Late Filing Penalty Relief

The IRS has instated a one-year pilot program offering penalty relief for one-participant retirement plans that have failed to timely file an annual retirement plan information Form 5500-EZ. A penalty for this infraction is at least $25/day and total up to $15,000 per return.

This program also includes certain foreign retirement plans (Rev.Proc.2014-32). Other qualified retirement plans (i.e. subject to ERISA) can use DOL’s Delinquent Filer Compliance Program to file a late Form 5500 or Form-SF. The late DOL filing penalties are reduced and IRS late filing fees are eliminated.

Generally, one-participant plans are exempt from filing Form 5500-EZ if the plan’s assets and the assets of other one-participant plans managed by the employer do not exceed $250,000 in value by the end of the plan year. However, a plan needs to file a final Form 5500 in the year that all plan assets have been distributed.

The deadline to File Form 5500 is the last day of the seventh month after the plan year ends. For calendar years this would be July 31.

A plan may file Form 5558 to automatically receive an extension for up to 2 ½ months.
There are stipulations for receiving an extension. First, the plan and the plan sponsor’s income tax year must be the same. Secondly, the employer has been granted an extension for a federal income tax return. Thirdly, a copy of the extension for the federal income tax is kept with the plan.

For Form(s) 5500-EZ that are filed late and to request relief from penalties and/or fees, the plan administrator must file Form 5500-EZ and mark in RED lettering in the top margin of the first page “Delinquent return submitted under Rev.Proc.2014-32, Eligible for Penalty Relief”. Additionally, a paper copy of the transmittal schedule provided in Rev.Proc.2014-32 is attached to front of each delinquent return. If a plan has multiple delinquent returns, all need to paper file in one submission. Remember, the top of each return needs to be appropriately marked in red letters.

This pilot program will accept delinquent returns until the close of the program June 2, 2015. To determine if your plan is eligible for relief through this program or you are unsure if your plan is required to file, contact your Wilke tax professional today by calling 412-278-2200.