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file 5500 without audit? I know, this has been discussed many times, but....


WCC

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I know the question of filing without the audit has been discussed many times. However, my question seems to not be addressed in prior discussions and this bothers me. I am looking for any clarification. The following sentence is above the signature line of the 5500:

Under penalties of perjury and other penalties set forth in the instructions, I declare that I have examined this return/report, including accompanying schedules, statements and attachments, as well as the electronic version of this return/report, and to the best of my knowledge and belief, it is true, correct, and complete. (emphasis mine)

I know the DOL has issued FAQ25 on EFAST2 Q&A https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/efast2-form-5500-processing.pdf

I understand there are extraordinary circumstances that cause the audit to be late. However, in my experience, 99% of the time audits are late due to procrastination. 

My question up for discussion is: does the penalty of perjury sentence mean nothing to the DOL? Or does it apply to all the data besides the audit? Does the perjury sentence mean nothing to CPA's and those under Circular 230 who recommend filing without the audit? 

Filing without the audit seems to just be a way to buy another 45 days of "extension" and the DOL seems to be okay with it. 

Thank you

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11 hours ago, WCC said:

Filing without the audit seems to just be a way to buy another 45 days of "extension" and the DOL seems to be okay with it. 

WCC, that is both my understanding and experience. But you had better get the audit in within the 45-day period, because you will not have DFVCP once they write back and tell you that you need to complete with the audit.

 

11 hours ago, WCC said:

My question up for discussion is: does the penalty of perjury sentence mean nothing to the DOL? Or does it apply to all the data besides the audit? Does the perjury sentence mean nothing to CPA's and those under Circular 230 who recommend filing without the audit? 

I have wondered about the same thing in the past. There is at least a superficial disconnect between the statement above the signature line and the policy of giving you a 45-day grace period for the audit, but the 45-day grace period is in a regulation (29 CFR 2560.502c-2(b)(3)) and is very explicit. I think what the penalties of perjury statement is probably designed to get at is that you have not left anything out in the way you have completed the form that would make what you included in the form potentially deceitful. That's obviously not what's going on with a late audit report.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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And remember, you get 45 days after the letter from the IRS or DOL (I forget which) is issued.  So in practice, it's more than 45 days after 10/15...

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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44 minutes ago, BG5150 said:

And remember, you get 45 days after the letter from the IRS or DOL (I forget which) is issued.  So in practice, it's more than 45 days after 10/15...

I would say that this is the case until it isn't.  If you abuse the 45 day "grace period" (for lack of a better word), I would not be surprised if they simply started marking your return (if you are the plan sponsor) or returns (if you are the preparer) as incomplete and therefore not actually filed.

 

 

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1 hour ago, RatherBeGolfing said:

I would say that this is the case until it isn't.  If you abuse the 45 day "grace period" (for lack of a better word), I would not be surprised if they simply started marking your return (if you are the plan sponsor) or returns (if you are the preparer) as incomplete and therefore not actually filed.

It says right in the reg:

An annual report which is rejected under section 104(a)(4) for a failure to provide material information [the audit] shall be treated as a failure to file an annual report when a revised report satisfactory to the Department is not filed within 45 days of the date of the Department's notice of rejection.

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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I agree, RBG.  I don't think I've ever had a 'repeat customer' when it came to a late audit.  Just one-timers.  Mostly they are either first year audits where the engagement only entered into in like September, or off-calendar plans where the audits were supposed to be done during income tax season.

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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I have never seen a penalty for perjury but I have seen huge penalties for not hitting the 45 days.  

So if you file without the auditor's report you better be sure you can get the report within 45 days of the letter.   The hard part is you don't know when you will get the letter.  Some come fast.   I have had 5500s not amended until the following January and they never got a letter.  The thing is once you go down this road you can't really access DFCV.   So if you get a penalty it will be large.   A DFCV filing limits your cost. 

 

So if you think it won't be long after 10/15 the amend filing is a reasonable risk.  The less sure you are the more likely you should just not file and use the DFCV (I hope I got the acronym right).  

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20 minutes ago, BG5150 said:

And what if you 'amend' w/in 45 days and don't attach the audit again?  Do you get another 45 days?  Are they smart enough to figure it out?

