Filing 5500 without Audit Report

[austin3515]

What is everyone's position about doing this? Pretty commonly accepted process. See the attached link from an ASPPA article:
https://www.asppa.org/News/Article/ArticleID/5554

The audit will be done soon, just not by Monday.

[Bill Presson]

It was somewhat common before electronic filing. I thought the new electronic process wouldn't accept the return without an audit attached.

[Tom Poje]

to get around the issue of no attachment, the some folks file a 'blank attachment' simply a note indicating audit will be attached as soon as possible.

years ago we did that with a 403b - it was the first year 403bs were required to be filed and we received a note back indicating something like 'ok, but this must be filed by such and such a date' and that was with electronic filing, but I think perhaps it is less acceptable without some real valid reason.

I haven't seen where Florida has been granted an extension despite the fact the hurricane ripped through here, but they would probably take something like that under a late filing (depending on how late)

[austin3515]

It was somewhat common before electronic filing. I thought the new electronic process wouldn't accept the return without an audit attached.

It won't Accept the filing, but it is still treated as filed for purposes of late filing penalties, etc.

[lisam]

I believe the penalty per day for a missing auditor's report is $150 up to a $50,000 maximum. You can file with the auditor's information blank, however my understanding is you subject yourself to the per day penalty. In comparison, the VFCP program is a $10 per day penalty with a $2,000 maximum (extensions not taken into consideration). Depending on when the opinion is ready, it may be more cost effective to not submit at all and go through the late filer program.

[austin3515]

Well, I've done this several times (often on advice of counsel) ad have never seen this penalty assessed (i.e., the missing audit report penalty). FWIW...

[John Feldt ERPA CPC QPA]

Have you received a letter from the DOL asking about the missing auditor's report? If you have, it generally has about 30 days or so to respond with the auditor's report. If you can't meet that deadline, good luck reversing any DOL penalties. They don't work the same way the IRS does in that regard. In some cases in might be better to not file at all and go under the inexpensive DFVC program. IF the IRS contacts you before that time, you can provide reasonable cause and still use DFVC.

If you already filed without the audit report, you cannot use DFVC.

[austin3515]

Well, they send out the notice saying it's 30 days, but the penalty is not assessed on the 31st day. As an example, I just did this with a plan where we didn't file because their bankrupt. If I was the DOL I suppose my preference is an incomplete filing as opposed to no filing at all.

Anyway, I've never ever had penalties assessed. I was curious to see if others had similar experiences, etc. Do others not see the ASPPA article I posted as an affirmation that this is a pretty "normal" strategy?

[John Feldt ERPA CPC QPA]

When going with either: "we've always done it that way" or "everybody else does it that way" - just keep in mind the possible fallout if you actually file it when it is not complete and then discovered later by the DOL. That small DFVC filing fee can be attractive as an option, but it's only an option if you have not already filed.

[Kevin C]

We've never had a problem when we had to file without an audit report and amended when the report was available. But, you made me look it up.

The DOL has an faq item dealing with filing without attaching the audit report.

www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/faq-efast2.pdf

Q25: Will the EFAST2 system still receive my filing if I do not attach the IQPA report with my Form 5500 annual return/report when it is required?

The EFAST2 system will receive your filing, but submitting the annual return/report without the required IQPA report is an incomplete filing, and the incomplete filing may be subject to further review, correspondence, rejection, and assessment of civil penalties. Also, if you do not submit the required IQPA report, you must still correctly answer the IQPA questions on Schedule H, line 3. This means you must leave lines 3a and 3b blank because the IQPA report is not attached and must also leave line 3d blank because the reason the IQPA reports is not attached (i.e., was not completed on time) is not a reason listed in any of the available check boxes. You should still complete line 3c if you can identify the plan’s IQPA. Please note that failing to include the required IQPA report and leaving parts of line 3 blank will result in the system status indicating that there is an error with your filing because, as noted above, submitting your annual return/report without a required IQPA report is an incomplete filing, and may be subject to further review, correspondence, rejection, and assessment of civil penalties. Thus, if you find it necessary to file a Form 5500 without the required IQPA report, you must correct that error as soon as possible.

