Guest Article

(From the July 11, 2011 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

Automatic Six-Month Filing Extension Is Provided for Health Plan Excise Tax Returns

As originally proposed, recently finalized Treasury regulations will provide an automatic six-month extension for filing Form 8928—Return of Certain Excise Taxes under Chapter 43. The automatic six-month extension applies if the group health plan or employer properly submits Form 7004—Application of Automatic Extension of Time to File by the original deadline for filing the Form 8928 and pays the excise taxes by the original due date. The extension applies only to the filing obligation. No extension is provided for payment of the tax.

Obtaining the Automatic Extension

The filing extension applies to Form 8928, which is used to report taxes due by an employer, group health plan, or plan administrator under:

For failures under Code §§ 4980B and 4980D the Form 8928 needs to be filed by the due date for filing the federal income tax return of the employer (or the plan administrator, if responsible for the failure). For failures under Code §§ 4980E and 4980G the Form must be filed by the employer by the 15th day of the fourth month following the calendar year in which the non-comparable contributions were made. The excise tax payment is due with the filing of the Form 8928.

To obtain the automatic extension, the Form 7004 must be filed by the original due date for filing the Form 8928. Payment of the tentative total excise tax is due with the Form 7004. What advantage does an extension provide? Clearly, if the Form 8928 is not or cannot be timely completed, an extension avoids imposition of a late filing fee (i.e., 5 percent of the unpaid tax for each month or part of a month the return is late). The extension might also provide greater time for an employer or plan to determine whether the failures were due to "reasonable cause" and not willful neglect—and, as such, potentially not subject to the excise tax. (See the Instructions to Form 8928. Form 7004 allows for a tentative total tax of $0 if applicable.) When filed, the Form 8928 provides an offset for amounts paid earlier with the Form 7004.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.220.2692, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955. Copyright 2011, Deloitte.