DFVC Unavailable-What To Do?

[Guest merlin]

A new client literally just walked in the door who hasn't filed his 5500EZs for 2000 and 2001 (the actuary went MIA). I assume he will still have to file with the EBSA, but the DFVC is not available to an EZ filer. What will happen when he files the back forms? Back in the days pre-EFAST the IRS was always very lenient in these cases. What about the DOL?

[Belgarath]

I'm not sure the DOL has any say in this situation. The DOL penalties are only applicable in the case of a plan covered by Title I of ERISA. An EZ filer isn't covered by Title I, (which is why DFVC isn't available to EZ filers) so the IRS would be imposing the penalties. Given that the IRS has formally said, in IRS Notice 2002-23 that they would waive their penalties for plans that are both eligible for and satisfy the requirements of the DFVC program, it's hard to imagine that they would be too difficult to deal with on this issue just because you have an EZ filer. In other words, I believe that for EZ filers, you are still dealing with the IRS, and not the DOL, and that the IRS would likely continue to be somewhat reasonable. But I haven't had an actual live case yet to test this, so I'm not sure if I'm right! Maybe someone else has?

[Guest jashendo]

What he said.

Actually, I had a similar (though not identical) situation arise last year, and the IRS actually waived the penalty altogether. You'll probably get a computer-generated notice imposing the regular IRS penalty, however, so don't be surprised at a bill for $24K, or something like that.

[Lynn Campbell]

I too have had recent experience with clients who were required to file 5500-EZ's but never found out until the GUST restatements. These were clients with brokerage house documents who had always "taken care of their own plan". We submitted all the 5500-EZ's for multiple years, and the clients did get penalty letters. However, the CPA responded with a reasonable cause letter in each case and as far as I know all penalties were waived.