Withholding not deposited

[pbarrett]

We are a TPA firm. In 2000, we instructed a Trustee to distribute appx $24,000 to a terminated participant and withhold $6000 for taxes. The $24,000 was paid out. The $6000 was transferred from the Trust to the Corporation (the Trust does not have a checking account and the intent was for the Corporation to in turn deposit the $6000 w/h). We just found out that the $6000 is still sitting in the Corp account.

We prepared and the Trustee sent in the 2000 1099R showing the total dist of $30,000 with $6000 withheld. No one has heard anything from anyone.

I don't know what the penalties are but I guess the proper approach would be to send the $6000 into IRS with a letter of explanation from the Plan's trustee. Are there special procedures or can someone direct me where to go to check out the late penalties. I thought maybe if the Trustee is just honest the penalties might be waived. This is a long time client and I truly think it was an innocent mistake.

Any thoughts would be appreciated.

[R. Butler]

See IRC §6656

http://benefitsattorney.com/cgibin/framed/...?ID=304&id==304

(1) Applicable percentage

(A) In general

Except as provided in subparagraph (B), the term

``applicable percentage'' means--

(i) 2 percent if the failure is for not more than 5

days,

(ii) 5 percent if the failure is for more than 5 days

but not more than 15 days, and

(iii) 10 percent if the failure is for more than 15

days.

[pbarrett]

Thanks so much!