5500-EZ Nonfiler

[austin3515]

We discovered a client who has not been filing their 5500-EZ's. We're not eligible for the DFVCP because it's an EZ. What have others been recommending? Filing the back forms and seeing if you get a letter? When people have taken this course of action, have they gotten penalty letters?

I was thinking maybe attach to the filings a letter requesting forgiveness for the late filing as they were not aware of the requirement. It actually relates to the change in filing threshhold from 100K to 250K.

[jpod]

The best approach is to include the letter with the late filing. P.S., if the employer is a first time filer (i.e., none of the EZs ever due were filed), make sure to point that out in the letter.

[Belgarath]

I've not spoken with anyone who has tried the following, but it might be worth considering: In the letter begging for a waiver of penalties, perhaps it would be worthwhile to suggest that if they cannot waive all the penalties, that a fair solution might be to only apply penalties that are identical to those that would be imposed under the DFVC program?

These penalty amounts are relatively minor, and just possibly the IRS would say "ok" rather than a flat out rejection of a penalty waiver, where they would then impose the maximum panalty and you'd have to negotiate downward from there, which isn't a really good bargaining position.

Or it may be a bad idea for other reasons. I'd be interested to see if anyone has tried a similar approach, or what their thoughts may be.

[austin3515]

If the IRS rejected our plea and assessed a $15,000 penalty, my response would certainly include the outrageosness of the penalty in light of the fees associated with DFVC. I'm just afraid that if you offer it up, they may find it easier to take you up on your offer

This is assuming of course the letters are ever read!!

[Bird]

I don't remember doing any of these recently, but we've always had success getting the penalties waived for EZs. Include a letter with the filing, and be prepared to send it again if they ignore it or appear to reject the plea for waiver. It sometimes takes a couple of tries.

[Guest DuBois]

I have this problem as well. I thought I had a creative answer, now that EZ filers can file an SF. Just file the delinquent year(s) on an SF under DFVC electronically via IFILE. Problem is, the EFAST2 faqs say specifically that you can't do this, either on an SF or a regular 5500. Anyone know the source for this? I'm tempted to file a DFVC using an SF anyhow, but I'm afraid that the IRS won't honor the DFVC, and may assess the penalty in any case.

I think the client has no other option than a statement of reasonable cause.

Generally, does anyone know, can an EZ filer elect to file on a regular 5500? The instructions to the EZ are ambiguous. First the instructions use the term "must," then "may."

[PensionPro]

The relief under the DFVCP is available only to the extent that a Form 5500 is required to be filed under Title I of ERISA. For example, Form 5500-EZ filers and Form 5500 filers for plans without employees (as described in 29 CFR § 2510.3-3(b) and ©) are not eligible to participate in the DFVCP because such plans are not subject to Title I of ERISA. Plan administrators may call 202.693.8360 if they have questions about whether the program applies to their filings.

[Guest Sieve]

Has anyone taken this suggested solution--i.e., filing delinquent Forms 5500-EZ and asking for an abatement of any assessed penalties--and NOT had the penalties abated?

It's an expensive risk to ask a client to take (filing the forms and receving a $15,000 penalty letter for each year) if there is a good chance that the IRS will not abate. In the one instance I've had (about 5 years ago), the abatement approach was successful, but I now have another (lengthier) situation and am wondering whether the landscape has changed.

[jpod]

I think if you file late EZs voluntarily, the likelihood that the IRS would assess penalties greater than the DFVCP amount is negligible, and I would not be surprised if that is their "top secret" policy.

[Guest Kirsten Curry Esq]

I file a couple each year, generally small plans, and plan sponsor has been referred to me by existing plan administrator. All of my abatement requests have been honored by the IRS, thus far.

Regards,

Kirsten Curry