tax-exempt entity to be a party to a prohibited tax shelter transaction. The excise tax is $20,000 and is assessed for each approval or other act causing the organization to be a party to the prohibited tax shelter transaction.

Section 4971, Failure to Meet the Minimum Funding Standards. Section 214 of the Pension Protection Act of 2006 provides that, for certain tax years, a multiemployer pension plan with (1) less than 100 participants, (2) an annual normal cost of less than $100,000, and (3) a funding deficiency on August 17, 2006, will not incur the excise tax for an accumulated funding deficiency under section 4971(a)(2) if the employers participated in a Federal Fishery Capacity Reduction Program and the Northeast Fisheries Assistance Program.

Section 4975, Prohibited Transactions. Generally, for purposes of a prohibited transaction described in section 4975(c)(1)(A), (B), (C), or (D), if a disqualified person enters into a prohibited transaction in connection with the acquisition, holding, or disposition of certain securities or commodities, and the transaction is corrected within the 14-day correction period, it will not be treated as a prohibited transaction and no tax will be assessed.

When calculating the prohibited transaction excise tax where there is a failure to transmit participant contributions (elective deferrals) or amounts that would have otherwise been payable to the participant in cash, the amount involved is based on interest on those elective deferrals. See Rev. Rul. 2006-38.

Generally, for financial investment advice provided after December 31, 2006, the prohibited transaction rules of section 4975(c) will not apply to any transaction in connection with investment advice, if the investment advice provided by a fiduciary adviser is provided under an eligible investment advice arrangement under Department of Labor guidelines.

Section 4972, Nondeductible Contributions to Qualified Employer Plans. The deduction limits of section 404(a)(1)(D) were altered for certain tax years beginning after December 31, 2005. The maximum deductible amount is not less than the excess of 150% of a plan's current liability in the instance of a single-employer defined benefit plan (140% for multiemployer plans) over the value of that plan's assets. Where an employer contributes to one or more defined contribution plans, the overall limit applicable to combinations of defined benefit plans and defined contribution plans only applies to the extent that the contributions exceed 6% of the compensation otherwise paid or accrued during the tax year to the beneficiaries under the defined contribution plans. For purposes of determining the excise tax on nondeductible contributions, matching contributions to a defined contribution plan that are nondeductible solely because of the overall deduction limit are disregarded. In addition, where there is a combination of defined benefit and defined contribution plans, multiemployer plans are not taken into consideration in applying the overall limit on deductions.

Purpose of Form

File Form 5330 to report the tax on:

A prohibited tax shelter transaction (section 4965(a)(2)).
A minimum funding deficiency (section 4971(a) and (b)).
A failure to pay liquidity shortfall (section 4971(f)).
A failure to comply with a funding improvement or rehabilitation plan (section 4971(g)(2)).
A failure to meet requirements for plans in endangered or critical status (section 4971(g)(3)).
A failure to adopt rehabilitation plan (section 4971(g)(4)).
Nondeductible contributions to qualified plans (section 4972).
Excess contributions to a section 403(b)(7)(A) custodial account (section 4973(a)(3)).
A prohibited transaction (section 4975).
A disqualified benefit provided by funded welfare plans (section 4976).
Excess fringe benefits (section 4977).
Certain ESOP dispositions (section 4978).
Excess contributions to plans with cash or deferred arrangements (section 4979).
Certain prohibited allocations of qualified securities by an ESOP (section 4979A).
Reversions of qualified plan assets to employers (section 4980).
A failure of an applicable plan reducing future benefit accruals to satisfy notice requirements (section 4980F).

Who Must File

A Form 5330 must be filed by:

