Is there a penalty for not remitting tax witholding on distributions electronically?

[Santo Gold]

We normally deal with pretty small plan sponsors and when distributions occur, our clients typically use an 8109 coupon to forward withheld taxes, usually with their bank. But recently an accountant told us that one of his clients got a $500 fine for not sending this repayment electronically, although the amount was correct and the timing was fine. Does anyone have any further information on whether electronic filing is now required?

[WDIK]

I have seen this situation once before. If I remember the circumstances correctly, the employer sponsoring the plan was required to file their payroll tax withholding electronically. This was confused with their retirement plan withholding (they may have filed those taxes under the employer identification number, I don't recall). If memory serves they were able to resolve the issue with the IRS with a letter of explanation.

[pmacduff]

We also had a small client receive a letter and fine after submitting with an #8109 (but their payroll taxes are electronic). They were able to get the fine waived, but the Service told them that they had better get a Trust ID # for the Plan tout suite, so that's what we did. It seems to be kind-of random at this point, because we do have other small Employers who are still filing coupons @ their bank as you mention and they have never gotten a letter...maybe just a matter of time?????

[GBurns]

I see many small employers who were notified that they were now required to use EFTPS but ignored the notice since they also got the FTD coupons. Now they are screaming at having been fined for their regular Withholding deposits. EFTPS also applies to non-payroll withholding etc.

[Jim Chad]

EFTPS (Electronic filing) can be required based on the amount withheld under that EIN. And it does not take much to get there. Many of our small employers are required to electronically file their payroll taxes.

So far, I have avoided this by having the Plan get a seperate EIN.

According to the ERISA Outline 2003 page 7.131 the threshold was raised from $50,000 to $200,000 in 2000