Erroneous IRS penalty letters - 2012 filings

[Brenda Wren]

We received 3 penalty notices for 2012 Form 5500 filings so far this week. The common ingredient? All were filed on 8/9/13. All of them were on extension and in 2 of the cases, the clients received the extension acknowledgement on the same day as the penalty notice. Oddly, the IRS thinks it is okay to use whatever date they deem appropriate on their letters. The penalty notices were all dated 9/16/13.

Is anyone else experiencing this?

[Lou S.]

Not yet but sure sounds like something the IRS would do. Every year seems we get a few notices of late filing for plans properly on extension.

[K2retire]

We have started hearing about these as well.

[goldtpa]

Funny. I just came on to pose the same question. Client files a 5500 on 8/8. Gets a $200 penalty notice. Three days before, the IRS sent a letter telling the client that they accepted the 5558.

[Brenda Wren]

Thank you to all responders. We have now received penalty notices for all the electronically filed forms we filed on behalf of our clients on 8/9/13. There were 6 of them. We are trying to determine if the problem is isolated to Datair users or all filers on 8/9/13. Any additional comments??

[Tom Poje]

I almost asked what software you are using earlier today. Haven't heard from any of our clients. we use FT William. had one form accepted 8/8, bot nothing filed on 8/9.

[Guest Kristina K]

_{This is not a software issue. This is an issue of when the Form 5558 was filed. IRS needs time to process the Form 5558 and if you filed it on 7/31 for a calendar year plan, they have not finished processing it by the date you filed.}

_{I, back in the old days, would wait until the due date to file the Form 5558, but with the changes with the IRS processing and their move to Ogden I believe Form 5558s need to be filed by 6/15 for a calendar year plan. Remember there is no penalty for having an extension, but filing before the original due date.}

_{Did you know that it takes the IRS 6 weeks to add a new plan to their system? So, if you filed a Form 5558 on 7/31 for a new plan and then filed the 5500 on 8/6/13, you are bound to get a penalty letter.}

_{There are firms who create and file the Form 5558s in January for their calendar year plans. I'm beginning to see their wisdom.}

[Hojo]

Is there any negative to filing a 5558 and then filing the 5500 before 7/31? Do you still have to check the extension box?

[BG5150]

Is there any negative to filing a 5558 and then filing the 5500 before 7/31? Do you still have to check the extension box?

I think no, and no.

I believe they match up post 7/31 5500's to 5558's and not the other way around.

[Guest Kristina K]

IRS receives a report from EFAST daily about filings. One aspect reported is a listing of 5500/5500-SFs filed more than 7 months after the end of the plan year, with or without the extension box being marked. The amazingly efficient IRS person then looks at their list of 5558s to determine which plans filed 5558s, and if no 5558 is listed they zip out a penalty letter.

On the other hand, the overworked, buried-in-paper IRS person processing the form 5558s has not finished processing all of the 5558s mailed to the IRS on 7/31 and has not given the efficient IRS person a complete extension list when the penalty letters are mailed.

EFAST -- Electronic and speedy

5558 -- manual and not.

The only logical answer to resolve this is to electronically file the 5558. (It is a 5500ish form afterall.) Even if they have to break the 5558 into 5558A for 5500 Series filings and 5558B for the 8955-SSA and 5330 filings.

[My 2 cents]

_{Would filing the 5558 at or just before July 31 and then waiting until after October 1 to submit the 5500 filing make the problem go away?}

_{What does the IRS have to do to "process" 5558 forms for 5500 and 8895-SSA extensions anyway? Unless the minimal information on the 5558 is messed up, the deadline extension is automatic if the 5558 is filed on a timely basis. IRS approval is no longer required.}

[BG5150]

That's why I'm going to batch transmit all my calender year 2012 5500's at noon on October 15.

What could go wrong?

[My 2 cents]

What can go wrong? Not to be superstitious but please don't tempt fate!

• Overloaded servers (October 15th? It's happened!)
• Power outages
• War
• Epidemics
• Cyber attacks
• The kind of natural disasters most likely to occur in your area
• Natural disasters not known to have previously occurred in your area
• Etc.

[Andy the Actuary]

Not that the following anecdote helps but . . .

I used to submit 5558 by certified mail. I could then always track on the internet. For 2009, I found there was no indication of delivery on USPS. I went to the post-office and inquired. I was told that the IRS receives so many filings that they no longer sign. Has anyone else experienced this?

In any event, I now file with "proof of mailing" only.

[A Shot in the Dark]

Andy:

We mailed our 5558 batch in one envelpe via certifed return receipt requested. The envelope to Ogden Utah was mailed and post marked on July 29, 2013.

We received in our mail on September 3, 2013 a stamped copy (It was a stamp that stated Received Deparment of Treasury) with no signature of the return receipt.

