Late 5500/SF

Form 5500-SF for 2013 was prepared for a client and filed late by about 2 weeks.

Apparently client has received more than 1 Notice from IRS as he just emailed an IRS bill for $15,000.

What is recommended here?

File under DFVC before he gets a letter from the DOL.

I was thinking about that.

Can we do that at this time, especially after a $15K IRS fine?

I assume the client should file under DVFC, pay the $750 and then send a copy of the filing to IRS at the address on the invoice?

That should be satisfactory with IRS??

TX.

Is it actually a  bill for $15,000?  Or a proposed penalty for $15,000?  What is the IRS form/notice number?

CP 283,  just a bill with a tear off payment slip

OK if its a CP-283 Notice its an assessed penalty rather than a proposed penalty and DFVCP is no longer an option (at least for the IRS).  I believe you can still seek penalty abatement for reasonable cause, so that would be the first thing I would try before paying a $15,000 penalty.

One thing is bothering me though.  The IRS penalty is $25 per day with a cap at $15,000. If the form was actually filed 2 weeks late, the penalty should not be the maximum $15,000.  Even if it was a year late, it shouldn't get to $15,000.  Something isn't adding up, or I haven't had enough coffee today...

Apparently was not filed at all.

I suggested filing under DFVC and paying the $750.

Client must have received previous notices and ignored them.

Are you saying that would not solve the issue?

The accountant is the brother of the client.

I think filing under DFVC should be done no matter what since the DOL could also assess penalties for a late filing.

The question is whether the CP-283 precludes you from using using DFVC to get out of the IRS penalty.  For the  5500-EZ, you are ineligible for the penalty relief program once the IRS issues the CP-283.  I think it is the same thing for the DFVC, you are eligible as long as it is a proposed penalty but you are stuck once the penalty is actually assessed.  I would start a dialog with the IRS to see if there is anything they can do at this point.

The plan can certainly use DFVCP, from the DOL FAQ:

• Plan administrators are eligible to pay reduced civil penalties under the program if the required filings under the DFVCP are made prior to the date on which the administrator is notified in writing by the Department of Labor (Department) of a failure to file a timely annual report under Title I of the Employee Retirement Security Act of 1974 (ERISA).

The IRS says in Notice 2014-35 that the only requirement for IRS penalty relief is qualification with the DFVCP requirements.  Thus the IRS notices don't count.  

Now, maybe the client DID get something from the DOL...but if not, hurry, do DFVCP and then the penalties will be waived.

Thanks for clarifying QP_Guy.  That is a clear distinction from the IRS 5500-EZ penalty relief program that draws the line at the CP-283.

So, to be clear, if we file with DOL under DFVC pronto and pay penalty and forward the filing to IRS with Acknowledgement ID and date, plus letter of explanation - reasonable cause -  that should theoretically, at least,  IRS and no penalty?

You don't need the letter of explanation.  Just DFVCP cures both DOL (actually EBSA) and IRS issues.

Even after the client receives a bill for $15,000???

You probably have contact the IRS after DFVCP since there is nowhere on the assessed penalty notice to respond with the DFVCP information like there is on the proposed penalty.  But the result should be the same.

Is the answer any different if it is a non-Title I plan that is required to file electronically using the S-F? 

huh?  A non-title 1 plan required to file SF?  You'll have to help me understand more: what is the plan type and entity type?

If the employer files 250 or more information returns it is required to file the 5500-SF electronically.  Example:  A partnership plan that covers only partners.  The partnership is large enough that it files more than 250 information returns annually. 

On 5/4/2018 at 2:54 PM, jpod said:

Is the answer any different if it is a non-Title I plan that is required to file electronically using the S-F? 

They would fall under the 5500-EZ penalty relief program rather than the DFVCP, but they will now have to file a Form 5500-EZ rather than the electronic 5500-SF.  The pilot program had them file the SF electronically, but the permanent program changed that to an EZ instead.

Since they fall under the EZ program, they would be ineligible because they have already received the CP-283.  They could still apply for relief due to reasonable cause, but I don't know how picky the IRS is with reasonable cause filings now that the penalty relief program is in place. 

Question on late filings.  5500-SF filed 22 days late for 2019 calendar year plan.  TPA withheld filing thru EFAST until invoice paid for filing fee, so that was reason plan was late in filing.  Plan is 403(b)(7) ERISA plan, but further complicated that 12/31/2019 plan year was last filing, since plan terminated and now has zero balance.  5558 was filed and dated by plan sponsor appropriately.  Plan sponsor received CP-220 notice from IRS for $5,500+interest ($250 per day plus interest).  

At this point, I see responses indicating DFVCP is preferable.  Is Form 843 requesting abatement becoming an issue?  Thought COVID period might be good reason to ask for full abatement via the 843, especially since this 2019 filing is last one for this plan and delay caused by TPA.  Any thoughts on 843 vs DFVCP to mitigate this penalty amount?

The delay wasn't caused by the TPA. The delay was caused by the client not paying their bills. File DFVCP.

52 minutes ago, Bill Presson said:

The delay wasn't caused by the TPA. The delay was caused by the client not paying their bills. File DFVCP.

👍

And in the end, it is the plan's responsibility to make sure it gets filed.  Whether TPA or client is at fault is a contractual issue, not reasonable cause for late filing of a required annual return.  

1 hour ago, Bill Presson said:

The delay wasn't caused by the TPA. The delay was caused by the client not paying their bills. File DFVCP.

And make sure you get paid in advance!

How does it work if you've already filed the return late?  Do you amend the plan and just check the DFVCP box?

26 minutes ago, BG5150 said:

How does it work if you've already filed the return late?  Do you amend the plan and just check the DFVCP box?

Correct, as long as the client hasn't received a letter from the DOL.

If the plan has already mailed 843, file DFVCP anyway or wait for 843 decision?