Is IRS being Stupid? Form 945 Issue

[justanotheradmin]

I saw the recent ASPPA article about the optional questions on the Form 5500, it also had a few paragraphs about the recent flurry of Form 945 notices that the IRS has sent out.

Sorry I don't have the link handy.

I actually had a conference call with a client and an IRS person this morning who claimed that for years where there is Zero withholding, the Form 945 was still required. In lieu of filing showing a Zero, the IRS would accept a statement saying no filing was being submitted because there was zero withholding.

We have been inundated with client questions regarding these stupid notices. In every instance it is related to a year where there was no filing because there was no withholding (usually a very small plan that didn't even had a distribution that year).

the 2015 Form 945 Instructions:

https://www.irs.gov/pub/irs-pdf/i945.pdf

Page 2, "Who Must File"

"You don't have to file Form 945 for thoses years in which you don't have a nonpayroll tax liability"

There is no reference to notifying the plans in lieu of non-filing.

Is there something I'm missing or is the IRS just being stupid?

The IRS person insisted that either a filing showing Zero, or a statement was required.

For what its worth, this particular call was regarding as 2013 form, but we have had clients received the notices for multiple/variety of years.

I don't recall the rules changing.

[Doghouse]

I went through this exact same exercise a couple of years ago - it may even have been for the 2013 form. I ended up sending in a written response pointing out the same part of the 945 instructions, and I never heard from them again. Of course I still had to get a 2848 and everything from the client, so I'm not sure I saved any time, but it was the principle you know....

[ESOP Guy]

To answer your question yes the IRS is being stupid. Or at least making a bad assumption.

Here is what is going on as far as I can tell. Their computers are set up to expect a 945 every year. That is the bad assumption that once you start distributions you would have them every year. They are looking for non-filers.

This is why it is so important to mark the final 945 as final or you will keep getting notices you failed to file. I had this happen once. We forgot to mark the 945 as final and no more would be sent. We kept getting notices until a few years after the 401(k) had been terminated and fully paid we filed a final 945 showing no withholding.

It is all about how their computers are programmed as far as I can tell.

[justanotheradmin]

The thing is, these are not finals. The plans have participants with balances, who presumably will need distributions in the future, often with reportable withholding. They are active, ongoing plans, albeit ones that are small (2 to 30 participants).

I do like the suggestion that it would be good practice to file a final showing Zero for the final year of a paid out/ terminated plans.

Its just not what I have here.

[chc93]

One thing that we have found is that if a 945 is filed for one year, but 945's are not filed for a few subsequent years, the IRS "terminates" the TIN. So when we go to file a withholding through EFTPS a few years later, we need to apply for a new TIN. For the past few years, we have always filed a "zero" 945 each year once a 945 is filed.

[justanotheradmin]

We try to include the TIN on the optional part of the Form 5500 along with the trust name, and this seems to help with the "terminated TIN" issue, though I'm sure it's not foolproof.

Just an unnecessary pain and waste of time.

[austin3515]

Consider using PenChecks... They handle all the reporting and it eliminates the need for a separate EIN.

When it becomes mandatory to report the Trust EIN I Plan on reporting the employer's EIN. I have 1,100 plans under my employer and NONE has a separate EIN.

[ESOP Guy]

The thing is, these are not finals. The plans have participants with balances, who presumably will need distributions in the future, often with reportable withholding. They are active, ongoing plans, albeit ones that are small (2 to 30 participants).

I do like the suggestion that it would be good practice to file a final showing Zero for the final year of a paid out/ terminated plans.

Its just not what I have here.

I know they aren't finals. I am just saying they have programmed their computers to look for one every year until you tell them it will stop.

[Peter Gulia]

What are BenefitsLink mavens' thoughts about whether submitting a "zero" filing for a year in which there was no distribution would be helpful or harmful?

[Bird]

What are BenefitsLink mavens' thoughts about whether submitting a "zero" filing for a year in which there was no distribution would be helpful or harmful?

Well, I'm not filing a return with zeros on it.

And fwiw, either this is not a universal problem...

or our clients are not calling us if they get the letter, which is hard to believe...

or, the letter boils down to a reminder of the need to file if applicable, and not a demand for a filing, and it can be ignored.

[justanotheradmin]

Thanks everyone for listening. I think I'm done being indignant now.

I thought it was random until I saw the ASPPA article, then I figured others must have received the notices too. I guess nothing more than a typical year.

We do encourage plans to use Penchecks, though not many do until plan termination.

The notices are more than a reminder, they are clearly asking for the missing form.

[austin3515]

How do you do the withholding? We had a few holdouts who did not want to go to PenChecks until they mandated EFTPS for the withholding. At that point we told them PenChecks was the only option.

[justanotheradmin]

The affected plans have their assets in brokerage accounts (don't get me started there) and either remit directly from the brokerage account, or from a checking account registered to the plan that is used specifically for this purpose.

