DFVCP After 5500 Filed

[EBECatty]

Would appreciate if anyone has recent experience here they can share.

Plan sponsor filed its 2021 Form 5500 late. They did not use DFVCP. IRS (but not DOL) sent a notice of proposed penalty. By phone, IRS tells me that, if we re-file the 2021 5500 now using DFVCP, IRS will waive the proposed penalty. I understand that the IRS's proposed penalty notice does not disqualify the plan from using DFVCP. From IRS's perspective, this is all fine.

My understanding from DOL, however, is that plans are ineligible from using DFVCP once they have already filed a 5500. In other words, once a 5500 is filed, it's no longer "delinquent" so cannot use DFVCP. I've been told by DOL in that situation that an amended return can be filed, but it cannot be filed using DFVCP. (This has been a few years now so may be stale info.) No information would be changing on the new filing; its sole purpose would be to use DFVCP. 

Does anyone know whether DOL will accept a DFVCP filing in that situation? 

[Sabrina1]

I believe they would.  I would file an amended 5500 indicating it's a DFVC filing, and pay the reduced penalty under DFVC ASAP.  And quickly, before the DOL also sends a late filing notice.  

[401 Chaos]

Thanks.  I'm wondering if anyone out there has direct, recent experience or further thoughts with this issue?

I have a new client facing a similar situation.  They just filed both 2022 and 2023 on October 15th.  Apparently received advice from recordkeeper to just go ahead and file both.  Then, a couple of days ago, they received IRS Notice CP-406 with respect to 2022.  (They say they were unaware of prior notices or missing filing; responsible employee no longer there, company moved, etc.) 

The CP-406 notes in one part:  "If you are required to file a Form 5500 and have not filed, you may be eligible to participate in the DOL Delinquent Filer Voluntary Compliance Program (DFVCP) . . . ."  I'm not sure the phrasing there is meant to be strictly interpreted so as to suggest a plan that has already filed is disqualified from the DFVCP but  it seems possible. 

In looking through the DOL fact sheets on DFVCP, I don't see this directly addressed.  It is clear that once the DOL notifies the plan of intent to assess that DFVCP is no longer possible but the fact sheets do not say having filed the Form 5500 disqualifies the plan.  To my mind, the late 5500 that gets filed is still a "delinquently filed" 5500, it's just that it was initially filed before going through the DFVCP.  If the plan files under the DFVCP before any DOL notice, it would seem to me that should be OK.  Of course, the fact that they went ahead and filed the 5500 may make it more likely that the DOL will notice and initiate a penalty assessment so time may be more of the essence as Sabrina1 notes.

[Paul I]

As you noted, an IRS Notice CP-406 is from the IRS.  You should find this link very helpful in sorting out steps to take in response to the letter:

https://www.irs.gov/retirement-plans/irs-filing-notices-for-forms-5500-5500-sf-5500-ez-or-5558 particularly in the section titled Understanding your CP403 or CP406 delinquency notice in subtopic Is there any way to reduce late-filer penalties?

Basically, the advice is to file under DFVCP.  The DFVCP process is very user-friendly.  Only 2022 form is late if the 2023 form was filed on 10/15, so amend the 2022 form and check the DFVCP box.  Note that filing an amended form replaces the prior filing in the EFASTs system which should make it unlikely that the DOL will initiate an assessment.  You will need to do this before using the DFVCP penalty calculator since it will ask among other things for the EIN, plan number and date the form was filed.  The DOL uses this information to cross check the form filing to the form filings listed in the calculator and will expect the 2022 form to have the DFVCP box checked.

Both agencies really want us to use these delinquent filer programs and they commonly respond well to a plan taking proactive steps to correct an issue.

Good luck!

 

 

 

 

[thepensionmaven]

We have had no problems with this approach in the past

However, what about a 2023 EZ Form that has not yet been filed (for whatever reason).

File online, then file a paper "amended " as DFVC filing, attach the IRS Form 14-7014 with a check for $500 (of course)

Is this going to fly.

[Paul I]

You file the EZ on paper and check the box

D If this return is for the IRS Late Filer Penalty Relief Program, check this box
(Must be filed on a paper Form with the IRS. See instructions)

There is no need to file online first.

[thepensionmaven]

Paul I, thanks for the response.  This was my initial response to the client

However, since the client has not yet filed, in order to get the filing in, albeit late, we were thinking it might be possible to file online, for the "filing received" then, file a paper "amended" with the IRS Form 14703 and a check.

