Form 5500EZ, assets dip below $250,000

[Basically]

A client is telling me that the form 5500EZ does not need to be filed this year because their assets have dipped below $250,000 (as of 12/31/2021).  Makes me nervous to not file.  Do people skip a year if the plan's assets don't exceed $250,000?  Or is it recommended/you recommend to the client to keep filing?  OR by chance, is an EZ plan required to keep filing once a form was filed (even if assets are less than $250,000 now)?

 

[C. B. Zeller]

The client is correct - you do not have to file 5500-EZ if the assets are below $250,000, even if you filed in the previous year (unless it's the final year of the plan).

However, you are inviting a contact from the IRS by not filing. They won't be able to assess any penalties, since the filing was not required. But it's easy to file, so why not go ahead and do it anyway?

[Basically]

Thanks.  Appreciate the response.

[Basically]

Update, the assets of the plan indeed have fluctuated.  Fluctuated to the point where:

2017 above $250K
2018 below $250K
2019 above $250K
2020 below $250K
2021 below $250K

The financial advisor wants to file all these years anyway.  Only 2017 was filed on time, and we can still get 2021 in before 7/31 (or file an extension).  2019 is the only truly late return.

Here is my question - since only 2019 was required, would we only file 2019 under the DFVCP and pay the $500 and leave well enough alone?  I'm hesitant to file 2018 and 2020.  I don't want to send up a flag for a return that, A) wasn't required, and B) wasn't filed.   Maybe, will the IRS accept the unnecessary returns if filed late and not under the DFVCP and say "ok, thanks, you didn't need to file but you did", or do you think if I am filing late regardless of had to or not,  I still need to file with a $500 IRS user fee?  File all 3 late with $1500 fee under the DFVCP program?

They really just want to be safe.

Thanks

[C. B. Zeller]

DFVCP is not available to EZ filers (it is a DOL program, and DOL rules do not apply to EZ filers). The IRS has a similar program, you can read about it here: https://www.irs.gov/retirement-plans/penalty-relief-program-for-form-5500-ez-late-filers

Since you said $500 for a single filing and not $750, I'm guessing you are already aware of the IRS program, but were just referring to it by the wrong name.

Strictly speaking, the IRS program is a penalty relief program; so if there is no penalty to relieve then I am not sure you are eligible for it.

However, if you went ahead and filed under the program anyway for all years, I think it's likely that they will just cash your check, stick your returns in a box somewhere, and never think about it again.

[Basically]

Yes, correct, I am aware and have prepared the form 14704 before.  

This plan received a notice with an attachment : Attachment 1562-D, "Compliance Check Information Request".  They are asking why since the last form 5500 filed have they not received another form 5500.  Under What you need to do on the form they go on to say,

"If you filed all required Forms 5500-EZ for the plan years after December 31, 2017, provide copies of those returns.  We'll correct our records if these returns bear an original signature and you certify that they're true copies of the returns you previously sent to us."

Only 1 year after 2017 were the assets greater than $250K (the 2019 return).  It was not filed and the client has decided to file under the penalty relief program (and not write a reasonable cause letter)

I have never seen this notice before.  Easy enough to answer and comply.

Thanks

[VeryOldMan]

I have an issue for a client whose plan assets and under $250,000. Normally the Form 5500EZ is not required to be filed if the ending year plan assets is less than $250000. In 2020 our client met this criteria but we filed the EZ Form nevertheless. Thru a miscommunication the return was filed late for that year.  Some months later in 2022 the client received a late filing assessment from IRS. We responded that the filing was exempted due to the $250,000 exemption. We had letter back and forth but the IRS is asking for the late filing penalty. My question is this: How can a late filing penalty apply to a year in which the return was not required?  Can anyone help us?

[BG5150]

Get a POA.  call and ask for a supervisor.

[WDIK]