Steep Penalty

[SSRRS]

Hi,

Thank you in advance for any information or advice regarding the following. The late filing penalty for the 5500s used to be $25 per day. It seems that was increased to $250 per day. This is quite high in relation to tax returns that even if filed up to a month late the penalty is a SMALL percent? True, there is the DFVCP , that caps the penalty  at 750, however, if someone files a day or two late, the penalty is 500? Thank you for any information etc regarding this.

[Peter Gulia]

Beyond confirming that Congress in 2019 enacted the change you describe, what information do you seek?

[Lou S.]

Don't be late?

[C. B. Zeller]

13 hours ago, SSRRS said:

if someone files a day or two late, the penalty is 500?

Assuming calendar year plan, if it's late July and the 5500 hasn't been filed yet, there is no reason not to file a 5558 extension. With that done, if you're a day or two late from the October 15 deadline, the penalty counts days back to the July 31 deadline, so you're looking at a minimum of 77 days late, or a $19,250 penalty.

The penalty increase was put in the bill as a "revenue raiser" to offset the loss of tax income from other things they wanted to do, like allow retroactive plan adoption and increase the RMD age.

[SSRRS]

55 minutes ago, C. B. Zeller said:

Assuming calendar year plan, if it's late July and the 5500 hasn't been filed yet, there is no reason not to file a 5558 extension. With that done, if you're a day or two late from the October 15 deadline, the penalty counts days back to the July 31 deadline, so you're looking at a minimum of 77 days late, or a $19,250 penalty.

The penalty increase was put in the bill as a "revenue raiser" to offset the loss of tax income from other things they wanted to do, like allow retroactive plan adoption and increase the RMD age.

C.B. Zeller , thank you very much. Do they actually go back from 10/15 to 7/31 or do they just hopefully charge for days late after 10/15? As if they enforce this and go back to 7/31, then it is impossible to file even one day late? thank you very much

[SSRRS]

1 hour ago, Lou S. said:

Don't be late?

thank you Lou. You are correct. However, this year we are understaffed with people out due to illness etc.

[Nate S]

2 minutes ago, SSRRS said:

C.B. Zeller , thank you very much. Do they actually go back from 10/15 to 7/31 or do they just hopefully charge for days late after 10/15? As if they enforce this and go back to 7/31, then it is impossible to file even one day late? thank you very much

once late, it counts back to the un-extended filing deadline, even if you filed an extension (essentially the late filing nullifies the extension).  So it is $250 a day for 75+ days, but that's just the IRS, the DOL penalty can be much more punitive, from the IRS Fix It Guide:

• The IRS penalty for late filing of a 5500-series return is $25 per day, up to a maximum of $15,000.  For returns required to be filed after December 31, 2019, the penalty for failure to file is increased to $250 a day (up to (150,000). See IRC Section 6652(e).
• The DOL penalty for late filing can run up to $2,529 per day, with no maximum.

File through DFVCP immediately!!  At $2,529 per day, that "one day" late filing now costs up to $189,675!

[SSRRS]

11 minutes ago, Nate S said:

once late, it counts back to the un-extended filing deadline, even if you filed an extension (essentially the late filing nullifies the extension).  So it is $250 a day for 75+ days, but that's just the IRS, the DOL penalty can be much more punitive, from the IRS Fix It Guide:

• The IRS penalty for late filing of a 5500-series return is $25 per day, up to a maximum of $15,000.  For returns required to be filed after December 31, 2019, the penalty for failure to file is increased to $250 a day (up to (150,000). See IRC Section 6652(e).
• The DOL penalty for late filing can run up to $2,529 per day, with no maximum.

File through DFVCP immediately!!  At $2,529 per day, that "one day" late filing now costs up to $189,675!

Thank you Nate. Can we file and if need be amend and file with the DFVCP?

[Lou S.]

1 hour ago, SSRRS said:

C.B. Zeller , thank you very much. Do they actually go back from 10/15 to 7/31 or do they just hopefully charge for days late after 10/15? As if they enforce this and go back to 7/31, then it is impossible to file even one day late? thank you very much

Yes the penalty is from 7/31 even if you had an extension to 10/15.

If you know you are filing late file under DFVC for $750 and piece of mind. If it's your client's fault (late data) have them pay, if it's your fault because you are short staffed, consider biting the bullet and paying yourself.

 

[Barry Levy]

I am not sure if this has been mentioned.  The 5500 filing can rely on the Plan Sponsors extension (if filed) if the plan year and fiscal year are the same.

 

 

[Barry Levy]

That is, the Plan Sponsor's federal tax return's extension.

[BG5150]

But keep in mind, that extension for a lot oc companies is only until 9/15...

And if you are running late this year, no one is going to catch that you are late for quite some time, so you'll be able to file under the delinquent program before any fines are levied.

Even if you get an IRS late notice, you can still file under DFVCP as long as the DOL hasn't caught you yet...

[SSRRS]

1 minute ago, BG5150 said:

Even if you get an IRS late notice, you can still file under DFVCP as long as the DOL hasn't caught you yet...

Thank you BG5150. So if someone is filing a day or two after 2/15 (IDA), you can take a chance and file without DFVCP and if a notice is sent, then can always amend to file with DFVCP? Thank you very much.

[imchipbrown]

This is why I retired 😁

 

[SSRRS]

30 minutes ago, imchipbrown said:

This is why I retired 😁

 

I hear

[BG5150]

I wouldn't file late WITHOUT DFVCP.  Unless the DOL came knocking and I wasn't able to use the program.

File it late (with the DFVCP button checked) and go thru the DFVCP procedures.  It will tell you what the late fee is, and it won't be more than 750 for a small plan filer (for one year; you get two or more years for a grand total of $1,500)

[ESOP Guy]

4 hours ago, BG5150 said:

I wouldn't file late WITHOUT DFVCP.  Unless the DOL came knocking and I wasn't able to use the program.

File it late (with the DFVCP button checked) and go thru the DFVCP procedures.  It will tell you what the late fee is, and it won't be more than 750 for a small plan filer (for one year; you get two or more years for a grand total of $1,500)

Yup

There used to be a time you could try asking for the penalty to be waived but with it being so large now the risk isn't worth doing that any more. 

You file DFVCP 100% of the time.