IRS Form 5330 is the return employers, plan sponsors, and other parties connected to a retirement plan use to report and pay excise taxes owed under the Internal Revenue Code when a plan is misused or falls short of operational rules. The taxes start at rates like 10% or 15% of the amount at issue and can climb to 100% if the underlying problem is not corrected, so the form matters most when a prohibited transaction, funding shortfall, excess contribution, or employer reversion has already occurred.
What Triggers a Form 5330 Filing
Each excise tax on Form 5330 ties to a specific section of the tax code. Four come up most often.
Prohibited Transactions
A prohibited transaction is an improper deal between a retirement plan and a “disqualified person” — for example, lending plan money to the employer, selling property between the plan and a fiduciary, or using plan assets for personal benefit. The initial excise tax is 15% of the amount involved for each year (or partial year) in the taxable period.1Office of the Law Revision Counsel. 26 U.S. Code 4975 – Tax on Prohibited Transactions If the transaction is not corrected before the taxable period ends, a second-tier tax of 100% of the amount involved applies. Correction means undoing the transaction as completely as possible without leaving the plan worse off than if the fiduciary had acted properly.2Internal Revenue Service. Retirement Topics – Tax on Prohibited Transactions
Minimum Funding Deficiencies
Defined benefit plans and certain other plans require minimum annual contributions. When the employer falls short, IRC Section 4971 imposes an initial excise tax of 10% of the aggregate unpaid minimum required contributions for single-employer plans, 5% of the accumulated funding deficiency for multiemployer plans, and 10% for CSEC plans.3Office of the Law Revision Counsel. 26 USC 4971 – Taxes on Failure to Meet Minimum Funding Standards If the deficiency remains uncorrected through the end of the taxable period, a 100% second-tier tax applies to whatever is still outstanding. The sponsoring employer is liable.
Nondeductible Contributions
When an employer contributes more to a qualified plan than the tax code allows as a deduction, the excess triggers a 10% excise tax under IRC Section 4972. The tax is calculated on the nondeductible amount at the close of the employer’s tax year and keeps accruing at 10% each year until the excess is eliminated.4Office of the Law Revision Counsel. 26 U.S. Code 4972 – Tax on Nondeductible Contributions to Qualified Employer Plans
Employer Reversions of Plan Assets
When a qualified plan terminates and the employer takes back leftover assets after satisfying all participant obligations, IRC Section 4980 imposes an excise tax on the reversion. The base rate is 20%, but it jumps to 50% unless the employer either establishes a qualified replacement plan or provides pro-rata benefit increases to participants before the reversion.5Office of the Law Revision Counsel. 26 U.S. Code 4980 – Tax on Reversion of Qualified Plan Assets to Employer Most employers who take reversions without meeting those conditions end up owing the 50% rate.
Other Excise Taxes
Form 5330 also covers less common excise taxes, including taxes on excess contributions to SEPs and SIMPLE IRAs, excess fringe benefits, certain tax-exempt entity transactions under Section 4965, and failures to provide required benefit reduction notices under Section 4980F. The form’s instructions list every covered code section and the matching part of the form to complete.
Who Has to File
The person responsible for filing depends on the tax. For funding deficiencies, nondeductible contributions, and reversions, the sponsoring employer files. For prohibited transactions, the “disqualified person” who participated in the transaction is personally liable and must file.
The disqualified person category under IRC Section 4975(e)(2) is broad. It covers plan fiduciaries, service providers such as accountants and attorneys, the sponsoring employer and any employee organization whose members are covered, anyone who owns 50% or more of the employer, close family members of any of the above, entities controlled 50% or more by any of the above, and officers, directors, 10% shareholders, and employees earning at least 10% of the employer’s yearly wages.1Office of the Law Revision Counsel. 26 U.S. Code 4975 – Tax on Prohibited Transactions Multiple disqualified persons involved in the same transaction can each be liable for the full tax, though the IRS only collects it once.
When Form 5330 Is Due
Deadlines vary by code section. Under the current instructions:6Internal Revenue Service. Instructions for Form 5330
- Prohibited transactions (Section 4975): the last day of the 7th month after the end of the tax year of the person required to file. For a calendar-year individual, that means July 31.
