Plan assets over $100k

[Guest taxmanrog]

At the end of 2005, we didn't notice that a client's plan assets crept over $100k. They hit $100,620 in the last week of December. We noticed it while filing the 2006 Form 5500-EZ, when it was obvious that filing was required. We prepared a 2005 Form 5500-EZ and the taxpayer filed both in July 2007. The IRS has hit the taxpayer with a $5,000 penalty!! How can we get out of this? Is there any way?

Thanks!

[Bird]

Write back and ask for an abatement of penalties; say that the client has procedures in place to prevent this from happening again, as evidenced by the correct filing for 2006. Emphasize that it is an informational return only with no tax liability, throw in some other stuff that basically says the same thing all over again, then repeat that they have procedures in place to prevent this from happening. If it doesn't work the first time, do it all again.

Also check and see if the $100,620 included an accrued contribution; if so, remark that a return wasn't even required because it could have been (non)filed on a cash basis.

I haven't had to deal with this for a few years, but I don't think anyone who tries fails to get the penalties abated on an EZ.