Order Your 5500 Filing With an Audit as Your Side Item?
You are sitting in your office, which of course has paperwork piled a mile high, and you start to take a quick 5 minute breather before collapsing from utter mental exhaustion. You pull up twitter or LinkedIn and see a post headlined “Did you order your 5500 filing with an audit as your side item?” Now you are REALLY starting to feel like you are catching the flu or whatever virus is floating around your neighborhood. Right NOW is the time to think about the need for an audit and the steps to prepare for one, as well as finding a reputable auditor.
After you have calmed down, consider the criteria that triggers the need for an audit. Does the plan have over 100 participants as of January 1, 2019, does the 80/120 rule apply this year, or has the plan existed less than 7 months and it can defer its audit until the subsequent year? There are a lot of what-ifs when determining whether your plan needs an audit, but right now, at the end of 2019, is the best time to determine if your plan needs an audit. This way you do not catch yourself in a deep Google search and asking around if your plan requires an audit next summer.
Time is of the essence when it comes to having your 401(k) audit completed, especially when the deadline to file calendar year-end plans is July 31st (unless extended to October 15th). Having the auditor’s report filed with your 5500 is of the utmost importance. I know, the technical jargon is only getting heavier, but don’t fret. The IRS has a fantastic site to visit for information and includes links to the Department of Labor's website. You can also speak to your third-party administrator or financial adviser to determine if you have reached any of the milestones that trigger an audit. And if you don’t, that's great news for you! If you do need an audit, be grateful you determined it early so you can begin the audit process with no regrets.