5558 Extension Denied for Late Filing - but wasn't late and was with our entire package of extension! Somewhat freaking out here.

[HarleyBabe]

We sent all our 5558 extensions in one package for 12/31 on 7/30 as we always do.  About 60 of them by priority mail on 7/30.  Today one of my clients received a letter stating they were denying the extension because it was received late.  Here's my issue, I can't find the tracking receipt ANYWHERE.  It was on my bulletin board and now just vanished.  Sooooo was it just this one that got separated or my entire package.  I have two things, one my bank statement that shows my charge at the Post Office on 7/30 as well as the screenshot of where all my clients needing one were generated on 7/30.  I tried going to the Post Office to see if they could back track and provide my tracking number but some new person was there and I have to go back and speak with the Postmaster.  At any rate, has anyone had this happen? and do you think they'll accept what I have noted above to abate any penalty considering we have never filed a late return or extension.  I am praying this is a one off and that it just got separated from the package.  I've had plenty of instances over my 30 years where they say they haven't received the extension, I've sent it in, and never heard another thing and never included tracking, just sent it to them.  Thoughts?  Anyone else receiving these notices so far? Would you do anything else other than respond right away with what I mentioned.

Thanks!

[Towanda]

Just as you have in the past, send a letter letting the IRS know that the 5558 was timely submitted with the packet that was mailed on 7/30.  If you want to send them your screenshots too, send the screenshots. 

I'm sure you know it wouldn't be wise to say you've misplaced or inadvertently deleted anything.  Just let them know that the 5558 was mailed timely, and request a penalty abatement and all should be fine - as always.

[HarleyBabe]

Two more clients just received the letter.  I feel sick.  Yes I'm going to respond as I normally do when I Efile with a separate attachment and hope I don't hear another word about it.  I'm wondering with the new extensions and the process they were going to be accepting Efile and then not, if maybe I'm not the only TPA receiving these.

[HarleyBabe]

Wondering if I should write to the EP Accounts Division with my entire list of plans and EIN numbers with what I have which is only the charge at USPS and the printouts of the date I generated the Extensions and ask for research and abatement OR should I take one at a time and send in my letter with the filing in the EFILE system as the 800 number told me to do that was on the letter.  But they also gave me the EP Accounts Division address if I wanted to reach out.  I didn't get a whole lot of direction.  Any advise would be much appreciated as on 9/19 this is the last worry I need.  Thank you.

[Craig Hoffman]

Hello all,

I have been a lurker for many years but have finally signed up to comment.

I think this is a more widespread problem. We have 4 plans (so far) that received the letter denying the extension. All were dated 9/23/24. We have Fed Ex tracking data to verify they were all delivered to Ogden on 7/31 so we can deal with it if need be. However, from my days at ASPPA, I believe this sounds more like something is amiss in Utah.

I am wondering if anyone besides HarleyBabe and our firm has begun receiving the denial letters. If so, it may be necessary to have a conversation with EPEO folks.

Craig

[Paul I]

Two weeks ago, I emailed a question about this specific issue to the membership in two industry groups (about 80 individuals in total) representing a significant number of recordkeepers/TPAs from among the largest, mid-level and smallest in the industry. 

Three people responded with each reporting a single, unique incident of a quirky IRS extension letter.  Several responded to the email and they all reported not having any issues with receiving denials of extensions.

Hopefully, their response is an indication that this is not a widespread or systemic issue.  I will update this post if I receive feedback reporting an issue.

[Craig Hoffman]

Here is my concern. The letters we received were all dated 9/23 and were received by clients late last week. That was after your survey. I am trying to determine if more of these are now surfacing.

[RatherBeGolfing]

@Craig Hoffman I haven't seen any for my clients yet, but I know there were erroneous denials dated 9/16 that have been talked about previously. 

Edit:  We did get a denial dated 9/30/24, but it was for a 8/31 due date.  5558 mailed on 8/23/24. 

[HarleyBabe]

Craig my letters started coming to clients dated from Utah on 9/19 and then 9/23 and 9/24.   CORRECTED - 9/16 my first denials were dated!

