Interest Accrual for Late Penalty Payment

[Guest BravelyObey]

I have calculated the excise tax for delinquent deferrals from 2002 and 2003.

It is my understanding that if excise taxes are not paid by the last day of the 7th month after the affected tax years, additional penalties are due.

I need a second opinion . . .

As I read the instructions for the 5330, it appears our client should file the 5330s for each individual year, and pay the excise taxes we calculated.

Additional penalties MAY be imposed later on if the IRS determines the client did not have good reason for filing 2 - 3 years late . It is therefore necessary to include with these payments correspondence that gives a darned good reason for the failure to pay these excise taxes on their respective due dates (last day of 7th month after the end of each tax year).

Am I understanding this correctly?

Thanks!

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In my experience the IRS sometimes will apply late penalties and sometimes they won't, but we usually don't hear from them on late penalties. It is my practice to not pay the late penalties up front. I tell the client that the IRS may come back and charge late penalties so they are aware of this possibility. For the most part the late penalty calculation usually results in a very low dollar amount anyway.

With that said I recommend waiting to see if the IRS even assesses the late penalties.