8955-SSA Late Penalty Letters

[ESOPMomma]

We have had clients inform us they received penalty letters from the IRS for their 2022 Form 8955-SSA.  The Form was filed by our office timely and accurately.  We received notification from ftwilliam.com today the IRS goofed.  Below is the text from the ftwilliam.com email:
 

Dear ftwilliam.com Customer:

We recently contacted the IRS due to several customers receiving erroneous penalty notices for filing late or incomplete Form 8955-SSA for the 2022 tax period. If users receive this letter, and the batch was filed timely, IRS representatives have advised that the Plan Sponsor request an abatement of penalties.

If the batch filing shows ‘Completed’ with a timestamp prior to the deadline within the ftwilliam.com software, the IRS FIRE records indicate the filings were completed timely and processed accordingly. Plans Sponsors are advised to contact the IRS at the number on the CP283C notice (877.829.5500) or fax a signed letter for request of abatement as well as the IRS notice to ATTN: Employee Plan Account at 877.792.2864.

We have included a sample fax coversheet letter to provide Plan Sponsors to send the IRS at the following Link: Request for Penalty Abatement Under Reasonable Cause

Please note the letter needs to be signed (including the signer’s title), and dated by the Plan Sponsor before faxing to the IRS.

Thank you for using ftwilliam.com, a product suite of Wolters Kluwer Legal & Regulatory U.S. If you have any questions or concerns, please feel free to contact us at 800.596.0714 or via email at support@ftwilliam.com.
 

[AndrewZ]

We have the same issue. We filed 40 8955-SSAs for 12/31/2022 PYEs that show as submitted to the IRS on 7/29/2023. We've been notified by two clients they've received late filing penalty notices (with huge penalties that don't make sense). We're really hoping to learn more, and that's it's a random issue and not all of our clients will receive these notices. That would be a nightmare to deal with!

[WDIK]

We are also starting to receive calls and emails from some of our clients who have received similar notices.

[RatherBeGolfing]

What about the ones that were not filed timely?  There is no correction program for a late 8955-SSA.  To my knowledge, the IRS has not systematically sent out penalties on late 8955-SSAs before.  If this is something they are going to start doing, we need a correction program. 

[ESOP Guy]

Based on the sample of clients we have seen so far it appears to be clients that filed close to the due date are the ones being hit with these letters.

 

It isn't even clear to me the IRS has statutory authority to hit people with a penalty or at least that was my conclusion many years ago.  I haven't looked at it for many years I will admit.   If someone wants to tell me I am wrong I can live with that. 

[Gilmore]

15 minutes ago, ESOP Guy said:

Based on the sample of clients we have seen so far it appears to be clients that filed close to the due date are the ones being hit with these letters.

We received a copy of the penalty notice from a client whose 8955 was FIREd on 6/26/2023.  That's more than a month before the filing deadline (calendar year plan).  

Is this a harbinger of how the electronic 5558 filing is going to work?  We just started receiving IRS letters admitting their 2021 5558 denials were incorrect, and now these 8955 letters start.  

Geez.

[AndrewZ]

2 hours ago, RatherBeGolfing said:

What about the ones that were not filed timely?  There is no correction program for a late 8955-SSA.  To my knowledge, the IRS has not systematically sent out penalties on late 8955-SSAs before.  If this is something they are going to start doing, we need a correction program. 

I've never run into a late notice before, even with ones that were actually filed a little late. I just ran across something from years ago (I think 2010 when EFAST was introduced) saying they were eligible under the Form 5500 DFVCP program, it sounded like you just mark "DFVCP" and send it to EFAST, and then on paper to the IRS at no fee (I wasn't clear if it had to be associated with a late 5500)... but I didn't look into it closer as that's the not the issue here.

[RatherBeGolfing]

What penalty rate is used on these notices?  Is it $10/participant/day?