[HarleyBabe]

On 10/3/2024 at 1:49 PM, RatherBeGolfing said:

@Craig Hoffman I haven't seen any for my clients yet, but I know there were erroneous denials dated 9/16 that have been talked about previously. 

Edit:  We did get a denial dated 9/30/24, but it was for a 8/31 due date.  5558 mailed on 8/23/24. 

This is the date my first letters started arriving from clients - dated 9/16

[HarleyBabe]

As I just told Kelsey in Government Affairs, I've received 15 from clients to date.  My package actually had 46 in it not 60.  One day I received 5 or so with the same date, the next time again 5 or so with the same date, like they are going out in groups (the IRS letters).  I have asked all my clients who were extended to please check their mail and not to sit on any IRS letter so I'm surprised I haven't received more.  Not sure if this is the client not sending them to me or whether just a group of mine got separated from my package in Utah.  Just don't know.

[HarleyBabe]

As I just told Kelsey in Government Affairs, I've received 15 from clients to date.  My package actually had 46 in it not 60.  One day I received 5 or so with the same date, the next time again 5 or so with the same date, like they are going out in groups (the IRS letters).  I have asked all my clients who were extended to please check their mail and not to sit on any IRS letter so I'm surprised I haven't received more.  Not sure if this is the client not sending them to me or whether just a group of mine got separated from my package in Utah.  Just don't know.

Our actuary on the West coast has told me that he has heard many actuaries are talking about this so maybe on another message board.  Seems to be more than you and I Craig.

 

[Craig Hoffman]

Yes, as I originally thought, something is amiss in Ogden yet again. We are up to 10 at last count. I have been in contact with Kelsey and she is pursuing this with Ogden. We will see what she finds out.

[BG5150]

This is why you don't wait until 7/30 to send them.  Do it in June.  If you get the 5500's filed by 7/31, great.  Just don't check the box.

Larry Starr (an OG poster here) used to send out his 5558's in January. (At least I think it was him.  If not, someone here did that)

[HarleyBabe]

Well, I'm comforted to know it's not just me.  Frankly I'm shocked my entire package of client extensions has not received the letters or if they have clients haven't sent them to me as of yet.  Up to 15 so far that I am responding too individually.  My clients are well aware of the situation because I have been communicating weekly asking for them to send me the letters and not sit on them and I've only received 15 so far, so could it be that 15 of my 46 were the only ones received?  No clue!!  Please Craig keep us posted on here or I may email you separately just to establish communication in regards to this issue.

[RatherBeGolfing]

17 hours ago, HarleyBabe said:

so could it be that 15 of my 46 were the only ones received?  No clue!!

Its hard to tell when the only ones you hear about are the denials.  I have had both denials and approvals in the same batch in prior years.  You should be able to get a resolution, but its a time suck.

[Peter Gulia]

I’m curious:

When responding to these problems, does a TPA bill the time?

At a professional’s rate?

At an assistant’s rate?

At each worker’s rate for her time worked?

[Bill Presson]

41 minutes ago, Peter Gulia said:

I’m curious:

When responding to these problems, does a TPA bill the time?

At a professional’s rate?

At an assistant’s rate?

At each worker’s rate for her time worked?

Sigh.

[RatherBeGolfing]

41 minutes ago, Peter Gulia said:

I’m curious:

When responding to these problems, does a TPA bill the time?

At a professional’s rate?

At an assistant’s rate?

At each worker’s rate for her time worked?

Depends on the firm.  Most places have a set rate in their service agreement for ad hoc services like this. Many places waive fees for things like this in favor of client retention.

My guess is that very few TPA have "rates" for different positions.  I did when the TPA was connected to a CPA firm, but TPA firms usually do not track billable time like a CPA or law practice. 

 

[Peter Gulia]

Thanks.

If a TPA doesn’t charge distinctly for responding to an executive agency’s processing errors, is some estimate for those errors figured into the costs on which the TPA sets its regular fees?

[HarleyBabe]

Good question, I've already got angry clients like we did something wrong so then charging them, even though it's been so time consuming responding to every letter, and not our fault, is a tough call.  I'm hoping the IRS comes out with some blanket statement because I KNOW the Efiled returns will prompt another auto generated letter now saying they are late because of the extension denial.    Just want this to all go away so I can not dread checking my email everyday for more denial letters.

