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IRS Penalty Relief for Retirement Plans is Now Permanent


6/4/15

Synopsis

Effective June 3, 2015, the IRS is providing permanent penalty relief to administrators or sponsors of certain retirement plans who neglect to timely file Form 5500-EZ.

Issue

Rev. Proc. 2015-32 establishes a permanent program to provide administrative relief from the penalties imposed under §§6652(e) and 6692 for a failure to timely comply with the annual reporting requirements for non-Title I retirement plans. The permanent program is structured in a similar manner to a pilot program the IRS had been conducting but contains several new features.

Under the pilot program, which expired on June 2, 2015, plans eligible for relief were: (1) non-ERISA plans covering only a 100% business owner or one or more partners and their spouses and (2) plans maintained outside of the U.S. primarily for non-resident aliens (foreign plans) subject to IRS annual reporting. Applicants were required to file a completed Form 5500 series return for each year the applicant was seeking penalty relief. No penalty or other payment was required to be paid under the pilot program.

The permanent program, which took effect on June 3, 2015, does have a payment requirement, as outlined below:

  • A $500 payment is required for each delinquent return submission for each plan, up to a maximum of $1500 per plan.
  • The permanent program requires that a Form 5500-EZ return be filed. The applicant must submit the delinquent return on Form 5500-EZ for the plan year in which the return was delinquent.
  • Payments are not based on the number of days the return is delinquent.
  • Certain exceptions apply to returns for plan years prior to 1990.
  • The permanent program also requires applicants to include a Form 14704, Transmittal Schedule – Form 5500-EZ Delinquent Filer Penalty Relief Program, with each submission.
  • The permanent program’s payment requirement is based on the number of delinquent returns for each plan. Therefore, multiple delinquent returns for a single plan should be submitted in a single package. Delinquent returns for different plans must be submitted in different packages.

 

What Does CohnReznick Think?

Those that did not avail themselves of the temporary program should do so with this new permanent program as soon as possible.

Contact

For more information, please contact Kenneth Kanter, Managing Partner of CohnReznick’s Tax Department, at kenneth.kanter@cohnreznick.com or 973-364–6668.


Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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