Any plan entity manager of a tax-exempt entity who approves the entity as a party to, or otherwise causes the entity to be a party to, a prohibited tax shelter transaction during the tax year and knows or has reason to know the transaction is a prohibited tax shelter transaction, see section 4965(a)(2).
Any employer who is liable for the tax under section 4971 for failure to meet the minimum funding standards under section 412 (liability for tax in the case of an employer who is a party to a collective bargaining agreement, see section 413(b)(6)).
Any employer who is liable for the tax under section 4971(f) for a failure to meet the liquidity requirement of section 412(m)(5).
Any employer with respect to a multiemployer plan who is liable for the tax under section 4971(g)(2) for failure to comply with a funding improvement or rehabilitation plan under section 432.
Any employer with respect to a multiemployer plan who is liable for the tax under section 4971(g)(3) for failure to meet the requirements for plans in endangered or critical status under section 432.
Any plan sponsor with respect to a multiemployer plan who is liable for the tax under section 4971(g)(4) for failure to adopt a rehabilitation plan within the time required under section 432.
Any employer who is liable for the tax under section 4972 for nondeduct-
ible contributions to qualified plans.
Any individual who is liable for the tax under section 4973(a)(3) because an excess contribution to a section 403(b)(7)(A) custodial account was made for them and that excess has not been eliminated as specified in sections 4973(c)(2)(A) and (B).
Any disqualified person who is liable for the tax under section 4975 for participating in a prohibited transaction (other than a fiduciary acting only as such), or an individual (or his or her beneficiary) who engages in a prohibited transaction with respect to his or her individual retirement account (unless section 408(e)(2)(A) or section 408(e)(4) applies) for each tax year or part of a tax year in the taxable period applicable to such prohibited transaction.
Any employer who is liable for the tax under section 4976 for maintaining a funded welfare benefit plan that provides a disqualified benefit during any tax year.
Any employer who pays excess fringe benefits and has elected to be taxed under section 4977 on such payments.
Any employer or worker-owned cooperative (as defined in section 1042(c)(2)) that maintains an ESOP that disposes of the qualified securities (as defined in section 1042(c)(1)) within the specified 3-year period, under section 4978.
Any employer who is liable for the tax under section 4979 on excess contributions to plans with a cash or deferred arrangement, etc.
Any employer or worker-owned cooperative that made the written statement described in section 664(g)(1)(E) or 1042(b)(3)(B) and made an allocation prohibited under section 409(n) of qualified securities of an ESOP taxable under section 4979A or any employer or worker-owned cooperative who made an allocation of S corporation stock of an ESOP prohibited under section 409(p) taxable under section 4979A.
Any employer who receives an employer reversion from a deferred compensation plan that is taxable under section 4980.
Any employer or multiemployer plan liable for the tax under section 4980F for failure to give notice of a significant reduction in the rate of future benefit accrual.

A Form 5330 and tax payment is required for:

Each year you fail to meet the minimum funding standards under section 412 or contribute an excess amount to your section 403(b)(7)(A) custodial account.
Each year any of the items in 1, 3, 5, 6, 7, or 9 through 14, or 16 under Who Must File, beginning on page 1, apply.
Each failure of the employer to make the required contribution as required by a funding improvement or rehabilitation plan under section 432 with respect to a multiemployer plan.
A reversion of plan assets from a qualified plan taxable under section 4980.
Each year (or part of a year) in the taxable period applicable to a prohibited transaction, under section 4975. See the instructions for Schedule C, line 2, columns (d) and (e), for a definition of taxable period.

When To File

File one Form 5330 to report excise taxes with the same filing due date. One Form 5330 may be filed to report one or more of these taxes. However, if the taxes are from separate plans, file separate forms for each plan.

Generally, the filing of a Form 5330 starts the statute of limitations running only with respect to the particular excise tax(es) reported on that Form 5330. However, statutes of limitations with respect to the prohibited transaction excise tax(es) are based on the filing of the applicable Form 5500. Use Table 1 to determine the due date of Form 5330.

Extension. File Form 5558, Application for Extension of Time to File Certain Employee Plan Returns, to request an extension of time to file. If approved, you may be granted an extension of up to 6 months after the normal due date of Form 5330.

Caution:

Form 5558 does not extend the time to pay your taxes. See the instructions for Form 5558.

