Audit Not Ready

[Rob P]

The required audit for a large 5500 filing will not be completed on time (due today). I just wanted to get some opinions. The way I see it, the client has two options; I’m just not sure which is the lesser of two evils:

1. File the 5500 today without the audit and then follow-up with an amended return with the audit in a few days. Keep fingers crossed that IRS and/or DOL will not hit them with penalties.

2. Don't file anything today, and then file the 5500 with the audit under the DFVCP in a few days. Besides the $2000 up front cost for the DFVCP filing fee, is there any addtional exposure under this option?

Any thoughts are appreciated.

[BG5150]

I don't think #1 is an option any more. The filing will fail without the auditor's opinion.

[Andy the Actuary]

Why are you assuming responsibility for the audit report being late. Either the Client did not get information to the auditor timely or the auditor is at fault. Why isn't this the auditor's problem to deal with? Just being onry.

[masteff]

2. Don't file anything today, and then file the 5500 with the audit under the DFVCP in a few days. Besides the $2000 up front cost for the DFVCP filing fee, is there any addtional exposure under this option?

May be cheaper than you think: https://www.askebsa.dol.gov/dfvcepay/calculate

[Sully]

2. Don't file anything today, and then file the 5500 with the audit under the DFVCP in a few days. Besides the $2000 up front cost for the DFVCP filing fee, is there any addtional exposure under this option?

If you can file within the next couple of days the DFVCP fee would be $10 per day calculated from the due date (without extension). If you file on Friday (10/19) the penalty would be $880.

https://www.askebsa.dol.gov/dfvcepay/calculator

[Rob P]

Thanks All.

I wasn't thinking about the DFVCP penalty being cheaper than $2000; that is a great point. The few times that I've filed under the program have always defaulted to the higher amounts.

Andy - in this case, the fault is 100% on the auditor. They've had the information for months and completely dropped the ball. I know the client is going to rely on us for solutions, so I was just trying to be proactive.

I appreciate all the input!!

[Guest Dell]

Maybe something has changed that I'm not aware of, but the IFILE system would accept the filing, with errors. Then you correct when audit is available . There is a big difference here; as accepted with errors is a lot better than rejected.

[Rob P]

Dell – If you file without an audit attached, the filing is technically incomplete and still subject to late penalties. I agree that you would still need to file an amended return with the audit, but the amended return does not automatically alleviate the late filing penalty. The DOL can hit the client with a $50K penalty for not timely filing the audit. Although I haven’t seen it, I think the DOL could also hit the client for perjury since they knowingly signed and filed an incomplete return.

In my case, the auditor sent the report at 7PM on 10/15 and the return was filed on time so we didn’t have a problem after all. If the audit wasn’t ready, I would have probably recommended the DFVCP option to the client. As long as you file under DFVCP before you receive a DOL letter, it is my understanding that the DOL cannot hit you with any late filing penalties. Better to pay a $900 then risk $50,000.

Thanks for the response.