Small qualified retirement plans must file annual returns in the 5500 series with the U.S. Department of Labor or face penalties unless the plans qualify for an exemption.
Plans not required to file include:
- SIMPLE IRAs
- Other types of plans (e.g., profit-sharing or defined benefit plans) with assets of no more than $250,000 at the end of the plan year
Plans required to file but don’t may face a penalty of up to $15,000 per return. Last year, the IRS announced a program to waive penalties for eligible filers who submitted returns by June 2, 2015. This deadline is getting near, so owners with small retirement plans that failed to file returns must act quickly. The IRS reports that about 6,000 delinquent returns have been filed since last year’s announcement.
Qualified plans for small businesses usually file either Form 5500-SF (fewer than 100 participants at the beginning of the plan year) or 5500-EZ (for one-participant plans).
Plans eligible for special relief for delinquency include:
- One-participant plans. These are plans covering only the owner or owner and spouse, or partners or partners and their spouses (i.e., no benefits are provided for anyone else).
- Foreign plans. These are plans maintained outside the U.S. for the benefit of nonresident aliens.
When to use the program. It is helpful for any oversight in filing. However, two situations can be responsible for such oversight:
- Failing to file a final return for the last year of the plan, even though plan assets are under the threshold amount.
- Failing to file a return for a plan in conjunction with ROBS (rollovers as business startups) under the mistaken belief that the plan was exempt because of having plan assets under the threshold amount. ROBS must file, regardless of the amount of plan assets, because the business, not the owner covered by the plan is the owner, so the threshold does not apply.
Procedures. Returns submitted under this program should be marked: “Delinquent return submitted under Rev. Proc. 2014-32, Eligible for Penalty Relief.” Multiple returns can be submitted. There are no fees or penalties for filing under this program.
Relief is not available if a CP 283 Notice, Penalty Charged on Your Form 5500 Return, has been issued to a plan sponsor or administrator with respect to a delinquent return.
Whether or not a delinquent return is filed under this relief program, a penalty for late filing can always be excused for reasonable cause. For example, if you want relief but miss the June 2, 2015, deadline for the special program, you can request relief because of reasonable cause.
A request for relief due to reasonable cause may be attached to the delinquent return when the return is filed or may be filed separately. The request should state the reason why the return was late and be signed by a person in authority. The request, along with the delinquent return if it has not already been submitted, should be mailed to the filing address provided in the instructions for the most current form available to taxpayers.
If your business maintains a qualified retirement plan, review your filing history to make sure you’re in compliance. Talk with your tax advisor for details.