[AndrewZ]

NAPA just issued an announcement (though they erroneously refer to EFAST2 when it's actually IRS' FIRE system). Glad we're not the only ones and that it appears that the IRS will have to address this! https://www.napa-net.org/news-info/daily-news/plan-sponsors-advisors-receiving-erroneous-irs-late-filing-notices

[Gilmore]

On 8/23/2023 at 3:22 PM, ESOP Guy said:

Based on the sample of clients we have seen so far it appears to be clients that filed close to the due date are the ones being hit with these letters.

We just received the penalty notice for a client whose 8955 for calendar year 2022 was filed on March 21, 2023.

[ESOPMomma]

And... one of our clients that received a penalty letter didn't even file a 2022 Form 8955-SSA, nor were they required to... very bizarre.  The notices our clients received did not explain how the IRS arrived at the penalty amount, it was just a flat amount.

[AmyETPA]

As TPA, are you having clients respond to the notice or are we hoping the IRS will fix their own mistake without wasting our time?  Already making us look like we filed something late....again!  

[Gilmore]

33 minutes ago, AmyETPA said:

As TPA, are you having clients respond to the notice or are we hoping the IRS will fix their own mistake without wasting our time?  Already making us look like we filed something late....again!  

For the first few that we received before AndrewZ posted the NAPA article we have already sent a reply to the IRS on our clients' behalf (they signed a 2848).  Today I am sending out a correspondence to all of our clients for whom we FIRE'd 8955s since January alerting them to this issue and giving them the opportunity to have us respond directly or they can take a wait and see.  We are a small firm so, while an annoying waste of time, we can manage.  

[AndrewZ]

3 hours ago, Gilmore said:

For the first few that we received before AndrewZ posted the NAPA article we have already sent a reply to the IRS on our clients' behalf (they signed a 2848).  Today I am sending out a correspondence to all of our clients for whom we FIRE'd 8955s since January alerting them to this issue and giving them the opportunity to have us respond directly or they can take a wait and see.  We are a small firm so, while an annoying waste of time, we can manage.  

We're providing our clients who contact us with the sample letter from FTW to submit to the IRS. However, one of them called the IRS before contacting me, and the agent told her there was a glitch that could be the cause, and she'd submit an inquiry request and our client should receive a letter in 30 days with the results. 

We processed 40 8955-SSAs in the same FIRE batch, and so far only about 4 have contacted us. So I'm hoping it's random and not all of them, and am hesitant to contact all of the clients included in that batch at this time.

[Gilmore]

We've received notices from clients that were FIRE'd in March, June, and July.  Ugh.

[bzorc]

February filings through FIRE for me. Gotta love the IRS.....

[Mr Bagwell]

3 for us today.   IRS said a glitch.....  good times.

[Lois Baker]

Update from ASPPA today:

https://www.napa-net.org/news-info/daily-news/irs-clarifies-erroneous-late-filing-notices-received-plan-sponsors-advisors

[AndrewZ]

2 hours ago, Lois Baker said:

Update from ASPPA today:

https://www.napa-net.org/news-info/daily-news/irs-clarifies-erroneous-late-filing-notices-received-plan-sponsors-advisors

Thank you! It looks like the IRS is latching onto NAPA's prior incorrect reference to EFAST (instead of FIRE) being the e-filing system for these, suggesting that incorrect e-filing could be part of the issue. Clearly, it's not -- I'm sure no practitioners are trying to use EFAST to file them.

[Gilmore]

14 minutes ago, AndrewZ said:

It looks like the IRS is latching onto NAPA's prior incorrect reference to EFAST (instead of FIRE) being the e-filing system for these, suggesting that incorrect e-filing could be part of the issue.

I hope this does not cause the IRS to consider not sending out some type of blanket response to their error.

