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What are the penalties if an extension for filing a Form 5500 was not obtained?

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6 replies to this topic

#1 Kemily


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Posted 30 September 2003 - 12:43 PM

What are the financial ramifications when an extension is not filed for a calendar plan year?

#2 jashendo


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Posted 30 September 2003 - 03:06 PM

If you file late (with or without having applied for an extension) the penalties are: (1) $25/day -- to a maximum of $15,000 -- from the IRS, and (2) up to $1100/day from the DOL. That said, there are several additional points to consider.
First, some plans are subject to DOL filing requirements only (e.g., welfare plans), some are subject to IRS filing requirements only (e.g., some pension plans that are not subject to Title I of ERISA, such as plans without common-law employees) , and some are subject to both IRS and DOL (most pension plans).
Next, in practice, the DOL will impose much smaller penalties (smaller than $1100/day), with the amount depending upon whether you file late on your own (generally, $50/day), or are caught as a "non-filer" (generally, $300/day up to $30,000/yr).
Finally, as long as you are a Title I plan subject to DOL filing requirements, there is the Delinquent Filer Voluntary Compliance program, under which you can file a late return and pay substantially reduced DOL penalties (e.g., $10/day -- max $750 for a small plan or $2000 for a large plan -- with some further twists for multiple plans, tax-exempt sponsors, and other situations) and no IRS penalties. (If you are not a Title I plan -- such as a 5500-EZ filer -- you are not eligible for this relief.)
By the way, even if you do file for an extension, but you miss the extended deadline, the penalties are computed from the original due date without regard to the extension. So the foregoing applies to filers who (1) file late without an extension, or (2) have an extension but miss the extended due date.

#3 Guest_named_B2Randolph_*

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Posted 20 October 2003 - 09:50 AM

The Delinquent Filers Voluntary Correction Program (DFVC) is a very easy program, and the penalties for filing under this program are minimal as compared to the $1100+ daily penalties the late 5500 may generate.

In a nutshell, all it takes it to send the form 5500 and all schedules and attachments to the regular EBSA address with a statement that you are submitting under DFVC and send another copy of the Form 5500 only to DFVC with a check. Worse case scenario, the check will only have to be for $4000 and may be as little as $10 per day late.

Check it out. This needs to be in everyone's bag of tricks.

#4 eafredel


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Posted 22 October 2003 - 12:40 PM

Two other things: first, if the employer files for an extension of time to file its federal corporate income tax return, this may trigger an automatic extension of time to file the Form 5500 (this is true even if a Form 5558 is not filed); second, the IRS often grants automatic extensions for employers in areas affected by some type of disaster. This year Hurricane Isabel triggered such relief. If these facts apply, your Form 5500 may not be untimely.

#5 jevd


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Posted 30 December 2003 - 10:30 AM

What can a single participant (Non-ERISA) employer do if 5500 was never filed for multiple years. ( 10 yrs) This was just discovered and employer could also use a referral to a good ERISA qualified atty on the east coast.
Making the complex understandable.

#6 Guest_named_merlin_*

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Posted 13 January 2004 - 01:03 PM

Is he a 5500 filer or 5500EZ? If 5500 he can avail himself of the DFVC program as described above. There is a $1500 cap on the penalty for plans with reporting delinquencies for multiple years, so the exposure is pretty small. Even better, the IRS has agreed in Notice 2002-23 not to levy any additional penalties on someone who files under the DFVC.

If he's a 5500EZ filer he's in the IRS ballpark alone. Historically the IRS has been extremely lenient with respect to delinquent filers who come forward voluntarily, especially if he can demonstrate "reasonable cause" for the failure to file. In my experience they have accepted any excuse short of wilful noncompliance.

If you're still interested,here are four ERISA attorneys in NJ (NY metro area):

Stephen Ferszt,973-530-2020
Alan Glazner,908-272-1544
Steven Marshall,732-855-6041
Leonard Witman,973-822-0220

#7 jevd


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Posted 13 January 2004 - 01:09 PM

Thanks Merlin.
He's a 5500EZ ( One Participant Plan)

I just wish the IRS would adopt a formalized plan for delinquent filers for the 5500 EZ filers with a reduced penalty similar to DOL.

Edited by jevd, 13 January 2004 - 01:11 PM.

Making the complex understandable.