They also tend to be ones that do payroll in house, so they are used to using EFTPS for their 941 withholding, so they are already familiar with the system for their 945 withholding.

[Bird]

How do you do the withholding? We had a few holdouts who did not want to go to PenChecks until they mandated EFTPS for the withholding. At that point we told them PenChecks was the only option.

We do it - we have a separate EFTPS account and use the IRS program for processing. I can't say it's the most user-friendly thing but we are used to it.

[austin3515]

A separate EFTPS account for each client, or are you doing essentially what the recordkeepers do with omnibus accounts?

Personally, I would not want to have responsibility for client funds. But I will say PenChecks adds quite a bit of time to the process for all of its convenience.

[Bird]

The way it works, we have one bank account for EFTPS stuff. We process all of the withholding, but it goes under each client's (plan's) ID. 1099-Rs and 945s are done under their numbers. So it's not exactly like an omnibus account.

I'm not crazy about the responsibility either but didn't see an alternative.

The couple of times I used Penchecks it seemed like I was doing all of the work. Not bad-mouthing them but that's just how I saw it.

[D Lewis]

The notices are more than a reminder, they are clearly asking for the missing form.

One our clients got a notice about 2013 - there was a box on page 4 for: "My business had no activity for the period above."

We had them check that box and mail it back.

[justanotheradmin]

A separate EFTPS account for each client, or are you doing essentially what the recordkeepers do with omnibus accounts?

Personally, I would not want to have responsibility for client funds. But I will say PenChecks adds quite a bit of time to the process for all of its convenience.

We do not touch any money for clients. We will point them to EFTPS and help them figure out how to register a checking account in the name of the plan, but we do not process withholding or remit holding in any way for clients.

[pkfountain]

IRS is being REALLY STUPID!

Client's office was closed yesterday afternoon.  When they returned this am there was a note on their door from the IRS.  An agent stopped and wanted to inquire about a Form 945 that they had not filed several years back.   Several months ago, the client sent a letter to the IRS in response to their request for a Form 945 and advised that there was $00 withholding and therefore a Form 945 was not required to be filed.  The client never heard from the IRS again, UNTIL yesterday's unannounced visit.  

I again provided the Form 945 instructions to the client where it clearly indicates a Form 945 is not required to be filed if there was no nonpayroll tax liability.   The client's CPA advised the client to go ahead and file the Form 945 with $00 just to get the IRS off of their backs.  

Our shock is that the IRS agent just showed up at the clients office unannounced - no appointment and that the client had no further correspondence subsequent to their letter advising the IRS the Form 945 was not required.

SMH !!!

[RatherBeGolfing]

59 minutes ago, pkfountain said:

IRS is being REALLY STUPID!

Client's office was closed yesterday afternoon.  When they returned this am there was a note on their door from the IRS.  An agent stopped and wanted to inquire about a Form 945 that they had not filed several years back.   Several months ago, the client sent a letter to the IRS in response to their request for a Form 945 and advised that there was $00 withholding and therefore a Form 945 was not required to be filed.  The client never heard from the IRS again, UNTIL yesterday's unannounced visit.  

I again provided the Form 945 instructions to the client where it clearly indicates a Form 945 is not required to be filed if there was no nonpayroll tax liability.   The client's CPA advised the client to go ahead and file the Form 945 with $00 just to get the IRS off of their backs.  

Our shock is that the IRS agent just showed up at the clients office unannounced - no appointment and that the client had no further correspondence subsequent to their letter advising the IRS the Form 945 was not required.

SMH !!!

That is the first time I hear of the IRS making an unannounced visit to a for a missing 945. That sounds like a huge waste of resources.

As for the $0 945, you are correct that no 945 is needed.  However, when the IRS requests a 945 for a period when no 945 is needed, you file a $0 945 to resolve the issue.  That is usually printed on the IRS notice requesting the prior year 945.

For some reason, responses to notices regarding 945's have a tendency to go missing.  This is why I always send them certified mail / return receipt.

I would get a POA right away and look into the visit though, it is possible there is more going on than missing 945.

[pkfountain]

Definitely a waste of resources.  The client's CPA talked with the IRS agent - all she wanted was the Form 945.   Sounds crazy!  

Yes they are filing a Form 945 with $00 just to resolve the issue.     The unannounced visit bothers me more than the IRS asking for a non required Form 945.

 

[DPL]

So if a balance forward 401k plan moves to a platform that will take care of all future withholding under their paying agent #, it would seem to make sense to final a final 945 with respect to withholding under the trust EIN.  Any problems there - like de-activating the trust EIN?  What if we forgot to check the final return box?  Form 945-X instructions imply that it is for reporting liability and deposit errors and doesn't seem suitable for simply saying, go away, no more 945s under this #.