IRS Sent Erroneous Form 5500 Penalty Notices to Businesses
by Terri Eyden on
By Jason Bramwell
Businesses that had requested an extension to file their Form 5500 recently received erroneous late-filing penalty notices from the IRS because of a service programming error, according to an alert the agency issued November 8.
The document, which was obtained by BenefitsLink.com, was issued as part of the IRS' Servicewide Electronic Research Program (SERP) intranet for employees.
The alert stated that businesses that filed their Form 5500 before their Form 5558, Application for Extension of Time to File Certain Employee Plan Returns, had a chance to post were receiving a CP 283, Penalty Charged on Your 5500 Return – a penalty notice that is sent to a business that filed its Form 5500 late or incomplete.
"Proposed changes to the penalty program would allow time for extensions to post before penalty notices are generated," the alert stated. "However, until these changes can be implemented, tax examiners and telephone assistors should abate these penalties as service errors."
The alert instructed IRS telephone assistors to apologize to the taxpayer and "prepare Letter 168C explaining the penalty has been removed due to service error."
"Any penalties that have been erroneously assessed should be abated, regardless of the amount, because the penalties are due to service programming," the alert stated. "Use Reason Code (RC) 045 to signify IRS error."
If the caller is an employee plan administrator or sponsor with multiple plans or clients, the alert instructed personnel to abate up to five penalties for the caller.
"If the caller has penalty notices for more than five accounts, instruct the caller to put his/her request for abatement in writing," the alert stated, which added that the "names and Employer Identification Numbers of the impacted plans may be put on an list; a separate request is not required for each entity."