There are three basic types of penalties for failure to file form 5500, including failure to pay, accuracy penalty, and failure to file penalty. If you are the first time you have filed a form for a tax year, you should consider if reasonable cause applies.
In the IRS’s view, reasonable cause requires that you have an exceptionally foreseeable, unavoidable reason for your failure to file. However, you should be aware that the IRS does not automatically abate any of these penalties.
Table of contents
One example of a reasonable excuse for late filing is a plan audit. A plan audit may reveal that a company was not transparent about the plan’s costs. If this is the case, plan administrators should review the plan’s finances to ensure that it’s complying with regulations.
Also, plan administrators should make sure that they’ve filed their Audit Reports in time. If they have not, then they should follow up with the plan administrator and request proof that they sent the Form 5500 on time.
In a similar way, the IRS has instituted a program that helps people with late or non-filing problems. It has also worked to ease the burden on businesses by offering administrative relief. The pilot program was designed to help one-participant plans and some foreign plans that don’t have to file Form 5500.
If you have a plan like this, however, the deadline is even sooner. In such cases, you must file the Form 5500-EZ return each year. The IRS will then consider it as a timely return and not penalize you for the late filing.
What is the penalty for late filing of form 5500-EZ?
For 2020 forms, the IRS has extended the filing deadline for the form by two and a half months by issuing a notice of late filing. But in most cases, the form is not due on time. If you need more time, you can file Form 5558, which extends the filing deadline for the form by two and a half months. But, the normal filing deadline for form 5500 is July 31 of 2021 for 2020 calendar year plans.
You can also file a form for a DFVC program. The DOL offers the DFVCP program to help you file a late form without incurring penalties. The minimum penalty under the DFVC program is $10 per day. This is a cost-effective option for most plan sponsors. If you are late filing a form 5500, you can try the DFVCP program. It can save your company thousands of dollars in late filing penalties.
Form due date
Generally, Form 5500-EZ filings are due on July 31 of the calendar year. By filing Form 5558, you can extend the filing date by two and a half months, bringing the final filing date to October 15 for calendar year plans.
If you are not able to meet this deadline, the IRS will issue a penalty assessment letter for the late filing. This fee is as much as $15,000 if you fail to meet the deadline.
There are some crucial details you must know before filling out a Form 5500-EZ. For instance, the instructions list which plans are not required to be filed and which are not. You need to update these details in question 4a-4b and 5a-5c of the form.
The instructions also include a list of exempt plans. Listed below are the details you must know. Follow these instructions to avoid mistakes.
What is IRS form 5500 EZ?
You should not forget to register for EFAST2 before filing your Form 5500-EZ. You must accept the PIN and signature agreements. Failure to do so may result in a DOL employee plan compliance check. For example, if you fail to include the correct information on your Form 5500, you may have a compliance check from the Department of Labor.
For this reason, it is critical that you answer the question honestly. You should include all employees who are eligible to participate in your retirement plan. It is also important to indicate whether employees with balances in their accounts in the plan are participants in the plan. Some companies make the mistake of answering ‘none’ and fail to list the employees who have balances in the plan.
If you cannot complete the form yourself, you should consult with a tax professional or a CPA. These professionals can help you fill out the Form 5500-EZ. However, this guide may not cover every scenario.
Moreover, the instructions do not replace professional advice. Always remember that professional advice is recommended before filling out any form. You should also make sure that you have the correct documents and information when completing Form 5500-EZ.