[erinak03]

I had a client with a penalty notice actually call the IRS.  They were told that the filing was done timely but the issue is that the total listed on lines 6/7 do not equal line 9.  Obviously lines 6-7 are used when reporting participants with Entry Code A, whereas line 9 (aka page 2) would list everyone reported on the filing.  If this is accurate, sounds like whomever set up that algorithm to flag the issues goofed big time since any filing with a code B, C, or D seems like it would get flagged.  Also a tough look for the IRS when their method of informing plan sponsors about a simple error is via a huge penalty!

[Gilmore]

2 hours ago, erinak03 said:

They were told that the filing was done timely but the issue is that the total listed on lines 6/7 do not equal line 9. 

Went and did a quick check of the 8955s that have received letters so far and all have a mix of A's and D's.  Thank you for passing along this information.

[Shawn T]

I thought looking at the amount of penalty might shed some light.  I have notices for two different 8955-SSAs filed the same day.  Plan X 16 A’s 23 D’s $10,560 penalty.  Plan Y 2 A’s 1 D $660 penalty.  If it was just D’s being penalized you would think the penalty for each divided by the D’s would be the same.  But then I cannot find any simple factor that reconciles the two penalty amounts.  

[RatherBeGolfing]

14 minutes ago, Shawn T said:

I thought looking at the amount of penalty might shed some light.  I have notices for two different 8955-SSAs filed the same day.  Plan X 16 A’s 23 D’s $10,560 penalty.  Plan Y 2 A’s 1 D $660 penalty.  If it was just D’s being penalized you would think the penalty for each divided by the D’s would be the same.  But then I cannot find any simple factor that reconciles the two penalty amounts.  

What was the due date for the 8955-SSA on these ones?

I believe the applicable rate is $10/day/participant.

[Shawn T]

Both were calendar year plans due 7/31/2023 both filed 7/20/2023

[Gilmore]

One of mine had 1 A and 1 D.  Filed on 6/20/2023.  Also assessed a penalty of $660.  So is that 1 D assessed $10 for 66 days, or both A and D assessed $10 for 33 days? 

[Gilmore]

BTW, the IRS penalty letter lists the old fees.  It says, "We are required by law to charge $1 for each participant for whom a required registration statement is not filed.  The penalty is multiplied by the number of days the failure continues.  The maximum penalty is $5000."

[RatherBeGolfing]

1 hour ago, Gilmore said:

BTW, the IRS penalty letter lists the old fees.  It says, "We are required by law to charge $1 for each participant for whom a required registration statement is not filed.  The penalty is multiplied by the number of days the failure continues.  The maximum penalty is $5000."

if its the old penalty, it is $1/day/participant.  This should include Code Ds and required Code As (excluding voluntary reporting).  

So if you had 1 A and 1 D with a $660 penalty, thats either 330 days late under the old fees or 33 days late under the new fees. If the 8955-SSA was mailed rather than e-filed, I could see the IRS scanning them 33 days late (we are seeing long delays with physical mail to the IRS).  This of course ignores the the fact that it would have been mailed before the deadline.

Or the system has gone completely wacky and the math doesnt add up all.

[Gilmore]

All our 8955s are FIREd.  I'm going with "completely wacky".

[Bill Presson]

IRS announced they fixed the "glitch" (shades of Office Space) and will allow clients to ignore any late filing letter dated before 9/1.

IRS Clarifies 8955 notices

[RatherBeGolfing]

6 hours ago, Bill Presson said:

IRS announced they fixed the "glitch" (shades of Office Space) and will allow clients to ignore any late filing letter dated before 9/1.

IRS Clarifies 8955 notices

Excuse me, I believe you have my stapler....

[Bri]

28 minutes ago, RatherBeGolfing said:

Excuse me, I believe you have my stapler....

I was told I could listen to the radio at a reasonable volume.

[BG5150]

Do you think we will get an official release from the IRS.  Other than from ASPPA saying the IRS told them so?

[C. B. Zeller]

Quote

The IRS said that the erroneous messages were the result of a programming error on their part. The IRS further said it will be announcing in an upcoming newsletter that anyone who received the 8955-SSA late filing letter dated before Sept. 1, 2023 can ignore it. They do not plan to contact the plan sponsor in such cases; rather, they will provide a telephone number for plan sponsors to call for further information.

