WRONG EIN Used for 2017 5500-SF

Took over a client - whose 5500-SFfor 2017 was filed using an incorrect EIN.  They have terminated the plan after only two years... (no money) and I assume I need to amend 2017 before I file the FINAL 5500 for 2018 using the correct EIN.  I am just wondering if I only  fix 2018 and mark as FINAL if that will be confusing to the DOL/IRS.  

Opinions?  

1 hour ago, Pammie57 said:

 I am just wondering if I only  fix 2018 and mark as FINAL if that will be confusing to the DOL/IRS.  

Yep.  And its a PITA.  Fix prior year first then file the final with the correct EIN.  

1 hour ago, Pammie57 said:

if that will be confusing to the DOL/IRS

As most of the participants on this site can attest from experience, the answer to that is almost always yes and even if you take the corrective steps as discussed, don't be surprised if the client still gets a "what's up" letter.

The plan sponsor probably is not required to amend the 5500, since it was correct to the best of their knowledge at the time.  But yeah, the government could very well be confused and if the IRS or DOL opens an examination or investigation, they might tell you to amend anyway.  So I would look at amending as preempting a possible instruction to amend.

I would be concerned that immediate termination probably sets off a lot of flags and might bring some formal regulatory attention, whatever you do.

6 minutes ago, loserson said:

The plan sponsor probably is not required to amend the 5500, since it was correct to the best of their knowledge at the time. 

No...There is no "correct to the best of their knowledge at the time" exception

35 minutes ago, RatherBeGolfing said:

No...There is no "correct to the best of their knowledge at the time" exception

That comes from the perjury statement on the 5500:

Quote

Under penalties of perjury and other penalties set forth in the instructions, I declare that I have examined this return/report, including accompanying schedules, statements and attachments, as well as the electronic version of this return/report, and to the best of my knowledge and belief, it is true, correct, and complete.

 

The argument that you do not have an obligation to amend a tax return or a tax statement or other regulatory filing is the typical legal advice I would give and that other tax and ERISA lawyers often gave to my clients and their clients.

This is the typical tax lawyer position, most often seen with regard to filing tax returns and filing/furnishing tax statements, that you have an obligation to be as correct as possible based on the perjury signature but not actually an obligation to amend later.  The advice is that you often do not have to amend a return or statement. For example, you may not have to correct your 1040 return if it is against your financial interest to do so.  But it is very clear that if you do choose to amend or correct a return or statement, then you must correct all known errors, not just the ones in your favor.  Again because of the perjury statement, but also because of statute and regulation.

There are some situations where you probably have to amend, and many situations where you really should amend.  Maybe your error is affecting dollar amounts or something else critical or important, like the EIN in this case.  And sometimes doing a corrected filing coming shortly after the error can mitigate some of the penalties, so correction may be wise even if it is not truly required.  But as a general rule, you probably do not have a separate obligation to amend.

That means you do take on the risk that the regulatory will tag you for failing to make an accurate filing, and you can try to head that off by internal recordkeeping explaining why you chose not to correct.  "Correct at the time we filed" becomes important here in showing good faith, which might be available as a formal avenue to avoid penalties or else as an informal argument to show to auditors.  If you can show the error was not consequential and not intentional, that may be protective against penalties.  You might want to avoid correcting precisely because it attract regulatory attention and could bring on late penalties.  But there is usually no separate penalty for failure to amend.

If you have seen contrary guidance that there is a general duty to amend, not just an IRS or DOL opinion that you should amend/correct but actual concrete regulation, statute or caselaw, then I would be very interested in adding it to my research file.  The IRS and DOL will probably always tell you to amend and correct if you ask them, but that is distinct from whether you must.  But this is the legal advice I have commonly heard and also given.

@loserson thank you for the explanation.  I guess that brings on a chicken or egg question.  If you file with wrong EIN and don't amend, have you satisfied the reporting requirement for the plan?  You could probably argue that you did, you just didn't use the correct information, but I don't think that argument will fly if you also want to argue that you are not required to amend.

Similarly, wouldn't  "correct to the best of their knowledge at the time", be limited to actual mistakes of fact rather than plain old mistakes?  If I report the assets from two out of three plan accounts because I forgot about one, that must be different from reporting two out of three because I didnt know the third existed.

17 hours ago, RatherBeGolfing said:

@loserson thank you for the explanation.  I guess that brings on a chicken or egg question.  If you file with wrong EIN and don't amend, have you satisfied the reporting requirement for the plan?  You could probably argue that you did, you just didn't use the correct information, but I don't think that argument will fly if you also want to argue that you are not required to amend.

That has come up before but I forget if I found specific guidance on that point.  Sometimes the client either wants an excuse to let it quietly drop or wants an argument to make internally to fix everything.  And in either of those situations, nobody really cares about the legal minutiae, as long as they have a broadly defensible and reasonable interpretation.

In general, if it's a while back and all your reporting in the last 3-5 years is correct, my first instinct is you can probably ignore an error like that if you want.  Even if the statute doesn't close, the IRS and DOL both prefer to focus on the most recent three years in their enforcement activity.

But I have had many clients where a previous benefits administrator royally ducked up the old 5500 reporting. For one client they had a bunch of plans, a bunch of subs with distinct EINs sponsoring different plans, they had plan mergers and spins and new plans and plan terms, and they had really sloppy reporting of it all.  I think we told that client they could probably let the old errors sit, since some of the shoddy reporting was like 10-20 years old.  But they got their reporting vendor to handle all the fixes in a big package, so they cleaned it up, even though the old errors were probably only important to the Benefits manager.  We ended up giving more literal, strict advice so that he could support his decision internally.  i.e. mentioning the penalties and obligations, and not highlighting the fact that nobody is likely to come after them for 10- and 15-year-old foot faults on the 5500.

17 hours ago, RatherBeGolfing said:

Similarly, wouldn't  "correct to the best of their knowledge at the time", be limited to actual mistakes of fact rather than plain old mistakes?  If I report the assets from two out of three plan accounts because I forgot about one, that must be different from reporting two out of three because I didnt know the third existed.

Yeah, the "we did our best srylol" argument does not relieve you of the obligation to file an accurate and timely return/report.  It might get you out of some penalties if the agent thinks you made an innocent mistake and takes pity on you.  The IRS has formal penalty relief guidelines that tend to privilege both good faith and well-meaning ignorance.  And it means that you did not commit perjury when you signed an inaccurate 5500 or other statement or return.

You still needed to do it, so *if they catch you* it's a problem.  The question is whether you want to take the time and expense to fix a return or statement that is inaccurate and might actually fail your reporting obligation, but which might not be worth fixing and might only attract unwanted attention.  

OP states that the 2017 5500 EIN was incorrect.  What about the previous year?

Have had this situation a couple of times.  Each time a phone call to the IRS resulted in them telling me to file using the correct EIN for the current filing and wait for a letter from them on the previous filing.

That said, they still seem to get confused even if you wait for the magic letter.  RBG is correct - it is a PITA!  (Took me a minute to figure out what that meant ;))

We have used Line 4 (Form 5500-SF) for the current filing and have never received a follow-up letter from the IRS.

We have the opposite experience.  Filled in Line 4 on Form 5500-SF, and *still* got that letter from the IRS.