Do You File Form 5500-EZ the Year You Close a Solo 401(k)? (w/Examples) + FAQs

This article reflects federal IRS rules as of June 2026 and covers the 2025 plan year (filed in the 2026 season). Form 5500-EZ is a federal return only — no state filing matches it. Tax law changes, so confirm current figures on IRS.gov before you file.

Yes. For the 2025 plan year and every year after, you must file a final Form 5500-EZ the year you close a Solo 401(k) — even if the plan held less than $250,000 and you never had to file before. You check the “final return” box once all assets leave the plan.

When you shut down a Solo 401(k), the plan does not simply vanish. You owe the IRS one last report — a final Form 5500-EZ — for the year you moved every dollar out and ended the plan, and skipping it is the single most common closing mistake owner-only savers make.

That final return matters because the penalty for a late or missing 5500-EZ runs $250 per day, capped at $150,000 per return. Most people who get burned are not the high-balance savers who already file every year — they are the small savers who rolled $40,000 into an IRA, closed the account, and assumed they were done.

Here is what you will learn:

📋 Why a final 5500-EZ is required even for plans that were always under $250,000.
📆 The exact deadline for the final return and how plan termination changes it.
🧮 Worked dollar examples showing when the form is due and what the penalty would cost.
🛟 How to fix a missed final return cheaply through the IRS late-filer program with Form 14704.
⚠️ The seven mistakes that turn a routine closing into a five-figure penalty letter.

What Form 5500-EZ Actually Is

Form 5500-EZ is the annual return for a one-participant retirement plan. A one-participant plan covers only you, or you and your spouse, when you both own the business — the classic Solo 401(k), plus owner-only profit-sharing and owner-only defined benefit plans. It is the simplified cousin of the full Form 5500 that big employer plans file, and it skips the schedules and audits those plans must attach.

The form is your plan’s yearly report card. It reports plan-level data: assets at year-end, contributions, rollovers in and out, participant loans, the number of participants, and basic plan features. It does not report your personal income, and filing it does not create a tax bill — it is an information return, not a tax return.

The reason this form exists is that a Solo 401(k) is still a qualified retirement plan under the tax code, even though you are the only person in it. The IRS wants a paper trail showing the plan’s money is real, that contributions stayed inside the limits, and that the plan eventually wound down cleanly. The consequence of treating a Solo 401(k) like a personal brokerage account — ignoring the reporting entirely — is that the IRS has no record the plan ever closed, which keeps the filing clock open against you indefinitely.

A common misconception is that the Solo 401(k) custodian files this for you. It does not. You, the plan sponsor and administrator, are responsible for filing, and most discount providers will not lift a finger. What you should do is treat the 5500-EZ as your job every year the form is required — and especially in your closing year.

The Two Triggers That Force a Filing

There are exactly two events that require a one-participant plan to file Form 5500-EZ. Understanding both is the whole ballgame, because the closing-year trigger catches the most people off guard.

The first trigger is the $250,000 asset test. You must file for any plan year in which your combined one-participant plan assets exceed $250,000 on the last day of the plan year, per the IRS filing rules. “Combined” trips people up: the test is not per account — you add together every one-participant plan you maintain. If your Solo 401(k) holds $210,000 and an owner-only cash balance plan holds $55,000, your combined total is $265,000, and you file for both.

The second trigger is plan termination. In the year your plan terminates and all assets are distributed or rolled out, you must file a final Form 5500-EZ — and this applies regardless of the balance. As the 2025 instructions state, all one-participant plans “should file a return for their final plan year indicating that all assets have been distributed.”

The consequence of misreading these triggers is steep. A saver who watched only the $250,000 test, closed a $90,000 plan, and never filed has still missed a required final return — and the $250-per-day penalty starts running the day after the deadline. What you should do is recognize that the moment you decide to close the plan, the termination trigger overrides the dollar threshold entirely.

Why Sub-$250,000 Plans Still Must File at Closing

This is the gotcha that costs ordinary savers the most money, so it deserves its own spotlight. During the normal life of a small Solo 401(k), you may legitimately file nothing — if your combined plan assets never top $250,000 at year-end, no annual 5500-EZ is due. Many owner-only savers go five or ten years without ever filing, which is perfectly correct.

The problem is that this clean no-filing history lulls people into thinking the closing year works the same way. It does not. The final-return rule is a separate, standalone requirement. The 5500Tax Group puts it bluntly: final Forms 5500 are required “even if you’ve been exempt from filing a Form 5500-EZ in previous years.”

