IRS Issues Penatly Notice for Late 5500 - If Plan Participates in DFVC, Is IRS Penalty Abated?

[Guest rocnrols2]

TPA has Client X which maintains a qualified plan subject to ERISA. For 2001, the Form 5500 was not filed. The IRS has issued a notice to Client X imposing a penalty of several thousand dollars. Client X has not received a notice from the DOL. If Client X files under the DFVC program, will the IRS penalty be abated?

[Archimage]

In every case I have dealt I have sent a letter back to the IRS saying that the client participated in the DFVC program through the DOL. The IRS has come back every time and waived the penalty. Should be no problem for your case.

[Belgarath]

IRS Notice 2002-23 says that they will not impose their separate $25.00 per day penalty for plans that are both eligible for, and satisfy the requirements of, the DFVC program.

[Guest F1fan]

In Notice 2002-23, IRS announced that it would not impose IRC penalties for a late filing of Form 5500 if: (a) the Form 5500 is eligible for DFVC Program, and (2) the late 5500 is filed in accordance with DFVC Program. Notice 2002-23 does not seem to explicitly prohibit relief from IRC penalties if IRS issued a delinquency notice prior to the DFVC Program being utilized. Section 2.02 of the DFVC Program (2002 release) indicates that DFCV Program is not available if plan administrator has been notified by the DOL that a 5500 is late (no mention of IRS notice). Therefore, based on my very quick review, it does seem possible to avoid the IRS penalty in scenario you describe, assuming use of DFVC Program. I note, however, that I do not have a real-life experience to cite.

[Guest rocnrols2]

Thanks for your uinput!

[Earl]

I have a similar situation. Penalty notice recieved from IRS.

Twist is the letter starts: "This notice is a follow up to prior correspondence you received from the Departmetn of Labor."

If that were true then client is ineligible for DFVC, but no notice was received from the DoL.

(If this were an isolated incident I would doubt the client's veracity, but it has happened twice in the past 2 weeks. Both of these guys are a mess but they are generally honest and open with me.)

My inclination is to have him file via DFVC but wondering if anyone has worked through this.

Also - DFVC filing does not seem to require that the DoL filing be submitted at the same time as the original EBSA filing. One of the above two was prepared prior to the inital deadline so the Ext/DFVC box D is not checked on that filing. Would that require an amended EBSA filing or would you just check the box now and submit to DFVC only?

Thanks