Waiver of Excise tax on late refunds

[austin3515]

Non-profit is in blackout and ADP refunds are due.  This is a non-profit that has definutey be impacted by COVID and the refunds are significant as is the amount of the excise tax.

Now, we can write an amazing "sob story" because this entity is definitely COVID front-line. So for example, the budget is really taking a heavy COVID hit for PPE and testing, etc.  If one was going to ask the IRS to abate the penalty how would one go about doing it?  We were thinking complete the 5330 as normal and then in lieu of sending a check, attach a cover-letter.  Has anyone ever been in this situation before?

[Bob the Swimmer]

AUSTIN--- From memory bank, there is a definition of "reasonable cause" in the Code which we have used many years ago as a catch-all for abatement

of penalties. Back then, more than 20 years ago, it worked. Have not done this recently but it sounds like you have a good position to stand on, assuming you have reasonable cause as they

define it.

[Luke Bailey]

Austin3515, Section 4979 imposes a tax, not a penalty. I don't think there is anything in the Code or regs that would authorize a waiver. However, For VCP, Section 6.09(4) of Rev. Proc. 2019-19 does say:

(4) Section 4979. As part of VCP, if a failure results in excess contributions as defined in § 4979(c) or excess aggregate contributions as defined in § 4979(d) under a plan, in appropriate cases, the IRS will not pursue the excise tax under § 4979, for example, where correction is made for any case in which the ADP test was timely performed but, due to reliance on inaccurate data, resulted in an insufficient amount of excess elective deferrals having been distributed to HCEs. The Plan Sponsor, as part of the submission, must request the relief and provide an explanation supporting the request.

Looks like you would not fit the stated criteria, but it is discretionary and COVID is a pretty good reason. But it does not appear relief available outside VCP.