Amend 5500-ez or let sleeping dogs lie

[Guest Savoir]

Here is a very interesting situation:

Business owner realizes belatedly she should have started filing 5500-ez last year as the total value of her two plans crossed well in excess of 100,000 at year end 2003. So, on her own, she filed for 2004 this year (two forms) but 'accidentally' showed an opening balance on one of the plans that brings he total opening lower than 100,000 when indeed it should have been higher to apparently avoid a letter and potential penalties for 2003. Her reasoning was that once she started submitting 5500-EZs in full compliance, her 'start up' error would fly under the radar of the IRS.

Clearly the right advice is (and was) for her to amend her return and submit returns for the two plans for 2003 as well, a concept that is tough medicine for her. To help make the case for doing the right thing to her, is there a std practice of auditing the balances reported against the 5500-EZs? Is her 'let sleeping dogs lie' scenario at high risk of being found out?

[WDIK]

To help make the case for doing the right thing to her...

How about the following statement that appears near the signature on Form 5500-EZ:

"Under penalties of perjury and other penalties set forth in the instructions, I declare that I have examined this return, including accompanying schedules, statements and attachments, as well as the elctronic version of this return if it is being filed electronically, and to the best of my knowledge and belief, it is true, correct, and complete."

[Earl]

and yet has anyone ever heard of any first year 5500EZ ever being audited?

Which I know is no excuse or justification to commit perjury, but the question was about the risk of being found out.

[Guest Savoir]

.. actually that was her point. She asked what the government incentive would be to audit this aspect for a dmall plan as opposed to looking for funny goings on with distributions, contributions. I replied that sometimes the government will randomly choose returns to assure that compliance on even small aspects is good, but I have no idea how prevalent this approach is for 5500-ez as opposed to, say, a 1040 and associated schedules.

[Bird]

You're right that the right advice is to re-file and file new returns for 2003; maybe you could even get the penalties waived.

The reality is that the chances of being audited are remote.

[R. Butler]

To help make the case for doing the right thing to her...

How about the following statement that appears near the signature on Form 5500-EZ:

"Under penalties of perjury and other penalties set forth in the instructions, I declare that I have examined this return, including accompanying schedules, statements and attachments, as well as the elctronic version of this return if it is being filed electronically, and to the best of my knowledge and belief, it is true, correct, and complete."

I'm with you. The chances of any plan being audited are remote, but that doesn't change the answer.

[Earl]

and yet has anyone ever heard of any first year 5500EZ ever being audited?

[R. Butler]

and yet has anyone ever heard of any first year 5500EZ ever being audited?

The initial post asks about audit risk, but it also mentions doing the right thing. While we have all acknowledged that the chances of being audited are remote, but the answer doesn't change.

The question really comes down to whats our integrity worth? This isn't a question where there is a shade of gray. I wouldn't advise a cleint to sell their integrity for $750 (the DFVC penalty).

[wmyer]

R. Butler, recall that DFVC is not available for EZ filers.

[R. Butler]

R. Butler, recall that DFVC is not available for EZ filers.

Of course you are correct; they aren't subject to Title I. That still doesn't change the answer though.

I'm guessing there is a pretty good chance any penalty would be waived. We've had penalties waived in the past for no reason other than the client forgot to mail it.

[Guest Carol Writing]

I had a 5500-EZ client who should have begun filing in 2002. She missed 2002 and 2003, and hired us in 2004 for all years. I filed three years and pleaded that she did not intend to evade the 5500-EZ filing requirement. The IRS/DOL accepted the explanation and did not even charge her the $750 per year penalty. This was, needless to say, a good outcome. I pleaded that she had had bad advice before she hired us.

[Earl]

I would never(!) tell someone to commit perjury. I thought I stated as much above. I was trying to move the discussion beyond that point since it had pretty well been played out.

I was truely wondering if any first year 5500-EZ had ever been audited.

From the silence received in response to that question, I will take it that no one who has read this thread has ever heard of it happening.

Just wondering....