New IRS Program Offers Relief for Late Filers of Form 5500-EZ

Missing the deadline for the annual Form 5500 can lead to hefty penalties from both the Department of Labor (DOL) and the Internal Revenue Service (IRS). A delinquent filer may be too deterred by these fees to send in the late filings. In an effort to counter this, in 1995 the DOL created the Delinquent Filer Voluntary Compliance Program (DFVCP). Under the DFVCP, employers pay reduced penalties to the DOL and the IRS waives its late filing penalties when employers file overdue 5500 forms through the program.  While this is a great option for filers of the Form 5500-SF and the long Form 5500, the DFVC program is only available for filers that are required to file under both Title I of ERISA and the Code.  DFVCP is not an option for retirement plans that file Form 5500-EZ.  Form 5500-EZ is filed by plans that are not subject to Title I of ERISA – namely, “one-participant plans” that cover only the owner of the business (or the owner and the owner’s spouse) or only one or more partners (or partners and their spouses) and does not provide benefits for anyone except the owner or one or more partners (and spouses).   

There has previously not been any program for relief of penalties for late filers of the Form 5500-EZ. In an effort to extend relief to these plans, in May of this year the IRS created a new pilot program which will be effective for submissions made between June 2, 2014 and June 2, 2015. No penalty or payment is required from eligible plans that take advantage of the pilot program.  However, the pilot program is not available to employers who have already received a CP 283 Notice (“Penalty Charge on Your Form 5500 Return”) from the IRS.

To use the program, late filings must be submitted by mail. Electronic filings through the DOL EFAST2 system are not allowed. To submit a form for penalty relief, the following procedures must be followed:

• A Form 5500, including all schedules and attachments, must be completed for each delinquent year, using the original IRS form from that year. For any plan year 2009 and later, a form 5500-EZ must be used.  For plan years before 2009, Form 5500 is used. 
• “Delinquent return submitted under Rev. Proc. 2014-32, Eligible for Penalty Relief” must be written in red at the top of the first page of each return being submitted.
• A Transmittal Schedule must be attached to the front of each late form.  http://www.irs.gov/pub/irs-tege/appendix_a_transmittal_schedule.pdf
• Multiple forms can be submitted together, but each must have a Transmittal Schedule.
• Mail Forms 5500-EZ for 2009 and later to:
  Internal Revenue Service
  1973 North Rulon White Blvd.
  Ogden, UT 84404-0020
• Mail Forms 5500 for years prior to 2009 to:
  Internal Revenue Service
  Employee Plans Delinquent Filer Program
  EP Classification
  9350 Flair Drive
  El Monte, CA  91731-2828

The IRS has stated that they are considering a permanent program after the temporary pilot program closes on June 2, 2015. Although late filers are not currently required to pay a fee to use the program, if the program becomes permanent it is expected that a fee or other payment will be required. The IRS has invited comments on both the question of establishing a permanent relief program and on how to determine fees for these late filings.