RatherBeGolfing

Dr. Acula had a practice with several full time employees. Dr. Acula leases a small space in the offices of Dr. Van Helsing. At some point Dr. Van Helsing takes over as the employer of Dr. Acula's employees. As part of this agreement, the two parties agree that Dr. Van Helsing will make his staff available to Dr. Acula for up to 30 hours per month at a set rate. The staff that will help Dr. Acula could be one of his old employees or a staff member who has always worked for Dr. Van Helsing, or any combination thereof. Question Does the prior service to Dr. Acula satisfy the leased employee condition that he or she has performed such services for the recipient (or the recipient and related persons) on a substantially full-time basis for at least one year? Thanks!

My issue with this is that the filing is either timely or it is not timely, it cant be both at the same time. As far as I'm aware, the reason you can get penalized for an incomplete filing is that a materially incomplete return is treated as if the return was never filed. If it is treated as if it was never filed, DFVCP should apply until you are notified by the DOL of a failure to file. The friendly DOL emails do not count as being notified of a failure to file. It doesn't make sense for the IRS to treat you as late while the DOL doesn't.

FWIW, I have talked to a lot of auditors in October, and none had seen the type of scenario that Austin brought up in the other thread. I agree, guidance is clear that even after IRS issues a penalty for late filing, you can avoid the penalty by filing DFVCP. Personally, that's how I think late audits should be corrected. The practice of attaching the audit coming soon letter has become so pervasive that I'm not seeing much urgency from auditor's anymore. They used to push and push once you are within a few weeks of the filing deadline, but now many of the auditors will just ask us to attach an audit coming soon letter.

It is probably much more likely that plan 002 allows for 401(k) and OP just doesn't realize it. These brokerage account solo plans often use super simplified pre-approved plan docs, so I doubt the end user can permit Roth only in the document.

If you have separate documents with 001 and 002, you have two plans. They have to be considered together for limits and such, but you will need separate Form 5500s when you exceed $250k combined, or when one or both plans terminate.

Email is fine. It is only the 2020 safe harbor that requires the initial notice to be paper.

Incorrect? No. Necessary? Also no. They don't have to be the same, but they can be. What is required is that different "sources" of money in the plan are tracked separately. If you have both pre-tax and Roth contributions, each source should be credited with its own earnings, losses, fees, etc. Same if you add match or profit sharing. If you are doing this without a TPA or if the custodian cannot/will not track sources separately, it may make sense to have an account for each source. If the custodian requires new plan paperwork for each account, you will end up with more than one plan. If you are charged any fees for creating or maintaining each account/plan, and I suggest you add those fees up and look into using a TPA if comparable.

To add a little more context, after decades of IRS not having an issue with the discretionary match language in these documents, they suddenly brought this up in the review stages of the C3 document. Their objection is that the fully discretionary matching contributions do not meet the requirements for definitely determinable benefits. Since it was brought up late in the C3 process, the new notice was a compromise to not have to scramble to redesign plans. My understanding is that the IRS will not make this compromise for the C4 document.

@Lou S. I think that might work even if it is not "by the book". A more conservative approach would be to remove as mistake of fact (since it appears it wasn't withheld from participant), or forfeit and use to to offset future employer contributions.

Nope, that's what I would do.

Sort of... You can file DFVCP as long as you have not received a DOL notice of intent to assess a penalty. You are still eligible for DFVCP if you receive an IRS penalty assessment. For the IRS late filer penalty relief program (for EZ filers), you are no longer eligible if you receive the IRS penalty assessment.

DC math is never close.

Correct. Attachments are reviewed to make sure PPI is not published for public viewing.

If the zip code of the plan sponsor is not in a designated disaster area, it will be denied or questioned.

That's a tough call. I think it would depend on whether the designated signer is a preference and someone else could have signed as Plan Admin. 866-562-5227 is the IRS number for affected taxpayers outside of the disaster area. You can call it as a service provider as well.

The final rule for PPP registration simply says to provide EIN and plan number. A quick search of PPP registrations show plenty of 001, 002, 003, etc. None starting with a 3.

Did you mean Hurricane Ian? NC is a declared disaster area for Ian. "Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief." If your TPA business is in NC, the answer is almost certainly yes. For employees working from NC but the TPA is in a different state, it gets a little tricky. I could see a situation where the NC employee had certain records that the non-NC firm cant access after the storm as qualifying for relief. In my situation at my prior firm, we had several offices throughout the state. A disaster hit the area where our main office was located, but not the other offices. Because a lot of the information needed was at the main office, this interrupted work from the other offices. We used relief for clients of all offices with no issue from the IRS. The matched the Zipcode of the main office to a county qualifying for relief.

Thanks John!

Yea this is the answer I'm looking for as well. I have never been a fan of the "attach a statement saying the audit isn't ready just to get it through EFAST" approach, but the fact that DOL has to give you 45 days to fix it has had me use it on occasion. If the DOL is sharing their data with IRS (who is not required to hive 45 days) that really does change things up a bit. I don't mind a change, I just want to know best practice of addressing the issue going forward.

That's what I'm thinking too. The DOL seems to be more efficient at finding late/incomplete filers early on, so it wouldn't surprise me if they are sharing with the IRS...

Well, I'm not sure that it will take them a lot longer to catch up. The DOL has been systematically looking at filing about 30 days after the due date. If you haven't filed, they send an email saying something along the lines of "your last 5500 had participants at year end and wasn't final, so you should have filed your 5500 month" . You have a few weeks to file DFVCP. This might give you longer than your current example though. There is a webinar on retroactive corrections later today, I'll float the question there to see if anyone else has had this experience.

Ok. So you aren't disqualified from DFVCP (CP-283 would disqualify a one participant plan from relief under the IRS late filer program) but its a big change from a "hey your filing is incomplete, fix it within 45 days" letter. I just had this conversation with someone in my office this morning, and I may need to revisit that discussion if this is the new normal...

Hey Austin, So they sent a CP-283 right off the bat? Or a 403/406 notice?

Tom, that is great to hear! A wonderful gift indeed!

Personally, I'd prefer to have all force-outs go to a default IRA. Cash-outs are notorious for going uncashed, which creates the headache of stale checks, withheld taxes, and so on. For purposes of this discussion I'm not going to go into the constructive receipt issue. It is very simple to select a default IRA provider these days, and they do most of the heavy lifting for you. It's also often at no cost to the sponsor. @Peter Gulia is the client concerned about liability for selecting and monitoring the default IRA provider? Or is there another reason for wanting to stay away from them?