What are the filing requirements with regard the 1096 and 945 in a year when the plan has no distributions?

[Guest mmc]

If a plan has no distributions for 2004, are they still required to file a form 1096? Are they required to file a 945? Does the 945 have a zeros?

[Guest CharlieLaur]

If there were no distributions in 2004, it is not necessary to file either a Form 1096 or a Form 945.

[Guest Harry O]

With very few exceptions (and none that I can think of offhand!), you should file a tax return even when no tax is due. This is because the filing starts the statute of limitations running. If it turns out there was a massive distribution made in 2004 that you were not aware of, you may escape liability for failure to withhold if the IRS doesn't get around to finding this out until after the 3 year statute has run. If you did not file any return, the statute remains open and you can be assessed at any time by the IRS. Better safe than sorry.

[Blinky the 3-eyed Fish]

Harry, we all can't be that cautious, can we? I certainly hope I am aware enough to know if a "massive distribution" occurred for any one of my plans. If not, then either the plan sponsor performed an egregious boo boo or I need to go into a home. The former removes me of liability. I could think of a thousand things more likely for a plan sponsor to do wrong with a plan then forget to tell me of a distribution that I should know of in the first place.

[GBurns]

Filing the tax return for that reason is wise. Although there was no distribution therefore no withholding therefore no deposit, you should still file a $0 945 and a subsequent $0 1096.

Not filing $0 Form 941 and other Forms is something that creates audit problems for many small business and self employed persons. The problems it creates are a big burden aside from being a trigger for audits.

It should be no different for plans.

[could be me maybe not]

Hah. That Blinky fish is always getting himself in donkey doo doo by cutting corners.

Bet he doesn't even file Schedule P. Bet he doesn't even file Schedule B for 401(k) plans. There might have been a massive contribution.

Hah.

[Blinky the 3-eyed Fish]

And don't forget that we should caveat every single thing we say or write so that it can in no way be taken out of context or misconstrued. Also, we should each purchase loud beepers to afix to our vehicles when we back them up so that no children run behind them. Also, we should never take a bath when no one else is home because we could suffer a blackout and drown. I don't even like to walk with scissors, let alone run with them.

I am being facetious to point out that we can't consider every wrong possibility. The trouble it would take to send a 1096 to every client would far outweigh the harm that would come from a missed distribution the client didn't tell me about.

[pmacduff]

I'm with Blinky on this one...see attached #945 instructions, page #1 column 2, 1st paragraph. We (and our clients) have enough forms & paperwork to worry about without having to file forms in years when they are not necessary. As Blinky points out, if I were to "miss" ANY distribution in the Plan (not just the massive ones), I believe I should find another career as that's a very important part of what I do.....

i9452004.pdf

[Guest Harry O]

And your departure from the pension profession will be of little solace to the employer that has to fork over tens of thousands in underwithheld tax (hoping they can get it back from the now departed employee), interest and possibly penalties. <g> The instructions say that you are not "required" to file under these circumstances. I'm only suggesting that you file anyway in case you were mistaken about your original obligation to file. I don't disagree that it is a pain in some unsightly body part to file the return but better safe than sorry . . .

[Blinky the 3-eyed Fish]

I don't disagree that it is a pain in some unsightly body part to file the return but better safe than sorry . . .

And here is where we will have to agree to disagree. My cost/benefit analysis has determined that the cost of filing the 1096's for every client is FAR greater than the benefit of doing so.

I can't even fathom charging a client for a form they didn't need to file under the guise that they may eventually make an unauthorized distribution and then forget to tell me. Can you imagine that discussion?

[WDIK]

I am curious to hear from anyone that has filed a form 1096 showing 0 in boxes 3, 4 and 5.

[Guest Pensions in Paradise]

Has anyone reading this thread ever filed a 945 showing $0? I would think that if you did file a $0 return, the IRS would think that it was a mistake and either call you or send you a letter. Then you would have to spend the time explaining to the IRS why you filed a $0 return.

And I don't agree with Harry that filing a $0 return would relieve the employer of withholding penalties.

[Guest Harry O]

It relieves you of withholding penalties if the statute of limitations has expired after 3 years. And the statute of limitations never expires if you don't file a return. Thus, you may want to file a return with $0 to have the statute expire after 3 years. I have filed many returns showing $0 tax due and have never had any issues with the IRS.

[Guest Pensions in Paradise]

Code Section 6501©(1) - "In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time."

[mbozek]

I do not prepare income tax returns or withholding forms but I thought that the 3 yr s/l under IRC 6501 applies only to returns filed for taxes imposed and withholding is not a tax imposed on a taxpayer. Thus the s/l doesn't begin just by filing a return for tax withholding. Need to get an answer from a tax accountant.

[could be me maybe not]

A colleague has a client (my client also-different plan) that filed 1096, 1099 and 945 forms for about $5,000 in taxes in 2003 (or 2002 I'm not sure off hand). The (top shelf) software printed the plan name over the TIN so part of it was unreadable. Nobody noticed.

A few months ago, the IRS' computer issues notice. After literally multiple dozens of hours later involving at least 7 people (it was not clear at first whether it was one plan or the other, whether it was a corporate or plan issue, etc), the IRS accepted the explanation of the error. The taxes had been paid timely. Only the form was partly unreadable due to the software error. All set.

Except that the client called last week (I took the call and saw the IRS notice) and said the IRS was now charging a $12,000 penalty unless the unpaid taxes were paid within 2 weeks. For the same exact issue!

Deja vu all over again.

Imagine risking this type of dialoge with the IRS computers (and English as a foreign language "experts") for dozens or more clients with no tax liability? Not me, Harry. But otherwise your points are well taken.

[GBurns]

If you think that withholding is not imposed the you might want to reconsider after looking at the attached and the other cited cases:

http://www.usdoj.gov/tax/txdv04559.htm

There are many other such cases.

[mbozek]

Withholding is not a tax, it is an advance payment by a taxpayer, since taxes withheld from an employee's income can be refunded if a tax return is filed within 3 years. The employer has the obligation to withhold taxes from employees' wages under the tax law and is subject to penalties for the failure to withhold but I dont think withholding is a tax on the employer's income which starts the S/l. Need to check with a tax accountant or 6501 regs.

[GBurns]

You posted "it is an advance payment ". Advance payment of what? Mortgage?

If withholding is not a tax what is it?

By that logic, since both Quarterly Estimated Tax paid by SE's etc and taxes paid with a 1040 are also refundable if either the SE's return is filed or a 1040X etc is filed within 3 years, those amounts are also not taxes?

What do you think the term "Payroll Tax" means and includes?

[Bird]

I wondered how this could possibly go on for two pages...what is this, April Fool's? To the original poster: no, you don't file. Period.

[GBurns]

We are just getting our wits warmed up so as to weather this cold winter season.