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Form 5500 Rejection Due to Incomplete IQPA report


Renafesq

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Hello, 

My client is undergoing an IRS audit. They filed a Form 5500 that requires and IQPA auditor's report, which was missing since the IRS is auditing the plan for issues in compensation utilized to determine benefits.  My client received a rejection letter from the DOL.  Any ideas on how to respond if the IRS has not completed its audit within the 45 day timeframe?  I'm thinking that they should send the rejection letter to the IRS agent working on the audit and alert them of the ramifications of not correcting the Form 5500 in time.  Thoughts? 

 

- Rena 

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I'm confused how the IRS Audit is holding up the IQPA and how the two are related. Usually plans under audit are older years that should already have a IQPA.

Are the IQPA auditors not willing to certify the IQPA while the Plan is under IRS audit and this is for a Plan Year subsequent to the IRS audit.

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The IQPA audit is completely separate from the IRS audit. The IQPA audit is performed by CPAs that the plan hires. Its not the same as the audit being done by the IRS. 

What plan year is the 5500 rejection letter for? 

What year is the IRS auditing?

I agree with Lou S. - if the IQPA isn't being released because those auditors want to see the IRS audit resolved first, I suppose that's possible. But I don't see how that is going to speed things up with the IRS. Their stance would probably be along the line of "well the IQPA audit should have been done months ago before our audit even started, not our problem"

 

I'm a stranger on the internet. Nothing I write is tax or legal advice. 

I'd like a witty saying here, but I don't have any. When in doubt, what does the plan document say?

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47 minutes ago, Lou S. said:

I'm confused how the IRS Audit is holding up the IQPA and how the two are related. Usually plans under audit are older years that should already have a IQPA.

Are the IQPA auditors not willing to certify the IQPA while the Plan is under IRS audit and this is for a Plan Year subsequent to the IRS audit.

Hi Lou,

Yes, the auditors are refusing to issue a report due to the IRS audit. Also, the IRS has included years through 2022, the year for which the Form 5500 was submitted.

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Hi JustAnotherAdmin, 

 

Yes, the IQPA auditors are refusing to issue their report while the IRS audit is ongoing.  The IRS audit includes the 2022 plan year, which is the year of the Form 5500.  But, I've been able to resolve this issue.  Our stance is that the IQPA auditors need to send the report. Failure to do so would cause the plan to incur penalties.  Our client can correct the Form 5500 once the IRS audit is complete (provided it is not later rejected).  

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If you weren't going to have a IPQA report completed, you probably should not have filed the return and simply filed under DFVCP but I think that ship sailed when you filed without audit. But the 2022 return isn't even due yet, why would it be filed now without an audit attached?

As for getting the IRS to close an audit in 45 days and send a closing letter, good luck. My last small plan audit opened July last year and despite the auditor verbally telling me he was closing the case in March, I still don't have the actual closing letter, they are kind of short staffed from what he told me.

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4 minutes ago, Lou S. said:

If you weren't going to have a IPQA report completed, you probably should not have filed the return and simply filed under DFVCP but I think that ship sailed when you filed without audit. But the 2022 return isn't even due yet, why would it be filed now without an audit attached?

As for getting the IRS to close an audit in 45 days and send a closing letter, good luck. My last small plan audit opened July last year and despite the auditor verbally telling me he was closing the case in March, I still don't have the actual closing letter, they are kind of short staffed from what he told me.

Sorry, you're right, it was the 2021 return (non-calendar plan year) and there were allowed some extensions due to federal disaster.  I initially advised two choices:  1- file it late under delinquent filers or 2-file without the auditor's report to see if that could buy them some time, knowing that the DOL would kick it back and grant an additional 45 days to refile penalty-free.  

This audit has been going on since September 2022, so we're not confident about how soon to expect a closing letter.  I think they can just file again with the auditor's report and just amend it post closing letter.  I was just wondering if anyone had dealt with this issue before.  Thanks for engaging.

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Push (or have the client push) for the auditor to complete the IQPA ASAP even if they have to attach some statement about how the on going IRS may require an amended return and IQPA at a later date pending result of the audit. I don't know but missing the 45 day window sounds expensive with potential IRS/DOL penalties.

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Might the plan’s financial statements, including the notes, fully disclose the IRS’s examination and that the plan might have been tax-disqualified as at the financial-statements date and for the year then ended (and for preceding years too)?

If so, might such a narrative let the independent qualified public accountant find that the plan’s financial statements are fairly stated?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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