With the paper filing, even sent certified, return receipt", there is no official record of the papaer filing being received in quite the same manner as if the filing was done on time.

[Kattdogg12]

On 10/19/2024 at 4:28 PM, Paul I said:

You file the EZ on paper and check the box

D If this return is for the IRS Late Filer Penalty Relief Program, check this box
(Must be filed on a paper Form with the IRS. See instructions)

There is no need to file online first.

Hi Paul, Question- we have an EZ filer that came to us for assistance - their prior TPA did not let them know about the IRS program, so they just filed their form late.  Then received the CP283.  Based on the instructions, once you receive that, there's no hope.  What do you think the chances are of them filing anyway and paying the $500 fee?

[Paul I]

See the IRS advice here https://www.irs.gov/individuals/understanding-your-cp283-notice

In particular, they comment

"You may want to:

•     You can send a signed statement and request removal of the penalty, if you have an acceptable reason why your return was late or incomplete.
•     You can complete Form 843 PDF and submit it with your signed statement requesting removal of the penalty and a refund of the penalty previously paid, if you previously paid the penalty and feel you have an acceptable reason.
•     Keep this notice in your permanent records."

I suggest gathering any and all documentation that shows why they were not aware of the availability of relief (including hiring a new service provider to help them), submitting a filing under the penalty relief program, and filing a Form 843 requesting acceptance of the filing and $500 fee in lieu of the penalty on CP283.

There is no guarantee this will work, but generally the IRS likes to work with plans to bring closure where the plan acts in good faith to correct an issue.

 

[thepensionmaven]

Interesting question - not sure of the answer.

Form 5500-SF was late, we checked the Box DFVC but have not as yet filed with DFVC.

We perused the EFAST website looking for recent filings and had questioned why none of our filings recently submitted were not on our "Submissions" on the EFAST2 website.

Apparently due to a software malfunction, our software was turned on "test" mode and EFAST had not passed the filings to DOL.

We were advised to refile with copies of the original submission and a letter of reasonable cause noting faulty software and stood a decent chance of no penalty.

Question is, since the original submission did not go through to DOL, can we uncheck the DFVC filing and file as initial filing upon resubmission.

[ERPAMaster]

On 10/27/2024 at 11:09 AM, Paul I said:

See the IRS advice here https://www.irs.gov/individuals/understanding-your-cp283-notice

In particular, they comment

"You may want to:

•     You can send a signed statement and request removal of the penalty, if you have an acceptable reason why your return was late or incomplete.
•     You can complete Form 843 PDF and submit it with your signed statement requesting removal of the penalty and a refund of the penalty previously paid, if you previously paid the penalty and feel you have an acceptable reason.
•     Keep this notice in your permanent records."

I suggest gathering any and all documentation that shows why they were not aware of the availability of relief (including hiring a new service provider to help them), submitting a filing under the penalty relief program, and filing a Form 843 requesting acceptance of the filing and $500 fee in lieu of the penalty on CP283.

There is no guarantee this will work, but generally the IRS likes to work with plans to bring closure where the plan acts in good faith to correct an issue.

 

We have clients that missed the 5500-ez filing for 2023 and are getting the CP283 without getting any kind of warning.  This seems unfair as it is not giving the clients a chance to correct as they have in the past.  Have you seen this issue?  Is your recommendation the same?

[thepensionmaven]

WE filed 5500-EZ timely, buy computer error not received by IRS, cliennt receive an IRS "love letter" with a 4500 fone.

Is there any way to file an amended thru EFAST and file under the Relief Program.  

Instruction not clear.

[thepensionmaven]

Several clients received CP-283 Notice before receding anything prior. The initial filing had a Reasonable Cause letter attached to it, but I understand DOL does not forward to IRS.

Rather than waste the time, we were advised to file under DFVC, pay the $750 and respond to the IRS Notice with a copy of the amended 5500-SF filing and check the Box DFVC, with a coverletter to IRS along with their invoice.

Anyone have a similar experience, and what would the cover-letter say?

[Bantais]

On 10/18/2024 at 8:40 PM, 401 Chaos said:

Thanks.  I'm wondering if anyone out there has direct, recent experience or further thoughts with this issue?