Table 1. Excise Tax Due Dates

If the taxes due are under section . . .	Then, except for section 4965, file Form 5330 by the last day of the . . . and for section 4965 by the . . .
4965	15th day of the 5th month following the close of the entity manager's tax year during which the tax-exempt entity becomes a party to the transaction.
4971	7th month after the end of the employer's tax year or 8½ months after the last day of the plan year that ends with or within the filer's tax year.
4971(f)	7th month after the end of the employer's tax year or 8½ months after the last day of the plan year that ends with or within the filer's tax year.
4971(g)(2)	7th month after the end of the employer's tax year or 8½ months after the last day of the plan year that ends with or within the filer's tax year.
4971(g)(3)	7th month after the end of the employer's tax year or 8½ months after the last day of the plan year that ends with or within the filer's tax year.
4971(g)(4)	7th month after the end of the employer's tax year or 8½ months after the last day of the plan year that ends with or within the filer's tax year.
4972	7th month after the end of the tax year of the employer or other person who must file this return.
4973(a)(3)	7th month after the end of the tax year of the employer or other person who must file this return.
4975	7th month after the end of the tax year of the employer or other person who must file this return.
4976	7th month after the end of the tax year of the employer or other person who must file this return.
4977	7th month after the end of the calendar year in which the excess fringe benefits were paid to your employees.
4978	7th month after the end of the tax year of the employer or other person who must file this return.
4979	15th month after the close of the plan year to which the excess contributions or excess aggregate contributions relate.
4979A	7th month after the end of the tax year of the employer or other person who must file this return.
4980	month following the month in which the reversion occurred.
4980F	month following the month in which the failure occurred.
If the filing due date falls on a Saturday, Sunday, or legal holiday, the return may be filed on the next business day.

Where To File

File Form 5330 with the:Department of the Treasury, Internal Revenue Service Center, Ogden, UT 84201.

Private delivery services. You can use certain private delivery services designated by the IRS to meet the “timely mailing as timely filing/paying” rule for tax returns and payments. These private delivery services include only the following:

DHL Express (DHL): DHL Same Day Service, DHL Next Day 10:30 a.m., DHL Next Day 12:00 p.m., DHL Next Day 3:00 p.m., DHL 2nd Day Service.
Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First.
United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express.

The private delivery service can tell you how to get written proof of the mailing date.

Interest and Penalties

Interest. Interest is charged on taxes not paid by the due date even if an extension of time to file is granted. Interest is also charged on penalties imposed for failure to file, negligence, fraud, gross valuation overstatements, and substantial understatements of tax from the due date (including extensions) to the date of payment. The interest charge is figured at a rate determined under section 6621.

Penalty for late filing of return. If you do not file a return by the due date, including extensions, you may have to pay a penalty of 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. The minimum penalty for a return that is more than 60 days late is the smaller of the tax due or $100. The penalty will not be imposed if you can show that the failure to file on time was due to reasonable cause. If you file late, you must attach a statement to Form 5330 explaining the reasonable cause.

Penalty for late payment of tax. If you do not pay the tax when due, you may have to pay a penalty of ½ 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. The penalty will not be imposed if you can show that the failure to pay on time was due to reasonable cause.

Interest and penalties for late filing and late payment will be billed separately after the return is filed.

Claim for Refund or Credit/Amended Return

File an amended Form 5330 for any of the following:

To claim a refund of overpaid taxes reportable on Form 5330;
For a credit for overpaid taxes; or
To report additional taxes due within the same tax year of the filer if those taxes have the same due date as those previously reported. Check the box in item H on page 1 of the return and report the correct amount of taxes in Schedule A through K, as appropriate, and on lines 1 through 16 of Part I. See instructions for Part II, lines 17 through 19.

If you file an amended return to claim a refund or credit, the claim must state in detail the reasons for claiming the refund. In order for the IRS to promptly consider your claim, you must explain why you are filing the claim and provide the appropriate supporting evidence. See Regulations section 301.6402-2 for more details.

Specific Instructions

Filer tax year. Enter the tax year of the employer, entity, or individual on whom the tax is imposed.

Item A. Name and address of filer. Enter the name and address of the employer, individual, or other entity who is liable for the tax.

Include the suite, room, or other unit numbers after the street number. If the post office does not deliver mail to the street address and you have a P.O. box, show the box number instead of the street address.

Item B. Filer's identifying number. Enter the filer's identifying number of the employer, entity, or individual on whom the tax is imposed. The identifying number of an individual (other than a sole proprietor with an employer identification number (EIN)) is his or her social security number. The identifying number of all others is their EIN.

Item C. Name of plan. Enter the formal name of the plan, group insurance arrangement, or enough information to identify the plan. This should be the same name indicated on the Form 5500 series return/report if required to be filed for the plan.

Item D. Name and address of plan sponsor. The term plan sponsor means:

The employer, for an employee benefit plan that a single employer established or maintains;
The employee organization in the case of a plan of an employee organization;
The association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the plan, if the plan is established or maintained jointly by one or more employers and one or more employee organizations, or by two or more employers.

