Leaderboard

If I was in your situation with both a 2021 and 2017 return on record, I would engage a professional NOW. My argument would be that I never intended to file a 2017 return, and only did so on the misguided advice of an IRS representative. I think your problem is that you need someone who speaks the same language as the IRS and knows which arguments are valid. Perhaps even more important, they know what not to argue.

Yep. Now there is clear intent to file a 2017 years after the due date, which could end up costing $15k. Hopefully the IRS rep made a note of it since OP cant identify the rep.

What sets up a restorative payment is that a fiduciary pays it to restore losses to a plan (or IRA) if there was a reasonable risk of liability for the fiduciary’s breach, and other facts and circumstances show the payment is not a disguised contribution. For a § 401(a)-qualified plan (or another plan that has § 415 limits), a Treasury department rule distinguishes between an annual addition and a restorative payment, which does not count as an annual addition. 26 C.F.R. § 1.415(c)-1(b)(2)(ii)(C) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR686e4ad80b3ad70/section-1.415(c)-1#p-1.415(c)-1(b)(2)(ii)(C); Limitations on Benefits and Contributions Under Qualified Plans, 72 Federal Register 16878, 16887 [middle column] (Apr. 5, 2007), https://www.govinfo.gov/content/pkg/FR-2007-04-05/pdf/E7-5750.pdf. That rule follows a general principle described in Revenue Ruling 2002-45, 2002-2 C.B. 116. The Internal Revenue Service has issued letter rulings applying the principle regarding IRAs. IRS Letter Rulings 2009-21-039 (Feb. 25, 2009), 2008-52-034 (Sept. 30, 2008), 2008-50-054 (Sept. 18, 2008), 2007-38-025 (June 26, 2007), 2007-24-040 (Mar. 20, 2007), 2007-19-017 (Feb. 12, 2007), 2007-14-030 (Jan. 11, 2007), 2007-05-031 (Nov. 9, 2006). [In the numbering of letter rulings, the two digits after the year show the week in which the ruling was released under the Freedom of Information Act.] Although a letter ruling is no precedent [I.R.C. § 6110(k)(3)], one might use the reasoning of the three layers of sources described above—and that the IRS has consistently applied the principle since at least 2002—to support a substantial-authority tax-return position. 26 C.F.R. § 1.6662‐4(d)(2)-(3) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR1d0453abf9d86e0/section-1.6662-4#p-1.6662-4(d)(3). The position will be stronger if the IRA holder had and keeps evidence, preferably independent evidence, that shows the settlement was truly made to end a fiduciary’s (or alleged fiduciary’s) risk exposure.