Late 5500 - Form Already Filed - DFVC

[austin3515]

Form 5500 filed a year late but did NOT do DFVC. IRS sends letter with penalty notice for late filing. So we're suggesting DFVC program. The question is, do you have to amend the 5500 to check the DFVC box in this situation?

I say no, because it seems to me the point of the box is to avoid getting the letter we already got.

Appreciate any thoughts.

[jpod]

I don't know, but I would hate to have that issue become a source of aggravation for my client (and/or and a basis for a malpractice claim against me).

[austin3515]

Malpractice seems a bit dramatic. We have our reasons, including completely data entering the entire form all over again (audited plan) because it was done by a prior recordkeeper who has proved uncooperative.

Anyone asked this question of the DOL or at a Q&A? It just seems to me that this should just not be necessary. But I'm asking, so I should credit for that!

[12AX7]

I've had this situation come up but for different reasons that were unrelated to the actions of my firm. In my situation, I only checked the DFVC box because no other changes were made to the form. The form and payment were accepted and no further action taken by the IRS.

[jpod]

Not sure why you think it's a bit dramatic. When it's not clear that the preferred answer is the right answer, explain that to client and let it decide whether to roll the dice or file and amended 5500.

[Andy the Actuary]

So long as client has a history of timely filing, generally talking to the IRS about abating penaties has been successful.

[austin3515]

TAG wrote me back and informed me that DFVC is not even available if the form was already filed. I swear I have used DFVC in these situations after the form was filed, upon receipt of an IRS late notice (i.e., if no extension was filed). It seems like others have used this as well.

Andy, this is another option that is being considered as well, thank you for the suggestion!

[Belgarath]

Austin - did TAG provide a citation? If so, I'd love to know what it is. Or perhaps they are just looking at the DOL FAQ's, and because the FAQ's don't specifically say you can do it, they are interpreting it that you can't?

There's very little sense in an interpretation that says, "if you are a complete screw-up and didn't file at all, we'll give you a reduced penalty, but if you actually FILED, then just because you made a mistake and filed late, therefore being MORE in compliance than the complete screw-up person, we're going to penalize you more than we will penalize the complete screw-up."

[austin3515]

I agree 100%. They did not provide a cite, but I will ask for one, now that you mention it.

[Belgarath]

Austin - did you ever get an answer on this?

[austin3515]

I just looked back in my emails. I requested the cite, but they never got back to me. Sorry. It wasn't even my plan, so I don't know the outcome. It was for a friend of mine who is a CPA plan auditor.

[TPApril]

What general approach would you take - Plan sponsor always files timely, then they miss one year, notice it and file. Then after filing they receive penalty notice.

Choices are

• amend filing for DFVC and then pay $750
• provide a detailed letter explaining why you couldn't file timely and asking for complete removal of late penalty

my approach beforehand woulda been to file as dfvc from the get go but that's another item.

 

[austin3515]

Unless something drastic happened use the DFVC.  The whole point of the program is for what you described, and that's why the fee is "so small" as compared to the $15,000 IRS cap.  I wouldn't bother asking for abatement personally unless there were extenuating circumstances, like the plan admin was out on a medical leave as an example.  I suppose you run the risk of aggravating them if you even ask.