Late Filing of 5500-EZ

[Guest scott34]

Our client recently received a CP-403 notice from the IRS stating that her husband, who past away in October of 2007, never filed a 5500-EZ for the plan year ending 12/31/06. He had filed returns in the past and the total value of the plan at 12/31/06 was over $100k. She has never had any envolvement with the returns and has no idea why her late husband did not file. Does anyone have a idea of how we can avoid IRS penalties? Any suggestions on a good reasonable cause?

Thanks.

[jpod]

Was it on extension and did he die before deadline? If not on extension was he sick through the deadline? Either should work. Depending upon whether the employer was a corporation or the decedent as an unincorporated sole proprietor, ignoring the IRS might be a viable approach too, as there may not be anybody with liability for this penalty (way too fact sensitive to resolve in this venue, however).

[Guest scott34]

It was not on extension and he wasn't sick at time return was due. The plan was related to his sole proprietorship and his wife was the beneficiary.

[WDIK]

Has it been established for certain that no filing was made? I would not just take the IRS's word for it.

[Guest scott34]

According to our client, his wife, a return was never filed.

[jpod]

If sole proprietorship, and if estate is settled and distributed, it seems like this can be ignored because there is nobody against whom the IRS can assess the penalty. Might be better to send a letter to IRS stating this, but if they come back with another notice then you can ignore it. Should confer with counsel on these issues.