Filing 5500 without 5330

[Guest GMP]

Has anyone ever filed a 5500 which discloses a funding deficiency without filing the 5330 and the 10% first tier tax at the same time (albeit to a different address)? If you have, what was the reponse of the IRS, and what was the timing of that response - that is:

- did the IRS ask for a 5330 and the 10% tax, or did they go right to the 100% tax?

- how quickly did the IRS respond after receiving the 5500?

- how much time did the IRS allow for you to respond?

- how long after the filing of a 5330 with the 10% tax before the IRS requested the second tier tax of 100% or proof that the funding deficiency was corrected?

I'm asking these questions because I have a client who works from project to project, and gets paid at the end of each project. This year he got caught short. I'm trying to buy him some time when he gets paid at the end of this year. Currently, my thinking is:

- file the 5500 on 10/15 without the 5330

- wait for the IRS to request the 5330 and the 10% tax (my concern is whether the IRS can skip the 10% tax and go straight to the 100% tax in this situation)

- file the 5330 with the 10% tax

- wait for the IRS to repsond with the next letter and hope that it arrives after 12/1/07 because the client will fund the plan by 12/31/07

Any thoughts or input would be most welcome.

Thank you.

[SoCalActuary]

The IRS has to try to solve the 10% tax rate before asking for the 100% penalty tax, so you still have time on that issue.

When you know that you are required to file 5330, but you don't file it, then you are subject to penalties and interest for late filing and for late payment.

Ignore it long enough, and you could be doubling the total penalty, all thru negligence.

Don't show this post to your E&O carrier.

[david rigby]

- wait for the IRS to request the 5330 and the 10% tax (my concern is whether the IRS can skip the 10% tax and go straight to the 100% tax in this situation)

NO and NO. The IRS has consistently stated that the 10% excise tax is not waivable because it is statutory. Very likley they will impose interest and penalties for late filing (although maybe not if less than30 days late).