5500s Not Ready - File Anyway and Amend?

[namealreadyinuse]

Form 5500 for a 401(k) won't be ready by Monday (audit and valuation not finished). Should we send what we have and then amend ASAP or wait and file DFVC?

Any suggestions?

[stephen]

If you file and amend will the amended filing be ready before you get the letter from the IRS requesting the audiotr's opinion?

[namealreadyinuse]

Yes, that is the plan. We assumed that we would not get a letter from the IRS immediately, but that it would take the IRS/DOL some time to sort it out.

[WDIK]

What exactly is being amended?

[namealreadyinuse]

We would correct any changes to the financial schedules and include the audit.

[saabraa]

Note that the 5500 returns are initially processed by a DOL controlled facility. I suspect they'll notice the absence of the required audit early in the processing of the return and will send a notice requesting the missing audit. Maybe someone can offer an experience based opinion on whether it's better to go this route or via the DOL's correction process, which is the original question.

Depending on how quickly the audit and valuation will be completed, a potential daily penalty could be less painful dollarwise and timewise than a certain correction fee, accompanied by whatever rigamarole you go through with that process.

Also note that by filing now, you're probably going to be considered timely for IRS purposes. The audit isn't an IRS requirement, so the return should be considered complete (except for the presumably small adjustments resulting from the valuation).

[stephen]

Depending on how quickly the audit and valuation will be completed, a potential daily penalty could be less painful dollarwise and timewise than a certain correction fee, accompanied by whatever rigamarole you go through with that process.

Also note that by filing now, you're probably going to be considered timely for IRS purposes. The audit isn't an IRS requirement, so the return should be considered complete (except for the presumably small adjustments resulting from the valuation).

I agree with these comments. I would send the filing registered mail return receipt requested or using an overnight mail service so you have proof that it was filed timely. Odds are the audit will be complete withing the time frame required for the response and an amended return can be filed. In my opinion the per day late fees are barbarian especially in this scenario where the employer is doing their best to follow the law.

[Guest Dell]

In my experience, the EBSA will send the letter that the filing was incomplete and you will have xx days to send in the needed information. As long as you meet this deadline, I don't think they assess any penalties. Has anyone's experience differed on this?

I have had situations where the missing report etc. was sent in late, but before the letter from the DOL came in, thus causing some confusion due to the crossing in the mail situation. I think I would still refile with the attached audit ASAP, not waiting for the DOL letter, but knowing there will be some confusion caused by this. Any other ideas on how to handle this?

[401 Chaos]

My experience has been very similar to Dell's experience. I think there is typically a grace period and compliance time once the DOL spots the lack of an audit and there is usually no problem if a complete 5500 is submitted in responses to the DOL notice. However, there is no guarantee so I suppose technically they could always pursue the initial return as a late / incomplete return if they chose to do so. Although submitting the amended return before the DOL spots the issue can cause some confusion, that is still my preference. If the DOL later writes to ask about the missing audit on the initial return, we just forward them a copy of the amended version and that usually takes care of things.

[Belgarath]

Take a look at page 7 of the 5500 instructions. Why take a risk of these penalties being imposed (very unlikely, I know) when the DFVC penalty for filing a few days late is so insignificant? For a small plan, I believe it is 10 dollars per day. So what's the big deal about filing, say, 1 week late? As for the IRS penalties, also not an issue. The IRS has issued guidance that a plan that is eligible for, and files under the DFVC program will have the IRS penalties waived as well.

[WDIK]

It is my understanding that the daily penalty is counted from the original due date, not the extended due date, but still a better deal than otherwise.

[Belgarath]

Yes! You're so right! Serves me right for staying up past my bedtime watching baseball and football games.