Due to the 2015-32 revenue procedure, only 401K late applicants via Form 5500-EZ received automatic exemption from IRS registration fees under 6652 (e) and 6692 of the Internal Revenue Code for non-compliance with reporting hours Cancellations are per Internal Revenue Code 6047 (e), 6058 and 6059, which applies to independent work plans, such as 401k individual plans and 401k individual plans.
Form 5500-EZ is the annual report for a member's (owners and spouses) solo 401K individual plans. It must generally be submitted when the total plan assets exceed $ 250,000 on the last day of the plan year (usually the 31st of December), or at the end of the plan.
The relief program was enacted in June 2015. The cost is $ 500 per delinquent return, up to $ 1,500 per plan.
The Form 5500-EZ must be submitted on time. The plan administrator is generally responsible for sending these forms. The penalties are high, but a reduction can obtain the exemption. You only need a few tips and tricks.
The 5500-EzZ module was jointly developed by the IRS, the Department of Labor, and the Pension Benefit Guarantee Corporation for employee retirement plans for annual reporting obligations under the Income Security Act of 1974 employee retirement (ERISA) and the Internal Revenue Code (IRC). Plan administrators must generally submit Form 5500 at the end of the seventh month after the end of the plan year.
Companies often use insurance brokers or third-party administrators to prepare and submit Form 5500. As a result, plan administrators do not take themselves seriously if their company's Form 5500 is prepared and submitted accurately and on time. Some companies have never sent form 5500, and still don't know how to send it correctly and before the deadline.
Some companies usually realize their errors when they receive a letter from the IRS or DOL indicating that they have not filed any, and are now considering the substantial penalties.
Section 502 (C) (2) of ERISA authorizes the Secretary of Labor to impose civil fines of up to $1,100 per day for calendar administrators who do not file or refuse to submit Form 5500-EZ accurately or as soon as possible. Below are the standard penalties by the IRS and DOL
Late Filing
• IRS penalty: $ 25 per day up to a maximum of $ 15,000
• DOL penalty - $ 50 per day, no limits
No Filing
• IRS penalty: $ 25 per day up to a maximum of $ 15,000
• DOL penalty: $ 300 per day up to a maximum of $ 30,000
Plan administrators may also incur other penalties for incomplete enrollment unless they have reasonable grounds for failing to file a comprehensive annual report which the DOL will approve.
Plan administrators can electronically file Form 5500 with the DOL Employee Benefits Security Administration (EBSA) and attach a letter stating the reason or cause for the late enrollment. If the DOL and the IRS believe that the cause is reasonable, the administrators of the plan will be freed from the late penalties.
But, ff the case is not convincing enough to the IRS and DOL, a proposal for notification of penalty will be sent to the administrators of the plan. The plan can contest the assessed penalties.
Another option is to participate in the DOL Voluntary Archiving (DFVC) compliance program. The DFVC limits the possible sanctions imposed by the DOL but does not completely cancel all the sanctions. To be eligible, plan administrators will have to submit a completed Form 5500-EZ electronically. They include all attachments and schedules for each delinquent year verified by the DFVC label on the form.
An online computer is used to determine the fines payable, and a check is sent for the same amount, or the administrator can use an electronic payment method.
The IRS can also cancel late fines for taxpayers who meet the requirements of the applicant's voluntary compliance program by the DOL and must also file the missing 8955-SSA forms and therefore meet the penalty and exemption requirements. All necessary documents should be mailed within 30 days of the end of completing the DFVC program filing.
Plan administrators, including the cash balance APTs, should make annual reports an essential task. They must be completed at the end of the plan and all funds paid. Failure to submit to companies subject to large fines can be easily avoided. You can create an internal department or use an external service provider to go through the filing tasks accurately and to file on time.
JG Tax and Financial Services