Funding Deficiency and 5330

[Doghouse]

We (TPA) have taken over a DB plan for 2013. It turns out that the 2012 contribution was funded late, and the 2012 Schedule SB reflects a funding deficiency. However, the sponsor never paid the excise tax.

They are now asking whether there is any particular advantage to coming forward and paying the tax at this time, vs. waiting until the IRS asks about it. Can anyone think of anything? Keep in mind that the funding deficiency goes away in 2013.

Dog

[david rigby]

Paying late usually leads to interest and/or penalties.

[Effen]

Deficiencies are not an "audit game" kind of thing. Since the SB was filed showing the deficiency, the IRS WILL send a letter asking followup questions. They generally don't ignore this kind of thing.

Prepare the 5330 for them, tell them to file it and pay the excise tax. If they choose not to, at least it won't be your problem.

Also, is this plan covered by the PBGC? If so, you also have a late reportable event with the PBGC to deal with as well.