[ESOP Guy]

2 hours ago, RatherBeGolfing said:

Depends on the firm.  Most places have a set rate in their service agreement for ad hoc services like this. Many places waive fees for things like this in favor of client retention.

My guess is that very few TPA have "rates" for different positions.  I did when the TPA was connected to a CPA firm, but TPA firms usually do not track billable time like a CPA or law practice. 

 

The TPA I work for has different rates for positions that do the work and bill accordingly.

 

We would most likely not bill for this kind of situation.  It is penny wise pound foolish.  As HarleyBabe notes they are upset already.  A few hundred in revenue isn't worth making them madder.  The cost to market a new client is pretty high.  The cost of one lost client is higher than all the revenue you will collect billing for 10 or 15 people.  I know very few management groups in the TPA world that would risk that. 

[RatherBeGolfing]

2 hours ago, ESOP Guy said:

The cost of one lost client is higher than all the revenue you will collect billing for 10 or 15 people.  I know very few management groups in the TPA world that would risk that. 

I agree. 

 

[Peter Gulia]

So, if a TPA mostly doesn’t charge for responding to an executive agency’s processing errors, that cost is borne commonly by the TPA’s clients.

Perhaps that’s somewhat fair if most clients don’t much differ in the probability of being a victim of such an error the client didn’t cause.

If anyone is wondering, some lawyers similarly use judgment in not billing work needed to respond to an executive agency’s wrong application of law. Those situations often demand big blocks of time, and often for work that cannot be delegated, instead requiring the personal attention and wasted time of the most experienced lawyer. That expense gets subsidized by all the lawyer’s paying clients, including those that bring little or no risk of being a victim of an executive agency’s errors.

[RatherBeGolfing]

2 hours ago, Peter Gulia said:

So, if a TPA mostly doesn’t charge for responding to an executive agency’s processing errors, that cost is borne commonly by the TPA’s clients.

Pretty much.  Its basically part of overhead. 

[HarleyBabe]

Funny our denial letters stopped coming.  They were 9/16 & 9/23. Nothing since.  So did they catch their issue or do more come.  Was expecting a grouping on the 9/30 based on pattern.  Hope we have answers or something soon to provide clients.

[BG5150]

On 10/9/2024 at 10:16 AM, RatherBeGolfing said:

My guess is that very few TPA have "rates" for different positions.  I did when the TPA was connected to a CPA firm, but TPA firms usually do not track billable time like a CPA or law practice. 

I've been at a few that did.  years ago, I was an "Sr Plan Administrator"  Our rates were:

Admin $75

Plan Admin $175

Sr Plan Admin $190 (dang I wish I was getting paid $190/hr)

Manager $225

Actuary $300

We normally wouldn't bill for something like responding to a 5558 letter, unless it ran into several hours of work we were not anticipating. 

[HarleyBabe]

UPDATE 11/13 - Letters coming now saying IRS needs more time to evaluate.  Unbelievable part is I've received 3 letters from clients who had received the denial letter and each of these followup letters have the wrong tax period listed.  All three have different tax periods.  One of them has the tax period as the date the extension denial letter was received.  What in the world is happening in Utah!

[ESOP Guy]

19 hours ago, HarleyBabe said:

UPDATE 11/13 - Letters coming now saying IRS needs more time to evaluate.  Unbelievable part is I've received 3 letters from clients who had received the denial letter and each of these followup letters have the wrong tax period listed.  All three have different tax periods.  One of them has the tax period as the date the extension denial letter was received.  What in the world is happening in Utah!

I have seen the wrong tax period issue last year with a 2/28 client.  We sent it in around the time everyone would have been sending the 12/31 extensions.  That client hates waiting.  At the time I assumed a person was just not paying attention.   I think they need to go to an electronic filed/input forms.  

[thepensionmaven]

On 10/9/2024 at 9:27 AM, Peter Gulia said:

I’m curious:

When responding to these problems, does a TPA bill the time?

At a professional’s rate?

At an assistant’s rate?

At each worker’s rate for her time worked?

Difference between billing and actually getting paid?