- Minimum funding deficiencies (Section 4971): the 15th day of the 10th month after the last day of the plan year. For a plan year ending December 31, the deadline is October 15 of the following year.
- Nondeductible contributions (Section 4972): the last day of the 7th month after the end of the employer’s tax year.
- Plan asset reversions (Section 4980): the last day of the month following the month the reversion occurred.
If a deadline falls on a weekend or legal holiday, the return is due the next business day.
You do not necessarily file a separate Form 5330 for every excise tax you owe. The instructions direct filers to combine all excise taxes sharing the same due date onto a single Form 5330. If the taxes relate to different plans, however, you file a separate form for each plan.6Internal Revenue Service. Instructions for Form 5330
Extensions
As of January 1, 2024, Form 5558 is no longer used to request an extension for Form 5330.7Internal Revenue Service. About Form 5558, Application for Extension of Time to File Certain Employee Plan Returns Filers now use Form 8868, which can grant up to six additional months from the original due date.8Internal Revenue Service. Form 8868 An extension gives more time to file, not more time to pay. Interest accrues on any unpaid balance from the original due date.
How to File and Pay
Filers required to file at least 10 returns of any type during the calendar year the Form 5330 is due must file electronically through the IRS Modernized e-File (MeF) system via an authorized e-file provider. The requirement applies to tax years ending on or after December 31, 2023.9Internal Revenue Service. Mandatory Electronic Filing for Certain Form 5330 Filers Using the IRS Modernized e-File System (MeF) Submitting a paper return when you are required to e-file counts as a failure to file, even if the paper form arrives on time.10Internal Revenue Service. Form 5330 Corner
The IRS waived mandatory e-filing for all Form 5330 filers for the tax year ending December 31, 2025.10Internal Revenue Service. Form 5330 Corner Whether that waiver extends to tax year 2026 has not been announced, so filers meeting the 10-return threshold should plan on e-filing unless the IRS issues another waiver.
Filers not subject to the electronic requirement mail paper returns to:6Internal Revenue Service. Instructions for Form 5330
Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201
The full excise tax is due when you file. Payment options include a check or money order payable to the U.S. Treasury, electronic payment through EFTPS, or debit or credit card. Interest runs on any unpaid balance from the original due date. The IRS underpayment rate is 7% per year, compounded daily, for the first quarter of 2026, dropping to 6% for the second quarter.11Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 202612Internal Revenue Service. Internal Revenue Bulletin 2026-8
Penalties and the Cost of Not Correcting
The failure-to-file penalty is 5% of the unpaid tax for each month or partial month the return is late, capped at 25% of the unpaid tax.10Internal Revenue Service. Form 5330 Corner The penalty can be waived for reasonable cause, but not knowing the tax existed rarely qualifies.
The bigger risk is the second-tier tax. The two-tier structure for prohibited transactions and funding deficiencies is designed as a carrot and stick: fix the problem quickly and you pay the initial tax; leave it uncorrected and 100% of the amount involved becomes the price. For prohibited transactions, correction means reversing the deal so the plan ends up no worse off than if the highest fiduciary standards had been followed.2Internal Revenue Service. Retirement Topics – Tax on Prohibited Transactions For funding deficiencies, correction means making the required contributions.
The IRS also runs the Employee Plans Compliance Resolution System (EPCRS), which offers programs for fixing plan errors. The Self-Correction Program lets sponsors fix certain failures without filing with the IRS. The Voluntary Correction Program allows sponsors to submit a correction proposal and pay a fee before any audit begins. Neither program erases a Form 5330 excise tax that has already been triggered, but timely correction through EPCRS can prevent escalation to the second-tier tax and demonstrates good faith.13Internal Revenue Service. EPCRS Overview
Stacked together, the numbers get painful fast. An employer who misses a minimum funding contribution, ignores the initial 10% tax, lets the correction period expire, and then files late is looking at the full deficiency, plus 100% of that amount as the second-tier tax, plus up to 25% in filing penalties, plus daily compounding interest. That is why the practical answer to “what is Form 5330” is usually followed by a second question about how quickly the underlying problem can be corrected.