Small retirement plans must submit annual financial returns to the IRS by using Form 5500-EZ. Generally, these plans cover only owners, partners, and their spouses. Technically, they are Non-Title I Retirement Plans.
A number of such plans have not been filing returns at all, making them subject to IRS penalties. This has prompted the IRS to launch a 12-month pilot program beginning in June 2014 (Rev. Proc. 2014-32). During the upcoming pilot year, no IRS penalty fees will be assessed for delinquent small plans which file delinquent returns.
To be eligible, a plan must qualify for the 5500-EZ form and have one or more delinquent filings. If the plan already has received an assessment letter from the IRS (“CP 283 Notice”), it cannot use the new program.
The process requires submitting the 5500-EZ (and attachments) and indicating on its first page that the form is being submitted under penalty relief. An IRS transmittal form also must be enclosed. Delinquent plans under multiple years and/or multiple plans can be submitted together, as long as each is accompanied by a transmittal form.
The IRS is considering whether the program will continue beyond a year. If it does, a filing penalty is likely to be introduced. For that reason alone, delinquent plans should take advantage of the penalty-free pilot program over the next year.
If you know of a plan that could use the temporary program, please contact us.