The consequence is jarring. Imagine never owing a single filing for a decade, rolling your $120,000 balance to an IRA, closing the account — and then learning you owed one final return you never knew existed. By the time an IRS notice arrives, the daily penalty has been compounding for months. What you should do is build the final 5500-EZ into your closing checklist the same way you would the rollover paperwork, because the IRS treats the missing final return as seriously as a missed high-balance filing.

Which Closing Situation Applies to You?

How you close the plan changes the timing and the box you check, so find your situation below before you file.

You rolled everything to an IRA and emptied the account. This is a full distribution and termination. You file a final 5500-EZ for the year the last dollar left, and you check the final-return box.
Your business dissolved or the LLC closed. The plan does not automatically terminate with the business. You must formally terminate the plan, distribute all assets, then file the final return for that year.
You switched to a new Solo 401(k) provider. This is usually not a termination — you transferred assets between custodians but kept the same plan. No final return is due if the plan continues; keep filing normally if you cross the threshold.
You distributed most but not all assets. If any money remains in the plan on the last day of the year, the plan is not terminated yet. You do not check the final box until the balance and participant count both hit zero.
You’re a high-balance saver who always files. Your final year is the same return you already know, with two changes: you check the final-return box and you report zero ending assets.

The branch that matters most is the difference between transferring custodians (no final return) and terminating the plan (final return required). What you should do if you are unsure is ask your provider in writing whether your action closed the plan or merely moved it.

How to File the Final Return, Step by Step

Closing out a Solo 401(k) on paper is a short process, but each step has a consequence if you skip it. Here is the full walkthrough.

Step 1 — Distribute or Roll Out Every Dollar

Before you can file a final return, the plan must actually be empty. Move all assets out — usually a direct rollover to a traditional IRA to avoid taxes, or a taxable distribution if you choose. The plan must show zero net assets and zero participants on the last day of the plan year. The consequence of filing “final” while money still sits in the plan is an error: the IRS EPCU found over 90% of final filings had a mistake, most often a “final” box checked alongside leftover assets.

Step 2 — Pick the Right Plan Year and Year-End Value

Your final return covers the plan year in which the last assets left. Report the fair market value of assets at the beginning of that year and confirm the ending value is zero. If you rolled out $120,000 in March 2026, your final return is the 2026 plan year, showing beginning assets and a zero ending balance. The consequence of using the wrong year is a mismatch the IRS can flag against your distribution records.

Step 3 — Check the Final-Return Box

On the form, you check the box for “the final return/report.” This single checkbox is what tells the IRS the plan is dead and stops the clock forever. Per the final-return instructions, you check it only when all assets have been distributed and no participants remain at year-end. The consequence of forgetting it is that the IRS still expects another return next year — and penalties build when it never comes.

Step 4 — E-File Through EFAST2

One-participant plans generally must e-file the 5500-EZ through the Department of Labor’s EFAST2 system, using the IFILE web tool or approved software. If you file at least 10 federal returns in the year, e-filing is mandatory for plan years beginning on or after January 1, 2024. The consequence of mailing paper when you are required to e-file is severe: the IRS can treat the paper return as never filed, which restarts the penalty exposure.

Step 5 — Save the Acceptance and Signed Copy

Keep the EFAST2 acceptance confirmation, the confirmation email, and a signed copy in a dated folder. The consequence of losing proof is that, if a notice ever arrives, you cannot show you filed on time — and the burden is on you, not the IRS.

Deadlines, Costs, and Timing

The standard due date for Form 5500-EZ is the last day of the seventh month after the plan year ends. For a calendar-year plan, that is July 31 of the following year. For the 2025 plan year, the on-time deadline was July 31, 2026.

The termination twist matters here. Per T. Rowe Price’s reporting guidance, when a plan is terminated the deadline is the last day of the seventh month after the plan termination — so a plan that empties out mid-year still generally points to that seven-month window. You can buy 2.5 more months by filing Form 5558 before the original due date.

On cost: filing the 5500-EZ yourself through IFILE is free. A CPA or third-party administrator typically charges roughly $150 to $500 to prepare a clean one-participant final return. The form itself takes most people an hour or two once assets are zeroed out. The consequence of missing the deadline without an extension is the $250-per-day penalty, so paying a professional a few hundred dollars is cheap insurance against a five-figure mistake.

Worked Example: When the Final Return Is Due

Suppose Maria, a freelance designer in Austin, opened a Solo 401(k) in 2018. Her balance never topped $250,000, so she correctly filed nothing for years. In February 2026 she rolled her entire $138,000 into a traditional IRA and closed the account.

Plan year of closing: 2026.
Combined year-end assets: $0 (all rolled out).
Was an annual filing ever required before? No — always under $250,000.
Is a final return required now? Yes — termination triggers it regardless of balance.
Deadline: July 31, 2027 (last day of the seventh month after the 2026 plan year).