Item E. Plan sponsor's EIN. Enter the nine-digit EIN assigned to the plan sponsor. This should be the same number used to file the Form 5500 series return/report.

Item F. Plan year ending. Plan year means the calendar or fiscal year on which the records of the plan are kept. Enter eight digits in month/date/year order. This number assists the IRS in properly identifying the plan and time period for which the Form 5330 is being filed. For example, a plan year ended March 31, 2007, should be shown as 03/31/2007.

Item G. Plan number. Enter the three-digit number that the employer or plan administrator assigned to the plan.

Item H. Amended return. If you are filing an amended Form 5330, check the box on this line, and see the instructions for Part II, lines 17 through 19. Also see Claim for Refund or Credit/Amended Return, earlier.

Filer's signature. Please sign and date the form. Also enter a daytime phone number where you can be reached.

Preparer's signature. Anyone who prepares your return and does not charge you should not sign your return. For example, a regular full-time employee or your business partner who prepares the return should not sign.

Generally, anyone who is paid to prepare a return must sign it and fill in the Paid Preparer's Use Only area.

The paid preparer must complete the required preparer information and—

Sign the return by hand, in the space provided for the preparer's signature (signature stamps and labels are not acceptable).
Give a copy of the return to the filer.

Part I—Taxes

Line 4. Section 4976—Tax on Disqualified Benefits for Funded Welfare Plans. Section 4976 imposes an excise tax on employers who maintain a funded welfare benefit plan that provides a disqualified benefit during any tax year. The tax is 100% of the disqualified benefit.

Generally, a disqualified benefit is any of the following:

Any post-retirement medical benefit or life insurance benefit provided for a key employee unless the benefit is provided from a separate account established for the key employee under section 419A(d);
Any post-retirement medical benefit or life insurance benefit unless the plan meets the nondiscrimination requirements of section 505(b) for those benefits; or
Any portion of the fund that reverts to the benefit of the employer.

Enter on line 4 the total amount of the disqualified benefit.

Line 5a and 5b. Section 4978—Tax on Certain ESOP Dispositions. Section 4978 imposes an excise tax on dispositions of securities acquired in a sale to which section 1042 applied, or in a qualified gratuitous transfer to which section 664(g) applied, if the dispositions take place within 3 years after the date of the acquisition of qualified securities (as defined in section 1042(c)(1) or a section 664(g) transfer).

The tax is 10% of the amount realized on the disposition of the qualified securities if an ESOP or eligible worker-owned cooperative (as defined in section 1042(c)(2)) disposes of the qualified securities within the 3-year period described above, and either of the following applies:

The total number of shares held by that plan or cooperative after the disposition is less than the total number of employer securities held immediately after the sale, or
Except to the extent provided in regulations, the value of qualified securities held by the plan or cooperative after the disposition is less than 30% of the total value of all employer securities as of the disposition (60% of the total value of all employer securities in the case of any qualified employer securities acquired in a qualified gratuitous transfer to which section 664(g) applied).

See section 4978(b)(2) for the limitation on the amount of tax.

The section 4978 tax must be paid by the employer or the eligible worker-owned cooperative that made the written statement described in section 1042(b)(3)(B) on dispositions that occurred during their tax year.

The section 4978 tax does not apply to a distribution of qualified securities or sale of such securities if any of the following occurs:

The death of the employee;
The retirement of the employee after the employee has reached age 59½;
The disability of the employee (within the meaning of section 72(m)(7)); or
The separation of the employee from service for any period that results in a 1-year break in service (as defined in section 411(a)(6)(A)).

For purposes of section 4978, an exchange of qualified securities in a reorganization described in section 368(a)(1) for stock of another corporation will not be treated as a disposition.

For section 4978 excise taxes, the amount entered on Part I, line 5a is the amount realized on the disposition of qualified securities multiplied by 10%. Also check the appropriate box on line 5b.

Line 6. Section 4979A—Tax on Certain Prohibited Allocations of Qualified ESOP Securities. Section 4979A imposes a 50% excise tax on allocated amounts involved in:

A prohibited allocation of qualified securities by any ESOP or eligible worker-owned cooperative.
An allocation described in section 664(g)(5)(A). Section 664(g)(5)(A) prohibits any portion of the assets of the ESOP attributable to securities acquired by the plan in a qualified gratuitous transfer to be allocated to the account of:
1. Any person related to the decedent (within the meaning of section 267(b)) or a member of the decedent's family (within the meaning of section 2032A(e)(2)), or
2. Any person who, at the time of the allocation, or at any time during the 1-year period ending on the date of the acquisition of qualified employer securities by the plan, is a 5% shareholder of the employer maintaining the plan.
The accrual or allocation of S corporation shares in an ESOP during a nonallocation year constituting a prohibited allocation under section 409(p).
Any synthetic equity owned by a disqualified person in any nonallocation year.