The Notice of Rejection mentioned in the ASPPA article Austin linked in his first post is sent by the DOL when a return is rejected as incomplete under ERISA 104(a)(4). 104(a)(5) provides for the 45 day correction period. The article says the letters the DOL sent last year about missing audits were not Notices of Rejection, so they did not start the 45 day clock ticking.

From 2560.502c-2(b)

(3) For purposes of this paragraph, the date on which the administrator failed or refused to file the annual report shall be the date on which the annual report was due (determined without regard to any extension for filing). An annual report which is rejected under section 104(a)(4) for a failure to provide material information shall be treated as a failure to file an annual report when a revised report satisfactory to the Department is not filed within 45 days of the date of the Department's notice of rejection. A penalty shall not be assessed under section 502©(2) for any day earlier than the day after the date of an administrator's failure or refusal to file the annual report if a revised filing satisfactory to the Department is not submitted within 45 days of the date of the notice of rejection by the Department.

[austin3515]

I really like these message boards a lot... Thanks Kevin!

[Doghouse]

Does anyone know if there is an explicit statement in DFVC guidance to the effect that DFVC is not available if the 5500 has already been filed? Thanks!

[RatherBeGolfing]

7 minutes ago, Doghouse said:

Does anyone know if there is an explicit statement in DFVC guidance to the effect that DFVC is not available if the 5500 has already been filed? Thanks!

No.  If you file your 5500 late you will get a notice telling you that your late filing penalty is a certain amount but that you can go through DFVC and pay the user fee instead.  So DFVC is still available after filing the 5500

[Doghouse]

John Feldt mentions it more than once above, which is why I was checking. I have a similar situation to the OP, where the 5500 was filed without the audit report, and now, almost a year later, the audit report is complete.

[RatherBeGolfing]

1 minute ago, Doghouse said:

John Feldt mentions it more than once above, which is why I was checking. I have a similar situation to the OP, where the 5500 was filed without the audit report, and now, almost a year later, the audit report is complete.

You could be fine as is, but the IRS could also take the position that the 5500 was never technically filed until it was filed with the audit and therefore late by almost a year.  Either way, DFVC should still be available.

On a related note, the IRS recently did a webcast on practicing before the IRS and the topic of filing incomplete returns  or responses for the purpose of meeting deadlines or as a stalling procedure during audit could lead to an OPR review if the practitioner is subject to Circular 230.  Unlikely that our 5500 example would lead to anything but I wanted to mention it since it was discussed during the webcast.

[John Feldt ERPA CPC QPA]

Well, give it a shot and file under DFVC, then report back here to let us know what happened. My experience is that a form already filed can be filed again only as an amended return, not as a late filed return under DFVC. That was several years back, so perhaps it can be done nowadays. Or perhaps there are additional steps available to get you there that I am not aware of?

[Doghouse]

The crazy client apparently got bored with the discussion and went ahead and filed as an amended return, so I guess there won't be much to report back on. I'm sure the opportunity will come up again though!

[RatherBeGolfing]

2 hours ago, John Feldt ERPA CPC QPA said:

Well, give it a shot and file under DFVC, then report back here to let us know what happened. My experience is that a form already filed can be filed again only as an amended return, not as a late filed return under DFVC. That was several years back, so perhaps it can be done nowadays. Or perhaps there are additional steps available to get you there that I am not aware of?

I'm not sure if EFAST2 will accept the form marked amended and DFVC.  If it does, then we are all good.  If it does not, then file as amended and move on.  Until the IRS says otherwise, I would say that the original filing date is still good.  If and when the IRS sends you a notice that they are considering the amended date as the filing date, you would be eligible to go through DFVC to correct.