[chc93]

A client just walked in the office. The 5558 was filed on July 30. The 5500-SF was electronically signed on Aug 8. I'm not sure when, but he got a 5500 late filing penalty notice for $200 (I assume 8 days at $25 each day). Interestingly, the "date of the notice" for this penalty is Sept 16. He paid the $200 penalty on Sept 10 (very diligent client... the due date for the penalty is Oct 7). Today he got the approved extension to Oct 15. The "date of the notice" for this extension was Sept 9.

So now, because of this IRS "problem", we've gotta go try and get the $200 back... at least, I think we should. The client said to forget about it if too much trouble.

If there's enough of such clients, the IRS stands to collect a bunch of money that shouldn't have been collected.

[Guest Kristina K]

Waiting until 10/1 to file calendar year filings for NEW plans might avoid the problem.

For existing plans, you can probably file next week without receiving a letter.

I'm not making any guarantees for the IRS though.

While the extension is automatic, the IRS must enter (manually) into their system that the extension was received and for which forms it was received. Then letters acknowledging the 5558 are mailed.

Doesn't seem like much, but remember this IRS office processes many other forms that are part of the 'mainstream' tax form variety, so qualified plans are a small part of what they do.

[BG5150]

So now, because of this IRS "problem", we've gotta go try and get the $200 back... at least, I think we should. The client said to forget about it if too much trouble.

There should be a number to call in the letter. Just call and they should probably take care of it right there.

[AndrewZ]

Exactly the same thing just happened to us - a client with 2 plans filed on 8/9 was issued late filing penalty notices dated 9/16. The return receipt from the IRS for the 5558s was stamped 8/12, so I'm assuming they are doing that to 5500s processed prior to them processing the 5558s. I would have thought they would have figured out by now to hold the penalty notices until 5558s were all processed (if they still insist on paper filings), after the same debacle in prior years.

[AndrewZ]

Not that the following anecdote helps but . . .

I used to submit 5558 by certified mail. I could then always track on the internet. For 2009, I found there was no indication of delivery on USPS. I went to the post-office and inquired. I was told that the IRS receives so many filings that they no longer sign. Has anyone else experienced this?

In any event, I now file with "proof of mailing" only.

I sent ours "return receipt" on 7/30 and the receipt came back with a stamp dated 8/12, even though online tracking says it departed the Salt Lake City sort facility on 8/1 (but no delivery info). Apparently, the IRS is allowed to date and return the receipts at its leisure. Fortunately, online tracking shows it was was in the mail on 7/30.

[My 2 cents]

Concerning "return receipt requested":

Judging from a personal experience of a couple of years ago (penalty assessed for late filing of an individual tax payment), I believe that for IRS timeliness purposes, a receipt proving that a form/payment was timely mailed is determinative. Show that you mailed something by the deadline (based on a certified mail receipt) and the IRS would not have a legitimate basis for assessing a penalty. Tax payments are judged to be timely if mailed by the deadline (presumably also the case for Form 5558). At best, a proof of receipt signed/stamped by the IRS would be dated after the deadline if the payment was sent on or just before the deadline. Proof of receipt is nice to have, but if (as in my case) the IRS tries to assess a penalty for late filing, a copy of the certified mail receipt showing timely mailing is enough to make the penalty go away.

[Kevin C]

The IRS proof of mailing rules changed in August 2011.

http://benefitslink.com/boards/index.php?/topic/49629-timely-mailing-treated-as-timely-filing

[Guest GoRebels]

Here's a thought......why not make all calendar year 5500's due on October 15 with no available extensions?

[Bill Presson]

ASPPA GAC just announced that the IRS has acknowledged this issue for 5558s filed close to 7/31 and the 5500 filed soon thereafter. The 5558 wasn't processed yet.

[david rigby]

Here's a thought......why not make all calendar year 5500's due on October 15 with no available extensions?

Nice thought, but it would require a change in the statute. See ERISA sec. 103-104.

[Kevin C]

It's more than just a processing delay. A client just sent us the late filing letter they received today. It is dated 12/2/2013. The extension was overnighted the IRS on 7/26/2013 and the 5500-SF was filed 10/11/2013. They also received a notice dated 11/25/2013 saying that their extension has been received and the filing deadline is extended to 10/15/2013.

[My 2 cents]

Did they check the box on the 5500 to indicate that a 5558 was filed? Just wondering. Maybe they filed the 5558 but forgot to assert on the 5500 that they were filing on extension.

[Kevin C]

Yes, the Form 5500-SF was marked to indicate a Form 5558 was filed. Also, the filing on 10/11/13 processed and has a status of filing received.

We sent copies of the IRS correspondence to ASPPA GAC.

[Kevin C]

I heard back from ASPPA. The IRS is sending an apology letter to our client. They are looking into the system problem and will update ASPPA when they know more.