Prohibited allocations for ESOP or worker-owned cooperative. For purposes of items 1 and 2 above, a prohibited allocation of qualified securities by any ESOP or eligible worker-owned cooperative is any allocation of qualified securities acquired in a non-recognition-of-gain sale under section 1042 which violates section 409(n); and any benefit that accrues to any person in violation of section 409(n).

Under section 409(n), an ESOP or worker-owned cooperative cannot allow any portion of assets, attributable to employer securities acquired in a section 1042 sale, to accrue or be allocated (directly or indirectly) to the taxpayer involved in the transaction (or any person related to the taxpayer) during the nonallocation period. For purposes of section 409(n), relationship to the taxpayer is defined under section 267(b).

The nonallocation period is the period beginning on the date the qualified securities are sold and ends on the later of:

10 years after the date of sale; or
The date on which the final payment is made if acquisition indebtedness was incurred at the time of sale.

The employer sponsoring the plan, or the eligible worker-owned cooperative, is responsible for paying the tax.

Prohibited allocations of securities in an S corporation.

Generally, the prohibited allocation rules for securities in an S corporation are effective for plan years beginning after December 31, 2004; however, these rules are effective for plan years ending after March 14, 2001, if:

The ESOP was established after March 14, 2001, or
The ESOP was established on or before March 14, 2001, and the employer maintaining the plan was not an S corporation.

The rules below apply to the prohibited allocation, identified in items 3 and 4, under line 6. The excise tax on these transactions under section 4979A is 50% of the amount involved. The amount involved includes:

The value of any synthetic equity owned by a disqualified person in any nonallocation year. Synthetic equity means any stock option, warrant, restricted stock, deferred issuance stock right, or similar interest or right that gives the holder the right to acquire or receive stock of the S corporation in the future. Synthetic equity may also include a stock appreciation right, phantom stock unit, or similar right to a future cash payment based on the value of the stock or appreciation; and nonqualified deferred compensation as described in Regulations section 1.409(p)-1(f)(2)(iv). The value of a synthetic equity is the value of the shares on which the synthetic equity is based or the present value of the nonqualified deferred compensation.
The value of any S corporation shares in an ESOP accruing during a nonallocation year or allocated directly or indirectly under the ESOP or any other plan of the employer qualified under section 401(a) for the benefit of a disqualified person. For additional information see Regulations section 1.409(p)-1(b)(2).
The total value of all the deemed-owned shares of all disqualified persons.

A nonallocation year means a plan year where the ESOP, at any time during the year, holds employer securities in an S corporation, and disqualified persons own at least:

50% of the number of outstanding shares of the S corporation (including deemed-owned ESOP shares), or
50% of the aggregate number of outstanding shares of stock (including deemed-owned ESOP shares) and synthetic equity in the S corporation.

For purposes of determining a nonallocation year, the attribution rules of section 318(a) will apply; however, the option rule of section 318(a)(4) will not apply. Additionally, the attribution rules defining family member is modified to include the individual's:

Spouse.
Ancestor or lineal descendant of the individual or the individual's spouse.
A brother or sister of the individual or of the individual's spouse and any lineal descendant of the brother or sister.

A spouse of an individual who is legally separated from an individual under a decree of divorce or separate maintenance is not treated as the individual's spouse.

An individual is a disqualified person if:

The total number of shares owned by the person and the members of the person's family (as defined in section 409(p)(4)(D)) is at least 20% of the deemed-owned shares (as defined in section 409(p)(4)(C)) in the S corporation, or
The person owns at least 10% of the deemed-owned shares (as defined in section 409(p)(4)(C)) in the S corporation.

Under section 409(p)(7), the Secretary of the Treasury may, through regulations or other guidance of general applicability, provide that a nonallocation year occurs in any case in which the principal purpose of the ownership structure of an S corporation constitutes an avoidance or evasion of section 409(p). For a description of situations where the definition of nonallocation year was considered, see Rev. Rul. 2004-4, 2004-6 I.R.B. 414.