I am sure they are, BG5150. If you want to try it I'll give you 8 to 1. I would go 100 to 1, but there is always the potential for clerical error.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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33 minutes ago, BG5150 said:

When you do these, do you attach a page that says 'audit coming' or just leave the required attachments left out?

We attach a page saying the audit is coming.   We get an error from our software if we file with no attachment and it is a plan that needs an audit.   I assume that the DOL's software would do the same thing.   I find the software we use based its checks on the DOL's checks plus some.  

 

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1 hour ago, ESOP Guy said:

I have never seen a penalty for perjury but I have seen huge penalties for not hitting the 45 days.  

So if you file without the auditor's report you better be sure you can get the report within 45 days of the letter.   The hard part is you don't know when you will get the letter.  Some come fast.   I have had 5500s not amended until the following January and they never got a letter.  The thing is once you go down this road you can't really access DFCV.   So if you get a penalty it will be large.   A DFCV filing limits your cost. 

 

So if you think it won't be long after 10/15 the amend filing is a reasonable risk.  The less sure you are the more likely you should just not file and use the DFCV (I hope I got the acronym right).  

The few "repeat offenders" I've seen all have been ESOPs, usually driven by the time lag from valuation to audit to filing. I've worked with a few where the DOL proposed penalties because the client filed the amended return with an audit after the 45-day window. Even in those cases, after explaining the timeline, the penalties were reduced substantially.

I had one last year where the client filed without the audit, which still wasn't complete at the 45-day mark. I spoke with the DOL and they asked us to send in a letter explaining the situation, which we did before day 45. The audit was filed within a few more weeks, and we never heard anything else. (Fingers crossed!)  

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41 minutes ago, EBECatty said:

The few "repeat offenders" I've seen all have been ESOPs, usually driven by the time lag from valuation to audit to filing.

 

Yeah, you would be shocked how many 12/31/2020 PYEs we still don't have the stock price for the ESOP as of today (10/13).    The reality is many times if you don't have the stock price by around 9/1 the TPA's work and the auditor's work can't get done by 10/15.   

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On 10/15/2021 at 3:11 PM, LANDO said:

So if the 5500 is filed on time without the audit attached, AND an amended return is filed within the 45 days WITH the audit attached...no DFVCP is required?

 

On 10/15/2021 at 4:41 PM, WCC said:

When you file without the audit you are deficient, not delinquent. The Delinquent Filer Voluntary Compliance Program (DFVCP) is for delinquent filers. 

But I wouldn't make a habit out of it.

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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That's a good point WCC. So assuming the filing isn't "late" if filed before the 45 days expires, the risk must be that penalties can be assessed for filing an "incomplete" return?  Sounds like everyone agrees there is a risk that DOL/IRS will assess penalties for filing without the audit attached, particularly in an abusive situation, like using this approach multiple times.

Anyone know what the potential penalties are for filing and "incomplete" return assuming the IRS/DOL decides to pursue that?  

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3 hours ago, LANDO said:

That's a good point WCC. So assuming the filing isn't "late" if filed before the 45 days expires, the risk must be that penalties can be assessed for filing an "incomplete" return?  Sounds like everyone agrees there is a risk that DOL/IRS will assess penalties for filing without the audit attached, particularly in an abusive situation, like using this approach multiple times.

Anyone know what the potential penalties are for filing and "incomplete" return assuming the IRS/DOL decides to pursue that?  

Lando, I think the risk is not that they will penalize you for filing without the audit, if you get it in within the 45-day period. I think the risk is that you don't get it in within the 45-day period and then they contact you asking for it and at that point you don't qualify for DFVCP.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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Following up on this since it was just discussed from the podium at the "ask the experts" session at ASPPA annual.

The conservative answer was to file as a delinquent filer when the audit is available. 

If you do file on time but incomplete, you still have to answer the questions truthfully, meaning that if you attach an "audit coming soon" page in place of the audit, you also have to answer that the audit was not attached on Sch H.   In other words, when you amend to include the audit, you also amend to answer the audit related questions on Sch H.

The DOL will mine the filings for data, and one of the things it looks for is large plans that file without an audit, and flag them for manual review and follow up.

How are others preparing schedule H if filing without an audit?  Do you answer the Sch H questions as if the actual audit was attached, and attach an "audit coming soon" note, or do you actually prepare Sch H saying no audit attached?

*edited for clarity

 

 

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