Multiple Late 5500EZ's

[David MacLennan]

I have a prospective sole-proprietor client with a money purchase and a profit sharing plan, who has never filed a 5500EZ. The plans were established in 1990, and assets exceeded 100K prob in 93 or 94. Does anyone have any experience on what penalties the IRS will assess if he comes forward voluntarily and files all the late 5500EZ's now? Or, does anyone have any experience on how the IRS may treat this if discovered during an audit?

[smm]

In my experience, the IRS will not assess any penalties if the taxpayer files all of the late 5500s at one time and accompanies the returns with a Statement of Reasonable Cause Requesting a Waiver of the Penalties. Obviously, there are no guarantees. You are asking for problems if you do nothing and wait for the IRS to raise the issue on audit.

[richard]

IRS has historically been lenient in this area, as long as you tell them about it (rather than them finding out upon audit).

How the Department of Labor will be henceforth, any ideas?

[Guest ERISAweasel]

DOL might not care, since it sounds like the only participants are owners and they don't typically enjoy or need the ERISA protections available to bona fide "employees."

[Guest R Snyder]

Well, looks like I have a client in the same multiple year no-filing situation...back to the 80's and wants to bring filings into compliance. The plan has always been a one-person Keogh Plan (over the dollar amount limit years ago), so looks like DFVC will not be available and we will be going the regular late filing/ reasonable cause waiver of penalties route. If there are any updates or current thoughts as to what I might tell my client to expect, I would appreciate it. Thanks.

[jpod]

I agree with SMM; that has been my experience. Also, even if the IRS wished to assess penalties, my bet is that it would assess penalties no greater than the stipulated penalties that would be available under the new DFVC.

If IRS initially tries to assess penalties greater than the DFVC penalties, it will never stick; it would be absolutely unconscionalbe to say, on the one hand, that if you're subject to ERISA there will be no IRS penalties if you play the DFVC game, but if you're not subject to ERISA we can stick you with all penalties the Code will allow.

[Guest R Snyder]

Thanks for the feedback. Yes, agree that penalities in excess of the DFVC amounts should be very unlikely, so we are likely going to proceed with the filings with a reasonable cause letter ...