For section 4979A excise taxes, the amount entered on Part I, line 6 is 50% of the amount involved in the prohibited allocations described in items 1 through 4, under Line 6. Section 4979A - Tax on Certain Prohibited Allocations of Qualified ESOP Securities, earlier.

Line 10a. Section 4971(g)(2)—Failure to Comply With a Funding Improvement or Rehabilitation Plan. Failure to comply with a funding improvement or rehabilitation plan will result in an excise tax equal to each failure of each employer to make the required contribution within the time frame under such plan. The tax is paid by each employer responsible for contributing to or under the plan. Include on line 10a the amount of each contribution the employer failed to make in a timely manner.

A funding improvement plan is a plan which consists of the actions, including options or a range of options to be proposed to the bargaining parties, formulated to provide, based on reasonably anticipated experience and reasonable actuarial assumptions, for the attainment by the plan during the funding improvement period.

A rehabilitation plan is a plan which consists of actions, including options or a range of options to be proposed to the bargaining parties, formulated, based on reasonably anticipated experience and reasonable actuarial assumptions, to enable the plan to cease to be in critical status by the end of the rehabilitation period.

All, or part, of this excise tax may be waived under Section 4971(g)(5).

Line 16. Section 4965—Prohibited Tax Shelter Transactions. For tax years ending after May 17, 2006, if an entity manager of a tax-exempt entity approves or otherwise causes the entity to be a party to a prohibited tax shelter transaction during the year and knows or has reason to know that the transaction is a prohibited tax shelter transaction, then the entity manager must pay the excise tax under section 4965(b)(2).

For purposes of section 4965, plan entities are:

Qualified pension, profit-sharing, and stock bonus plans described in section 401(a);
Annuity plans described in section 403(a);
Annuity contracts described in section 403(b);
Qualified tuition programs described in section 529;
Retirement plans described in section 457(b) maintained by a governmental employer;
Individual retirement accounts within the meaning of section 408(a);
Individual retirement annuities within the meaning of section 408(b);
Archer medical savings accounts (MSAs) within the meaning of section 220(d);
Coverdell education savings accounts described in section 530; and
Health savings accounts within the meaning of section 223(d).

An entity manager is the person who approves or otherwise causes the entity to be a party to a prohibited tax shelter transaction.

The excise tax under section 4965(a)(2) is $20,000 for each approval or other act causing the organization to be a party to a prohibited tax shelter transaction.

A prohibited tax shelter transaction is:

A Listed transaction within the meaning of section 6707A(c)(2). Listed transactions are reportable transactions that are the same as, or substantially similar to, any transactions that have been specifically identified by the Secretary as a tax avoidance transaction for purposes of section 6011.

A prohibited reportable transaction is:

a. Any confidential transaction within the meaning of Regulations section 1.6011-4(b)(3); or

b. Any transaction with contractual protection within the meaning of Regulations section 1.6011-4(b)(4).

Part II—Tax Due

Required disclosure. Lines 17 through 19.

If you are filing an amended Form 5330 and you paid tax with your original return and those taxes have the same due date as those previously reported, check the box in item H and enter the tax reported on your original return in the entry space for line 18. If you file Form 5330 for a claim for refund or credit, show the amount of overreported tax in parentheses on line 19. Otherwise, show the amount of additional tax due on line 19 and include the payment with the amended Form 5330.

Make your check or money order payable to the “United States Treasury” for the full amount due. Attach the payment to your return. Write your name, identifying number, plan number, and “Form 5330, Section ____” on your payment.

Schedule A (Section 4972)

Tax on Nondeductible Employer Contributions to Qualified Employer Plans

Section 4972. Section 4972 imposes an excise tax on employers who make nondeductible contributions to their qualified plans. The excise tax is 10% of the nondeductible contributions in the plan as of the end of the employer's tax year.

A qualified plan for purposes of this tax means any plan qualified under section 401(a), any annuity plan qualified under section 403(a), and any simplified employee pension plan qualified under section 408(k) or 408(p). The term qualified plan does not include certain governmental plans and certain plans maintained by tax-exempt organizations.