Maria files one final 5500-EZ for 2026, checks the final-return box, reports a zero ending balance, and is permanently done.

Worked Example: What the Penalty Would Cost

Now suppose Maria forgot. She never files the final return, and the IRS sends a notice on November 1, 2027 — 93 days after the July 31, 2027 deadline.

Daily penalty: $250.
Days late: 93.
Raw penalty: 93 × $250 = $23,250.
Statutory cap per return: $150,000 (she is far below it, but the meter keeps running until she files).

Had she instead used the IRS late-filer relief program, her cost would drop to a flat $500 for the single delinquent return — a difference of $22,750. The math is the entire argument for fixing a missed filing fast.

How to Fix a Missed Final Return

If you already closed the plan and skipped the final 5500-EZ, do not panic and do not wait. The IRS runs a late-filer penalty relief program specifically for one-participant plans under Revenue Procedure 2015-32.

The fix is a flat $500 per delinquent return, capped at $1,500 per plan, instead of the $250-per-day penalty. You attach Form 14704 to the top of the delinquent return and mail the package on paper to the IRS in Ogden, Utah — this relief path uses paper, not EFAST2.

Late-Return Situation	What It Costs You
Caught it before any IRS notice, used the relief program	Flat $500 per return, $1,500 max per plan
Ignored it until a penalty notice arrived	$250 per day, up to $150,000 per return
Filed electronically by mistake hoping for relief	E-filed delinquent returns may not qualify for the program

The critical rule: you must file before the IRS sends a penalty notice. Once a CP notice for that return lands, you lose the cheap fix and fall back to reasonable-cause arguments, which are not guaranteed. Note that Solo 401(k) owners are not eligible for the Department of Labor’s separate DFVCP program — that one is for plans that file the regular Form 5500.

Three Closing Scenarios and Their Outcomes

These three patterns cover the situations most owner-only savers actually face.

Scenario 1 — The small saver who rolled out and closed

Closing Move	Filing Outcome
Rolled $75,000 to an IRA, account emptied, plan terminated	Final 5500-EZ required for the closing year, final box checked, even though no return was ever due before

Scenario 2 — The high-balance saver winding down

Closing Move	Filing Outcome
Distributed $410,000, ended plan, already filed yearly	Same return as always, but check the final box and report zero ending assets

Scenario 3 — The custodian switch mistaken for a closing

Closing Move	Filing Outcome
Transferred $300,000 to a new Solo 401(k) provider, same plan continues	No final return — plan did not terminate; keep filing annually because assets exceed $250,000

Named Examples in Action

David, a consultant in Denver, shut down his S-corp at the end of 2025 and assumed the plan died with the business. It did not. He had to formally terminate the plan, roll his $260,000 to an IRA, and file a final 5500-EZ for 2025 by July 31, 2026 — and because he had crossed $250,000, he also confirmed his prior-year filings were current.

Priya, an e-commerce seller, moved her $180,000 Solo 401(k) from one brokerage to another in 2026. She nearly filed a final return out of caution, but because the plan itself continued, no final return was due — only a normal annual filing once assets stayed above the threshold. Filing “final” by mistake would have wrongly told the IRS her live plan had ended.

Tom, a retired contractor, closed a $95,000 Solo 401(k) in 2024 and never filed, thinking the under-$250,000 rule still applied. An IRS notice arrived in 2026. Because he acted before the penalty was formally assessed on some returns, he used Form 14704 and the relief program to cap his cost at a flat fee rather than thousands in daily penalties.

Mistakes to Avoid

Assuming no final return is due because you never filed before. The outcome is a missed required filing and a daily penalty you never saw coming.
Letting the business closure stand in for plan termination. The outcome is an open, un-terminated plan with no final return on record.
Checking the final box while assets remain. The outcome is an IRS error flag, since a true final return shows zero ending assets and zero participants.
Mailing paper when you must e-file. The outcome is the IRS treating the return as never filed, restarting penalty exposure.
Missing the seven-month deadline with no extension. The outcome is the $250-per-day penalty stacking up fast.
Waiting until an IRS notice arrives to fix a late return. The outcome is losing the flat-fee relief program and facing the full daily penalty.
Treating a custodian transfer as a termination. The outcome is wrongly killing a live plan on paper and confusing future filings.

