Small Business Taxes & Management

Special Report

IRS Provides Relief from Penalties for Certain Late Filed Form 5500


Small Business Taxes & ManagementTM--Copyright 2014, A/N Group, Inc.



Pension Plan Filing Requirements

There are a number of different types of pension plans available to a small business. Some such as a Payroll Deduction IRA, SEP, or SIMPLE IRA don't require an annual filing with the IRS or Department of Labor. Other types of plans including profit sharing, defined benefit, and the various types of 401(k) plans require an annual filing on Form 5500. There are several variations of the form. Form 5500 must be filed electronically and, depending your plan, can be complicated. Form 5500-SF is simpler and many plans with fewer than 100 participants can use the form.

If you, or you and your spouse, are the only participants in the plan you can file Form 5500-EZ. You may be able to complete the form yourself. If not, the cost for professional help should be small. You can use Form 5500-EZ if you are not eligible or choose not to file the annual return electronically on Form 5500-F. A one-participant plan is a retirement plan (that is a defined benefit pension plan or a defined contribution profit-sharing or money purchase pension plan), other than an Employee Stock Ownership Plan (ESOP), which:

You don't have to file even Form 5500-EZ for the plan year for a one-participant plan if the total of the plan's assets and the assets of all other one-participant plans maintained by the employer at the end of the plan year doesn't exceed $250,000. There's an exception for the final year of the plan. A Form 5500-EZ must be filed regardless of the amount of the plan's assets.

The fine for failure to file a return by the required due date is $25 a day, up to $15,000. There can be other penalties in some situations.


IRS Relief

Notice 2014-35 The IRS has updated the rules with respect to administrative relief from certain penalties for Delinquent Filer Voluntary Compliance (DFVC) Program and administered by the Department of Labor (DOL) and the Employee Benefits Security Administration. Notice 2014-35 supersedes the relief previously provided in Notice 2002-23. (The Secretary of Labor as well as the IRS can impose penalties on certain plans.)

In order to encourage voluntary compliance with the ERISA annual reporting requirements by late filers, the DFVC Program allows plan administrators who fail to file a timely annual report to pay reduced civil penalties. Notice 2002-23 provides that the IRS will not impose penalties under Secs. 6652 and 6692 (as those sections related to the filing of a Form 5500 series return) on a person who is eligible for and satisfies the requirements of the DFVC Program with respect to the filing of a Form 5500.

The Service will not impose penalties under Secs. 6652(d) and (e) or under 6692 with respect to a year for which filing of such a form is required on a person who (1) is eligible for and satisfies the requirements of the DFVC Program with respect to a delinquent Form 5500 series return for such year and (2) files separately with the Service a Form 8955-SSA for the year to which the DFVC filing relates. A delinquent Form 8955-SSA must be filed on using paper. The Form 5500 series must be filed electronically using EFAST2.

Any Form 8955-SSA required to be filed pursuant to this notice must be filed on paper by the later of 30 calendar days after the filer completes the DFVC filing or December 1, 2014.

For the complete notice, go to Notice 2014-35.

Revenue Procedure 2014-32 The above notice does not apply to a delinquent filing of a Form 5500-EZ for retirement plans that do not cover any common law employees. That's a plan under which a business owner and the owner's spouse are the only participants.

Certain plans that are not subject to Title I of ERISA are exempt from some of the annual reporting requirements if they satisfy certain criteria specified by law or in IRS published guidance. For years beginning after 2006, one-participant plans with asset of $250,000 or less are not required to file a 5500 except in the year the plan is terminated and all assets have been distributed.

Rev. Proc. 2014-32 provides relief from the penalties of Secs. 6652(e) and 6692 if they satisfy the requirements of Sections 4 and 5 of the revenue procedure. In lieu of the relief provided under this revenue procedure, filers may continue to file for relief currently available for a failure to timely file that is due to reasonable cause.

Relief is available under this revenue procedure if the plan administrator or sponsor is subject to the filing requirements of the Code (Secs. 6047(e), 6058, and 6059) but not subject to Title I of ERISA for the plan year that is delinquent. Thus, the relief under this revenue procedure is only available to the plan administrator or sponsor of (1) certain small business (owner-spouse) plans and plans of business partnerships (together, one-participant plans) and (2) certain foreign plans. (See above for a list of requirements of one-participant plans.) Relief is not available if a penalty has been assessed (i.e., if a CP 283 Notice, Penalty Charged on Your form 5500 Return, has been issued) with respect to a delinquent return.

No penalty or other payment is required to be paid under this pilot program. However, if this temporary pilot program is replace with a permanent program, a fee or other payment will be required. Revenue Procedure 2014-32 describes in detail the filing requirements, what must be included for the various plan years, how the returns must be marked and the mailing addresses.

The relief provided under this revenue procedure is effective June 2, 2014 and will remain in effect until June 2, 2015. Returns submitted after June 2, 2015 will not be entitled to relief under this revenue procedure.


Copyright 2014 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Articles in this publication are not intended to be used, and cannot be used, for the purpose of avoiding accuracy-related penalties that may be imposed on a taxpayer. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536

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--Last Update 06/18/14