Nondeductible contributions. For purposes of section 4972, nondeductible contributions for the employer's current tax year are the sum of:

The excess (if any) of the employer's contribution for the tax year less the amount allowable as a deduction under section 404 for that year, and
The total amount of the employer's contributions for each preceding tax year that was not allowable as a deduction under section 404 for such preceding year, reduced by the sum of
1. The portion of such amount that was available for return under the applicable qualification rules and was actually returned to the employer prior to the close of the current tax year and
2. The portion of such amount that became deductible for a preceding tax year or for the current tax year.

Although pre-1987 nondeductible contributions are not subject to this excise tax, they are taken into account to determine the extent to which post-1986 contributions are deductible. See section 4972 and Pub. 560, Retirement Plans for Small Business, for details.

Defined benefit plans exception. Generally, contributions up to the current unfunded liability of a defined benefit plan are deductible, regardless of the number of participants in the plan. In addition, when determining the amount of nondeductible contributions for any tax year, an employer may elect, for that tax year, not to include any contributions to a defined benefit plan except to the extent they exceed the full-funding limitation (as defined in section 412(c)(7), determined without regard to section 412(c)(7)(A)(i)(I)). This election applies to terminated and ongoing plans. An employer making this election cannot also benefit from the exceptions for terminating plans and for certain contributions to defined contribution plans under section 4972(c)(6). When determining the amount of nondeductible contributions, the deductible limits under section 404(a)(7) must be applied first to contributions to defined contribution plans and then to contributions to defined benefit plans.

Defined contribution plans exception. Employer contributions to one or more defined contribution plans that are nondeductible because they exceed the combined plan deduction limits of section 404(a)(7) are not subject to the 10% excise tax. In determining the amount of nondeductible contributions that are subject to the 10% excise tax, do not include:

Employer contributions to one or more defined contribution plans which are nondeductible solely because of section 404(a)(7) that do not exceed the matching contributions described in section 401(m)(4)(A),
Contributions to a SIMPLE 401(k) or a SIMPLE IRA that are considered nondeductible because they are not made in connection with the employer's trade or business. However, this provision pertaining to SIMPLEs does not apply to contributions made on behalf of the employer or the employer's family, or
Contributions not in excess of 6% of the compensation (as defined in section 404(a) and adjusted in section 404(a)(12)) paid or accrued during the tax year to the beneficiaries under the plans.

For purposes of this exception, the combined plan deduction limits are first applied to contributions to the defined benefit plan and then to the defined contribution plan.

Restorative payments to a defined contribution plan are not considered nondeductible contributions if the payments are made to restore some or all of the plan's losses due to an action (or a failure to act) that creates a reasonable risk of liability for breach of fiduciary duty. Amounts paid in excess of the amount of the loss are not considered restorative payments.

For these purposes, multiemployer plans are not taken into consideration in applying the overall limit on deductions where there is a combination of defined benefit and defined contribution plans.

Schedule B (Section 4973(a)(3))

Tax on Excess Contributions to Section 403(b)(7)(A) Custodial Accounts

Section 4973(c) imposes a 6% excise tax on the excess contributions to 403(b)(7)(A) custodial accounts at the close of the tax year. The tax is paid by the individual account holder.

Line 1. Enter the total current year contributions, less any rollover contributions described in sections 403(b)(8) or 408(d)(3)(A).

Line 2. The amount you will enter on line 2 is the amount excludable under section 415(c) (limit on annual additions).

To determine the amount excludable for a specific year, see Pub. 571, Tax-Sheltered Annuity (403(b)) Plans, for that year.

The limit on annual additions under section 415(c)(1)(A) is subject to cost-of-living adjustments as described in section 415(d). The dollar limit for a calendar year as adjusted annually is published during the fourth quarter of the prior calendar year in the Internal Revenue Bulletin.

Schedule C (Section 4975)

Tax on Prohibited Transactions

Section 4975 imposes an excise tax on a disqualified person that engages in a prohibited transaction with the plan.

Plan. For purposes of prohibited transactions (section 4975), the term plan means any of the following:

A trust described in section 401(a) that forms part of a plan.
A plan described in section 403(a), and that trust or plan is exempt from tax under section 501(a).
An individual retirement account described in section 408(a).
An individual retirement annuity described in section 408(b).
An Archer MSA described in section 220(d).
A Coverdell education savings account described in section 530.
A Health Savings Account described in section 223(d).
A trust described in section 501(c)(22).

