Penalty Relief for Form 5500-EZ Late FilingsAugust 21, 2015
In 2014, the IRS established a one-year pilot program that provided penalty relief for failure to timely file annual reports for one-participant retirement plans. The feedback from the pilot program was favorable, and it was suggested that a permanent penalty relief program be put in place. In June 2015, the IRS issued Revenue Procedure 2015-32, which establishes a permanent penalty relief program for filers of Form 5500-EZ, Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan.
Penalties under the IRS Code for late filing of Form 5500 series can be up to $15,000 per return. Failure to timely file the returns may also result in civil penalties under Title I of the Employee Retirement Income Securities Act of 1974 (ERISA). While the Department of Labor (DOL) has established their Delinquent Filer Voluntary Compliance (DFVC) program, which includes reduced late filing penalties, the DFVC program does not apply to Form 5500-EZ filers.
Fees for late filing under the program established by Rev. Proc. 2015-32 are $500 for each delinquent return for each plan, up to $1,500 per plan. Under the program, multiple delinquent returns for the same plan can be filed in one submission to take advantage of the penalty cap of $1,500 per plan. Delinquent returns for different plans must be filed in different submissions.
Plans that are eligible to file under this program include “One-Participant Plans.” A one-participant plan is a retirement plan that covers only the owner (or the owner and the owner’s spouse), or covers only one or more partners (or partners and their spouses) in a business partnership. Foreign one-participant plans are also eligible for relief under this program if the employer that maintains the plan is a domestic employer or a foreign employer with income derived from United States sources. Plans that are required to report under Title I are not eligible.
The filing under the program must include:
- A complete Form 5500-EZ return, including all required schedules, for each plan year for which the applicant is seeking penalty relief.
- The return must be marked. The applicant must mark in red letters in the top margin of the first page of the return “Delinquent Return Submitted under Rev. Proc. 2015-32, Eligible for Penalty Relief.”
- Form 14704. Each submission must include Form 14704. The form must be attached to the front of the oldest delinquent return in the submission.
- Payment of the penalty. The correct payment must be included with each submission.