I have a new client facing a similar situation.  They just filed both 2022 and 2023 on October 15th.  Apparently received advice from recordkeeper to just go ahead and file both.  Then, a couple of days ago, they received IRS Notice CP-406 with respect to 2022.  (They say they were unaware of prior notices or missing filing; responsible employee no longer there, company moved, etc.) 

The CP-406 notes in one part:  "If you are required to file a Form 5500 and have not filed, you may be eligible to participate in the DOL Delinquent Filer Voluntary Compliance Program (DFVCP) . . . ."  I'm not sure the phrasing there is meant to be strictly interpreted so as to suggest a plan that has already filed is disqualified from the DFVCP but  it seems possible. 

In looking through the DOL fact sheets on DFVCP, I don't see this directly addressed.  It is clear that once the DOL notifies the plan of intent to assess that DFVCP is no longer possible but the fact sheets do not say having filed the Form 5500 disqualifies the plan.  To my mind, the late 5500 that gets filed is still a "delinquently filed" 5500, it's just that it was initially filed before going through the DFVCP.  If the plan files under the DFVCP before any DOL notice, it would seem to me that should be OK.  Of course, the fact that they went ahead and filed the 5500 may make it more likely that the DOL will notice and initiate a penalty assessment so time may be more of the essence as Sabrina1 notes.

Also, when taking breaks from this, I like to unwind with some gaming—especially CS2—and checking out cs2 case opening is a fun way to stay entertained during busy workdays.

From my experience, the situation you describe is fairly common. Filing the Form 5500 late does not automatically disqualify a plan from the DFVCP. The key factor is whether the Department of Labor has already notified the plan of intent to assess penalties. If no such notice has been issued, the plan generally can still participate in the DFVCP even after a late filing.

The late-filed Form 5500 is treated as "delinquently filed," so submitting it before engaging with the DFVCP doesn’t negate the plan’s eligibility. However, as you noted, filing first may increase the likelihood that the DOL will notice and potentially start the penalty process sooner, so it’s prudent to move quickly if planning to enter the DFVCP.

It’s also helpful to keep detailed documentation explaining the circumstances of the late filing—like changes in responsible personnel or relocation—as this can support a reasonable cause argument if the DOL does assess penalties.

[CharlieR]

Hello Everyone,

I have a similar situation 5500-SF for 2023 was filed late by 3 months with out checking the DFVCP program. Now we got a letter from IRS CP220.

I have amended the 5500-SFwith the DFVCP program but when I go to the DOL calculator the amendment 5500 does not show. Only the original one. Should I make the payment to this one or would the system update in a couple days? The date of filing reflects the date of the original filing. 

[ESOP Guy]

When did you do the filing?  If today it can take some time to show up on EFAST2. 

 

Did you pay the fine?  That now takes time for the DOL website that computed the fine to acknowledge the filing. 

 

[CharlieR]

Yes the amended 5500-SF was filed today. I might have to wait a couple days to reflect on the calculator. 

 

[thepensionmaven]

I usually put myself down as the person to contact and leave my email.  Most clients are clueless when it comes to any of this.

This way, I get the return receipt.

BTW, I found an actual phone number you can call to check whether a plan actually was filed or not if a receipt can not be found.

Contrary to what DOL said in the past, DFVC does track and keep a record.

[Kansas401k]

Question for this group. I am currently working a lead for a plan. They filed their 2020 5500 late using DFVCP in 2022. They have not filed for 2021, 2022, 2023 or 2024. I don't yet know why they haven't filed. 

Question is can they use DFVC program if they've had another mess-up? What is the next step for this firm if they cannot use DFVC program? Thanks in advance.

[RatherBeGolfing]

38 minutes ago, Kansas401k said:

Question is can they use DFVC program if they've had another mess-up?

As long as they are otherwise eligible, the fact that they filed under DFVCP for 2020 does not restrict them from using the program for subsequent failures. 

[ESOP Guy]

5 hours ago, Kansas401k said:

Question for this group. I am currently working a lead for a plan. They filed their 2020 5500 late using DFVCP in 2022. They have not filed for 2021, 2022, 2023 or 2024. I don't yet know why they haven't filed. 

Question is can they use DFVC program if they've had another mess-up? What is the next step for this firm if they cannot use DFVC program? Thanks in advance.

And doing them all at once is the least costly option as the max amount is based upon filing with the DOL not forms.   

[thepensionmaven]

I believe DFVC is capped at $1,500 for a small plan (you did not mention); just hurry up and file before client gets a DOL letter.