If the IRS determined at any time that your plan was a plan as defined above, it will always remain subject to the excise tax on prohibited transactions (section 4975). This also applies to the tax on minimum funding deficiencies (section 4971).

Disqualified person. A disqualified person is any person who is:

A fiduciary.
A person providing services to the plan.
An employer, any of whose employees are covered by the plan.
An employee organization, any of whose members are covered by the plan.
Any direct or indirect owner of 50% or more of:
1. The combined voting power of all classes of stock entitled to vote, or the total value of shares of all classes of stock of a corporation,
2. The capital interest or the profits interest of a partnership,
3. The beneficial interest of a trust or unincorporated enterprise in a, b, or c, which is an employer or an employee organization described in 3 or 4 above. A limited liability company should be treated as a corporation, or a partnership, depending on how the organization is treated for federal tax purposes.
A member of the family of any individual described in 1, 2, 3, or 5. A member of a family is the spouse, ancestor, lineal descendant, and any spouse of a lineal descendant.
A corporation, partnership, or trust or estate of which (or in which) any direct or indirect owner holds 50% or more of the interest described in 5a, 5b, or 5c of such entity. For purposes of 7, the beneficial interest of the trust or estate is owned directly or indirectly, or held by persons described in 1 through 5.
An officer, director (or an individual having powers or responsibilities similar to those of officers or directors), a 10% or more shareholder or highly compensated employee (earning 10% or more of the yearly wages of an employer) of a person described in 3, 4, 5, or 7.
A 10% or more (in capital or profits) partner or joint venturer of a person described in 3, 4, 5, or 7.
Any disqualified person, as described in 1 through 9 above, who is a disqualified person with respect to any plan to which a section 501(c)(22) trust applies, that is permitted to make payments under section 4223 of the Employee Retirement Income Security Act (ERISA).

Prohibited transaction. A prohibited transaction is any direct or indirect:

Sale or exchange, or leasing of any property between a plan and a disqualified person; or a transfer of real or personal property by a disqualified person to a plan where the property is subject to a mortgage or similar lien placed on the property by the disqualified person within 10 years prior to the transfer, or the property transferred is subject to a mortgage or similar lien which the plan assumes.
Lending of money or other extension of credit between a plan and a disqualified person.
Furnishing of goods, services, or facilities between a plan and a disqualified person.
Transfer to, or use by or for the benefit of, a disqualified person of income or assets of a plan.
Act by a disqualified person who is a fiduciary whereby he or she deals with the income or assets of a plan in his or her own interest or account.
Receipt of any consideration for his or her own personal account by any disqualified person who is a fiduciary from any party dealing with the plan connected with a transaction involving the income or assets of the plan.

Exemptions. See sections 4975(d), 4975(f)(6)(B)(ii), and 4975(f)(6)(B)(iii) for specific exemptions to prohibited transactions. Also see section 4975(c)(2) for certain other transactions or classes of transactions that may become exempt.

Line 1. Check the box that best characterizes the prohibited transaction for which an excise tax is being paid. A prohibited transaction is discrete unless it is of an ongoing nature. Transactions involving the use of money (loans, etc.) or other property (rent, etc.) are of an ongoing nature and will be treated as a new prohibited transaction on the first day of each succeeding tax year or part of a tax year that is within the taxable period.

Line 2, Column (b). List the date of all prohibited transactions that took place in connection with a particular plan during the current tax year. Also list the date of all prohibited transactions that took place in prior years unless either the transaction was corrected in a prior tax year or the section 4975(a) tax was assessed in the prior tax year. A disqualified person who engages in a prohibited transaction must file a separate Form 5330 to report the excise tax due under section 4975 for each tax year.

Line 2, Columns (d) and (e). The amount involved in a prohibited transaction means the greater of the amount of money and the fair market value (FMV) of the other property given, or the amount of money and the FMV of the other property received. However, for services described in sections 4975(d)(2) and (10), the amount involved only applies to excess compensation. For purposes of section 4975(a), FMV must be determined as of the date on which the prohibited transaction occurs. If the use of money or other property is involved, the amount involved is the greater of the amount paid for the use or the FMV of the use for the period for which the money or other property is used. In addition, transactions involving the use of money or other property will be treated as giving rise to a prohibited transaction occurring on the date of the actual transaction plus a new prohibited transaction on the first day of each succeeding tax year or portion of a succeeding tax year which is within