Failed Filing 5500

[Guest Twinky]

I have a client who is so unorganized you wouldn't believe it. (He even told me that there isn't anything more I could possibly do for him when providing the year end valuation, except maybe sign the forms for him and walk them to the post office.)

He received a letter from the IRS for late/no filing of his 2005 5500 in which they are assessing a penalty of $14,825. We have proof he (the client) received the 5500 in May of 2006 (calendar year plan), so it should have been filed timely providing he signed it and sent it in. However, he doesn't remember if he did, he doesn't have a signed copy (as we request everyone keep), and he didn't return a signed copy to us (which we also request).

Since he's been notified by the IRS (Dept of Treas), the DFVC program is not an option. What other possible options/programs does he have, to get the penalty either abated or reduced?

Thanks in advance for any help you can give me.

[JanetM]

I was able to get the penalty waive a few times by explaining extenuating circumstances. Examples - fire and loss of records, death of staff member who did this task, owners serious health condition.

Unless you have a pretty compelling reason you are most likely stuck.

[Bird]

I think you can still file DFVC after getting an IRS letter; it's a DOL letter that means it is too late. Unless I mixed them up or mis-remembered something else entirely, which is always possible...maybe someone else can confirm.

[Bill Presson]

I think you can still file DFVC after getting an IRS letter; it's a DOL letter that means it is too late. Unless I mixed them up or mis-remembered something else entirely, which is always possible...maybe someone else can confirm.

Bird is correct.

[rcline46]

BIrd is right, cuz the IRS letter asks for the DFVC filing date. So file like NOW!

[Guest Sieve]

The IRS often will give a one-time pass from penalty for a late-filed return, regardless of the reason--even if it's not a compelling reason--based on a history of timely filing in the past. The IRS will abate the penalty and indicate that this is a one-time forgiveness, only. So, make sure you mention the timeliness of past X years of filings for the plan.

As to DVFCP, what everyone is saying is indeed correct. But, on a practical level, once the IRS

indicates a penalty, will a proper DFVCP filing actually result in the IRS abating the penalty? Has this been the result for anyone in that situation?

[Guest Twinky]

Thank you everyone!

I guess that's my next question. According to the DFVCP, you have to send in a check for the penalty amount. How will this help the client get out of paying (or reducing) the penalty? Once the IRS gets the check, what are the chances that the IRS will give it (or a portion of it) back to the client?

[Guest Sieve]

DFVC is a DOL program, so filing under DFVC is necessary. DOL gets the check, NOT the IRS. So, after DVFC filing, go to the IRS with a simple letter, indicating that you've filed under DFVC (with a cc, if you like). That should take care of it--it appears--although I've never filed under DFVC after receving an IRS notice of penalty amount. If the IRS responds with another notice of penalty, then answer with the facts surrounding your past timeliness.