DFVCP Following IRS Penalty Assessment

I've having a difficult time finding a clear answer on whether DFVCP may be used to eliminate IRS penalties for a late 5500 after the IRS has already imposed a penalty. The available IRS late-filer relief guidance does not seem to address this squarely. It says that IRS will waive penalties if, among other things, the filer complies with DFVCP. The DFVCP FAQs say an "IRS late-filer letter" will not disqualify a plan from using DFVCP, but it doesn't address a situation where the IRS has already imposed a penalty. There has been no correspondence from the DOL on the late 5500. 

My initial reaction is that using DFVCP now probably would not automatically waive the IRS penalties already imposed (but that it may be a good idea to minimize further DOL liability) and that a separate reasonable cause statement would need to be filed with the IRS requesting abatement of the penalties.

Am I off base?

Relatedly, the penalty is imposed on a Letter CP283, which I have understood to be specific to a 5500-EZ. The plan at issue files a 5500-SF reporting around 50 participants. Is this the typical form letter for a non-EZ Form 5500?

EBECatty, the way I read both the DOL Fact Sheet and the FAQs, any correspondence or related action by IRS is not going to disqualify you from DFVCP. Only a DOL letter will do that. So let's assume you are successful under DFVCP. You should be.

The IRS "guidance" on the topic, which is just what it says on its website, would seem to say that it will probably abate penalties once you demonstrate success under DFVCP. My guess is that you would be successful here as well, but I am not aware of anything in the IRM or anywhere else that discusses this situation, and of course dealing with IRS is often a demanding process on something like this.

From my experience it is too late unless the penalty is due to an error (i.e. the client filed under the wrong EIN).  The client should have received CP403 and CP406 notices well in advance of the CP283 penalty.  I believe the fact that the CP283 notice is associated with 5500EZ is just semantics as EZs are filed with the IRS and 5500 & 5500SF are filed with the EBSA.  Both agencies can apply a penalty for a late filer of Form 5500 and 5500SF.

Also see Q4 & Q9 here: https://www.irs.gov/retirement-plans/form-5500-ez-delinquent-filing-penalty-relief-frequently-asked-questions

23 hours ago, Nate X said:

From my experience it is too late unless the penalty is due to an error (i.e. the client filed under the wrong EIN).  The client should have received CP403 and CP406 notices well in advance of the CP283 penalty.  I believe the fact that the CP283 notice is associated with 5500EZ is just semantics as EZs are filed with the IRS and 5500 & 5500SF are filed with the EBSA.  Both agencies can apply a penalty for a late filer of Form 5500 and 5500SF.

Also see Q4 & Q9 here: https://www.irs.gov/retirement-plans/form-5500-ez-delinquent-filing-penalty-relief-frequently-asked-questions

 

 

 

Nate X, was your experience with EZ-filers only? Q&A-4 seems inconsistent with the more general guidance regarding the IRS's willingness to waive penalties if the plan successfully completes DFVCP. My thought is perhaps Q&A-4 was intended to apply only to EZ-filers, for whom DFVCP is not an option. The Q&A's are specifically addressing EZ filers.

Q&A-4 is indeed limited to EZ filers. 

You can file DFVCP for 5500s filed for plans other than one participant plans and foreign plans after you receive a CP283 notice.  You cannot use the IRS penalty relief program after CP283 (penalty was assessed after notice and follow ups), but you can still request penalty abatement (with no guarantee of approval).  If you request abatement and get denied, you are no longer eligible for the penalty relief program.

You cannot file DFVCP after the DOL has notified you in writing of a failure to file.  I belive that DOL procedure says this has to be certified mail, but they also say they can change this at any time without notice.  The DOL is now sending emails letting you know that they did not receive a 5500 they expected, and they have stated this does not prevent you from filing DFVCP.

15 hours ago, RatherBeGolfing said:

You can file DFVCP for 5500s filed for plans other than one participant plans and foreign plans after you receive a CP283 notice.  You cannot use the IRS penalty relief program after CP283 (penalty was assessed after notice and follow ups), but you can still request penalty abatement (with no guarantee of approval).  If you request abatement and get denied, you are no longer eligible for the penalty relief program.

I think this is where my original conclusion was heading. I was confused because the IRS relief says, essentially, if you follow DFVCP, we will not penalize you. And DFVCP suggests it's still available after receiving an IRS notice, it just isn't clear which notice.

I still don't see a clear statement confirming that, once the CP283 notice has been issued, the IRS relief program is no longer available. But it does seem counterintuitive that you would be able to avoid penalties that are already assessed (and not just proposed).  

12 minutes ago, EBECatty said:

I still don't see a clear statement confirming that, once the CP283 notice has been issued, the IRS relief program is no longer available. But it does seem counterintuitive that you would be able to avoid penalties that are already assessed (and not just proposed).  

Its in the rev proc that established the permanent administrative relief program Rev. Proc. 2015–32

Quote

Section 6.05 Penalty assessment notices. The relief provided by this revenue procedure is not available with respect to a delinquent return if a penalty has been assessed (that is, if a CP 283 Notice has been issued by the IRS to a plan sponsor or administrator) with respect to that delinquent return.

Rev. Proc. 2015-32 is only for non-Title I plans.

Notice 2014-35 covers Title I plans, and does not include similar language. 

The question is whether you can file DFVCP after the IRS has assessed penalties, correct

Eligibility for DFVCP https://www.federalregister.gov/documents/2013/01/29/2013-01616/delinquent-filer-voluntary-compliance-program

3 hours ago, EBECatty said:

I still don't see a clear statement confirming that, once the CP283 notice has been issued, the IRS relief program is no longer available.

Neither do I.

3 hours ago, EBECatty said:

But it does seem counterintuitive that you would be able to avoid penalties that are already assessed (and not just proposed).  

It doesn't seem that counterintuitive to me. They should live by the guidance they've provided. But I don't know enough about administrative law to reach a conclusion on whether you would win in court or not, EBECatty. 

Hi,

I received a CP283 notice from the IRS for my 5500EZ plan for late filling. I talked to the IRS employee and she said that I was not eligible for the DFVCP program because the fine has been assessed already.  She mentioned to send a letter requesting an abatement. Do you have any experience with this process? Does the IRS provide any relief like lowering the fees to a more reasonable amount? Does hiring a tax lawyer an option or they do not influence much in the process?

12 hours ago, pablodgar said:

Hi,

I received a CP283 notice from the IRS for my 5500EZ plan for late filling. I talked to the IRS employee and she said that I was not eligible for the DFVCP program because the fine has been assessed already.  She mentioned to send a letter requesting an abatement. Do you have any experience with this process? Does the IRS provide any relief like lowering the fees to a more reasonable amount? Does hiring a tax lawyer an option or they do not influence much in the process?

Just to clarify, if you file a 5500-EZ, you are NEVER eligible for the DFVCP.  You are eligible for the IRS Penalty Relief program under Rev Proc 2015-32 (different from DVFCP which is DOL) unless you have received CP283 which is the penalty assessment.  The IRS logic is that you ignored the previous notices before the assessment, so you are not eligible for the relief program.  You can still request an abatement (which is not guaranteed like the relief program).  If you are not familiar with the abatement process and the penalty is substantial, I would recommend the assistance of a professional in this practice area.

And to clarify further, the OP was about 5500-SF, not -EZ. There's lots of good information above about both, but the reader needs to keep the two separate.