So it seems they told ASPPA they would be making an official statement, not clear from this when exactly that might be.

[Paul I]

In the TE/GE regional conference yesterday, the IRS said they would make the announcement is their newsletter.  There will be no formal IRS Notice and they will not send any correspondence to plans.

[Bri]

and here it is (in part):

[JustSayin]

From:  Employee Plans News | Internal Revenue Service (irs.gov)

Plan sponsors that filed timely and complete Forms 8955-SSA do not need to respond to penalty notices dated before September 1, 2023

As a result of a programming issue in the IRS system that receives Forms 8955-SSA, the IRS sent out CP 283-C penalty notices to plan sponsors who timely filed complete 2022 Forms 8955-SSA. The notices indicate a late or incomplete filing of Form 8955-SSA.

Plan sponsors that timely filed a complete return do not need to respond to penalty notices dated prior to September 1, 2023. The IRS has resolved the programming issue and is updating its records to reflect the timely and complete filings. If you have any questions, contact the IRS at 877-829-5500.

The IRS also reminds plan sponsors that Form 8955-SSA must be filed with the IRS, not with DOL through the EFAST2 System. If a Form 8955-SSA is filed in EFAST2, it will not be treated as timely filed by the IRS. Go to IRS.gov/5500corner for more information on filing Form 5500 series returns and Form 8955-SSA.

[ESOP Guy]

Anyone else now having clients getting tax refunds garnished becasue of this glitch? 

We have had a few. 

[RatherBeGolfing]

22 minutes ago, ESOP Guy said:

Anyone else now having clients getting tax refunds garnished becasue of this glitch? 

We have had a few. 

Not that I'm aware of, but that is a concerning development...  Large amounts?

[ESOPMomma]

34 minutes ago, ESOP Guy said:

Anyone else now having clients getting tax refunds garnished becasue of this glitch? 

We have had a few. 

9 minutes ago, RatherBeGolfing said:

Not that I'm aware of, but that is a concerning development...  Large amounts?

We have, too... our client has an ESOP and a 401(k)... the erroneous SSA penalty was $20k for one plan and $13k for the other.  On a $77k refund, the IRS was only going to refund the difference of $44k... pretty significant chunk. To boot, the client responded to the initial error for both plans back in August and the IRS had STILL not fixed it when the client got their refund notice in November.  I recommended my client call the IRS and sit on hold for however long is necessary to set them straight, since sending written communication did no good whatsoever.  Such a waste of time.

[ESOP Guy]

17 hours ago, RatherBeGolfing said:

Not that I'm aware of, but that is a concerning development...  Large amounts?

I haven't heard of any numbers bigger than a few thousand from co-works but yesterday was the first time I recall it was mentioned on a company wide basis.   

[LauraERPA]

We just received notice from our first client that was charged a penalty. We filed their 8955-SSA timely via the IRS FIRE system. The client responded to the IRS notice in early September. The IRS deducted $1,320 from their corporate tax refund. 

Any updates on this issue?

[Bill Presson]

https://www.asppa-net.org/news/browse-topics/another-erroneous-8955-ssa-notice-issue-and-what-do-about-it

 

Covered in an ASPPA daily email.

[LauraERPA]

29 minutes ago, LauraERPA said:

We just received notice from our first client that was charged a penalty. We filed their 8955-SSA timely via the IRS FIRE system. The client responded to the IRS notice in early September. The IRS deducted $1,320 from their corporate tax refund. 

Any updates on this issue?

UPDATE: Found a number on the IRS website; 877-829-5500.  Client called and advised us:

"WOW, in my 30 years as an accountant that was the easiest call to a government agency that I have ever had. Wait time was less than 4 minutes (as opposed to hours) and the agent actually solved the issue and is sending us a refund check."