Form 5330 is the IRS return used to report and pay excise taxes on retirement plan problems, such as prohibited transactions, minimum funding failures, nondeductible contributions and excess contributions. For a small employer, the case that comes up most is failing to pass employees' elective deferrals to the plan on time, which the IRS treats as a prohibited transaction. The initial tax on a prohibited transaction is 15% of the amount involved for each year it stays uncorrected.
Everything below comes from the IRS Instructions for Form 5330 (Rev. December 2025), as of October 2026.
What it reports
The instructions list the excise taxes the form covers. The ones employers most often meet:
- a prohibited transaction (section 4975)
- a minimum funding deficiency (section 4971)
- nondeductible contributions to qualified plans (section 4972)
- excess contributions to plans with cash or deferred arrangements (section 4979)
- excess fringe benefits (section 4977)
- a reversion of plan assets to the employer (section 4980)
- a failure to give notice of a significant reduction in future benefit accruals (section 4980F)
The person who files depends on the tax: often the employer, but for a prohibited transaction it's the disqualified person who took part, and for a prohibited tax shelter transaction it's the entity manager who approved it.
The late deferral trap
When an employer holds on to amounts withheld from employees' pay instead of sending them to the plan, the instructions treat it as a failure to transmit participant contributions. That's a prohibited transaction, and the amount involved is based on the interest on those elective deferrals, under Rev. Rul. 2006-38. The insight people miss: the tax is figured on the lost interest, not the whole deferral, so the tax is far smaller than the deferral itself. What isn't small is the 100% additional tax if the problem isn't corrected within the taxable period.
Due dates depend on the tax
| Tax under section | File Form 5330 by |
|---|---|
| 4971 (funding) | The 15th day of the 10th month after the plan year ends |
| 4972, 4975, 4976, 4978, 4979A | The last day of the 7th month after the end of the filer's tax year |
| 4977 (excess fringe benefits) | The last day of the 7th month after the calendar year the benefits were paid |
| 4979 (excess contributions) | The last day of the 15th month after the plan year the contributions relate to |
| 4965 (tax shelter transactions) | The 15th day of the 5th month after the entity manager's tax year |
File one Form 5330 for all excise taxes that share a due date, and separate forms for separate plans. A financial institution that took part in a prohibited transaction with several IRAs or plans files one form under its own EIN, with a list of the plans affected.
Extensions
You request an extension on Form 8868, not Form 5558, which is no longer used for Form 5330. A timely Form 8868 can give up to 6 months, but it doesn't extend the time to pay, so any tax due goes with the extension request. If taxes on the same Form 5330 have different due dates, each needs its own Form 8868. The Form 8868 page covers how that form works.
Working out the prohibited transaction tax
- List each transaction, its date and the amount involved.
- Apply the initial tax of 15% of the amount involved for each year, or part of a year, in the taxable period.
- Correct the transaction. If it isn't corrected within the taxable period, an additional tax of 100% of the amount involved applies to any disqualified person who took part, other than a fiduciary acting only as such.
- Answer Part I line 4: if not everything was corrected by year end, attach a statement saying when it will be.
- File and pay by the last day of the 7th month after your tax year ends.
Penalties and electronic filing
| Problem | Penalty |
|---|---|
| Late filing | 5% of the unpaid tax for each month or part of a month, up to 25% |
| Late payment | Half of 1% of the unpaid tax for each month or part of a month, up to 25% |
Neither applies if you show reasonable cause, and you can attach a statement explaining it to a late return. Since tax years ending on or after 2023, filers who must file at least 10 returns of any type in the calendar year have to file Form 5330 electronically.
Fixing a Form 5330 you've already filed
File an amended Form 5330 to claim a refund of overpaid tax, to get a credit for it, or to report more tax due in the same tax year with the same due date as tax you've already reported. You check the box in item H and report the correct amounts. A refund or credit claim must state the reasons in detail, with supporting evidence. If there's an overpayment, the form now has direct deposit fields on Part II, lines 20b to 20d.
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A note on the statute of limitations
Filing Form 5330 generally starts the limitations period only for the excise taxes reported on it. For prohibited transaction taxes, though, the limitations period runs from the filing of the plan's Form 5500, so an accurate 5500 matters here too.
My verdict
If deferrals reached the plan late, fix the deposit, calculate the lost interest, and file Form 5330 by the end of the 7th month after your tax year. The tax on interest is usually modest; leaving it uncorrected is what turns a small excise tax into a 100% one.
Frequently asked questions
What is Form 5330?
It's the IRS return for reporting and paying excise taxes related to employee benefit plans, such as prohibited transactions, funding deficiencies and excess or nondeductible contributions.
Do late 401(k) deposits need a Form 5330?
Failing to transmit participant contributions (elective deferrals) on time is treated as a prohibited transaction, and the excise tax on it goes on Form 5330, based on the interest on those deferrals.
What is the Form 5330 tax on a prohibited transaction?
An initial tax of 15% of the amount involved for each year or part of a year in the taxable period, plus an additional 100% if it isn't corrected in time.
When is Form 5330 due for a prohibited transaction?
By the last day of the 7th month after the end of the tax year of the employer or other person who must file.
How do I get an extension for Form 5330?
File Form 8868 by the normal due date. It can extend the filing date by up to 6 months but doesn't extend the time to pay.
