Missed Restatement Penalty

[JAY21]

Does anyone have any current practical experience on a late Volume Submitter amenders for GUST (just discovered a plan was missed). Has anyone recently submitted a late amender for GUST to the IRS under their closing agreement program ? (forget the revised names of these programs). I believe Rev. Proc. 2003-44 is the appropriate guidance, and I know the penalty sanction is supposed to "consider" part of what the max sanction amount would be (e.g., 40% of amount if trust was disqualified or something like that), but practically speaking, the last time we did restatements for TRA 86, it seemed like in the immediate 6 months or so after the deadline most late amenders were getting slapped with some fairly modest fees ($1,000 - $2,000) as a practical matter. Anyone have any current experience with what late Volume Submitter amenders are receiving as penalties in general currently ?

[Mike Preston]

Late amenders are subject to a specific schedule (the VCP schedule) divided by 2 if the submission is within 1 year of when it should have been done.

[JAY21]

Mike is that schedule part of the Rev. Proc. 2003-44 (haven't worked my way through all of if) or is it found somewhere else ? Thx.

[Mike Preston]

See Section 12 of that very document.

[g8r]

One other point. As stated, the fee is reduced to 50% if you update within one year of the deadline. Unfortunately, if it's a GUST update, you're beyond one year. Even though most pre-approved plans had a deadline of Sept. 30, 2003, when you miss that deadline it relates back to the unextended deadline - the later of 2/28/2002 or the last day of the plan year beginning in 2001. So, for most plans the deadline was 2/28/2002 so the reduction in the sanction can't be used.

[JAY21]

Thanks for the additional clarification on the deadline.

[Mike Preston]

g8r, do you have any citation on the inability to use the 9/30/03 extended RAP as the basis for the EPCRS one-year rule?

[g8r]

No, I don't have cite on that. It's based on an interpretation of the rules. The extension to 9/30 was a limited extension. If you didn't meet the requirements, it seems that the general deadline would apply.

[Mike Preston]

Well, in the absence of a clear rule to the contrary, I think I'd submit on the basis if the lower fee being applicable and then see what happens.

[g8r]

Agreed. It does no harm to try the submission with the lower fee. I would just let the client know that there is a possibility that the fee will be higher.