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