Do’s and Don’ts

Do file the final 5500-EZ the year the plan empties, regardless of balance — because termination is its own trigger.
Do check the final-return box, because that single checkbox is what permanently stops the filing clock.
Do confirm ending assets and participants are both zero before filing, because mismatches are the top IRS error.
Do e-file through EFAST2 and save the acceptance, because proof of filing protects you if a notice arrives.
Do use Form 14704 promptly if you missed the deadline, because the relief window closes once the IRS assesses a penalty.
Don’t assume your custodian files for you, because owner-only providers rarely do and you remain responsible.
Don’t rely on the $250,000 rule in your closing year, because it does not override the final-return requirement.
Don’t mail paper when the e-file mandate applies, because the return can be treated as not filed.
Don’t delay fixing a late return, because the daily penalty compounds while you wait.
Don’t check the final box during a custodian transfer, because the plan is continuing, not ending.

Pros and Cons of Closing a Solo 401(k)

Pro — Simpler administration. You end annual filing duties for good, because the plan no longer exists.
Pro — Consolidated retirement money. Rolling into an IRA can simplify your accounts, because everything sits in one place.
Pro — Broader investment menu. IRAs often offer wider choices than a small Solo 401(k), because custodian restrictions ease.
Pro — Clean compliance trail. A proper final return closes your IRS file, because the termination is documented.
Pro — No more contribution-limit tracking. You stop juggling employee and employer limits, because the plan is gone.
Con — Loss of high contribution room. A Solo 401(k) allows far larger contributions than an IRA, because of its dual employee-employer structure.
Con — Lost loan feature. IRAs cannot lend to you, because the participant-loan option dies with the plan.
Con — The mandatory final filing. You owe one last return, because closing triggers it regardless of balance.
Con — Penalty risk if mishandled. A missed final return can cost thousands, because the daily penalty runs until you file.
Con — Harder to restart. Reopening later means new plan setup, because the terminated plan cannot be revived.

What to Do Next

Confirm the plan is fully empty — all assets rolled out or distributed, ending balance zero.
Identify your final plan year (the year the last dollar left) and your deadline (the last day of the seventh month after that year-end).
Register for EFAST2 credentials and prepare the final 5500-EZ in IFILE, checking the final-return box.
E-file, then save the acceptance, the confirmation email, and a signed copy in a dated folder.
If you already missed the deadline, file delinquent returns with Form 14704 before an IRS notice arrives.
Call a CPA or third-party administrator if your plan held real estate, private notes, participant loans, or multiple one-participant plans — those filings get complicated fast.

This article is educational and not a substitute for advice from a licensed tax professional for your specific situation.

Frequently Asked Questions

Do I have to file Form 5500-EZ if my Solo 401(k) was always under $250,000?

No — not for normal years. But yes for your final year. The under-$250,000 exemption applies to annual filings only; plan termination requires a final 5500-EZ regardless of balance.

When is the final Form 5500-EZ due?

The last day of the seventh month after the plan year ends. For a calendar-year plan terminated in 2025, that is July 31, 2026. Form 5558 can extend it 2.5 months if filed by the original due date.

What box do I check to show the plan is closed?

The “final return/report” box. You check it only when all assets are distributed and no participants remain at year-end. It permanently tells the IRS the plan has ended.

What happens if I never file the final return?

A penalty of $250 per day, up to $150,000 per return, runs until you file. The IRS also has no record the plan closed, keeping your filing obligation open.

Can I fix a missed final 5500-EZ cheaply?

Yes — use the IRS late-filer relief program. You attach Form 14704 and pay a flat $500 per return, capped at $1,500 per plan, but only if you file before the IRS issues a penalty notice.

Does closing my business automatically close the plan?

No. The plan survives the business unless you formally terminate it, distribute all assets, and file a final return. Many owners miss this step.

Do I file a final return if I just switched providers?

No — if the same plan continues at a new custodian, it is a transfer, not a termination. You keep filing annually only if your assets exceed the $250,000 threshold.

Does my custodian file Form 5500-EZ for me?

No, usually not. As plan sponsor and administrator, you are responsible. Most discount Solo 401(k) providers do not prepare or file the return for you.

Can I paper-file the final 5500-EZ?

Only if exempt from the e-file mandate. Most one-participant plans must e-file through EFAST2. Mailing paper when e-filing is required can cause the IRS to treat the return as never filed.

Is a final return required if I distributed everything as a taxable payout instead of a rollover?

Yes. Whether you roll the money to an IRA or take a taxable distribution, emptying and terminating the plan triggers the final 5500-EZ for that year.

Do state rules require a separate filing when I close a Solo 401(k)?

No. Form 5500-EZ is a federal information return with no direct state equivalent. States do not require a parallel closing return for one-participant retirement plans.

Can the IRS waive the penalty for reasonable cause?

Sometimes. If you miss the flat-fee relief window, you can request reasonable-cause relief, but approval is not guaranteed and you must show a genuine, documented reason for filing late.

Word count: approximately 3,500 words.

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