Personal liability for nonfiling of corporation Form 5500

Client had liquidated corporation.

There had been a corporation 401(k), for which the corporation was Plan Administrator.

If the final Form 5500 was not filed, is the corporation owner personally liable for the penalties?

Or is the penalty owed by the corporation and therefore is uncolllectble?

Thanks!

I don't see a theory whereby a stockholder is liable for a corporate level penalty.

I don't see a theory whereby a stockholder is liable for a corporate level penalty.

I do. It's called "transferee liability," section 6901.

section 6901

What corporate asset was transferred? Doesn't the employee own the 401k? The penalty is on the trustee.

OP said that the corporation was the plan administrator and that the corporate owner liquidated the corporation. In my view, this is enough for transferee liability for the penalty for failure to file the 5500.

We'd need to follow the bouncing ball between 401(a) and 501(a), which I did not do, but if the penalty is covered by sec 6652, we'd see this in (c)(6)

(C) Person
For purposes of this subsection, the term “person” means any officer, director, trustee, employee, or other individual who is under a duty to perform the act in respect of which the violation occurs.

A late file penalty is like $3k would a revenue agent even assert transfer liability. I think they could depending on what happened, but doubt anyone would in case this small.

Don't know where you're getting a penalty of $3k. The penalty for a late-filed 5500 is $250 a day up to $150,000 per 6652(e).

What corporate asset was transferred?

All of these (is Dave’s point):

Client had liquidated corporation.

Is the 401k a corporate asset? I was under the impression it was the employee's.
This Experian blog echoes my understanding:

Is Your 401(k) Protected if Your Employer Goes Out of Business?
If you invest in your company's 401(k) plan, you know that your pre-tax savings comes out of your paycheck each period and is invested in one or more investment vehicles, usually mutual funds. But you may wonder if your employer ever sees any of that money, other than any contribution it may provide. Very simply, your employer is not legally allowed to hold your 401(k) money. Under federal law, all 401(k) money must be held in a trust or in an insurance contract that's separate from your employer's assets. Therefore, neither your employer nor any of your employer's creditors can grab that 401(k) money.

Based on the cite in post #6, do we even need transferee liability to apply the penalty to the owner of the stock?

That's my point in post #4. I don't think 6901 is the applicable section, but liability may still be the trustee's as you reference in #6.
Having just fought a 7 month battle to remove a 5500-EZ penalty in the amount of $50K, I wouldn't subject my client to that if I had a choice. The OP should look into the DFVCP.

That's my point in post #4. I don't think 6901 is the applicable section, but liability may still be the trustee's as you reference in #6.

I don't agree. 6058(a) requires the employer or the plan administrator to file the 5500. In this case, the corporation was both the employer and the plan administrator. So, the liability for the penalty is the corporation's. With a liquidated corporation, the only way for the IRS to collect would be 6901.

The OP did state that the corporation was the plan administrator so I have to agree with you.

Is the 401k a corporate asset?

No, but all the other assets that were removed from the corporation via liquidation are.

So, corp has a big obligation. Problem solved, we’ll just shut down the corp (transferor) and distribute all the corporate assets to the sole shareholder (transferee). And we’ll leave the corporate obligtion unpaid.