Penalty Relief Program for Late Filing of Form 5500-EZ

Form 5500-EZ returns are used only by plan administrators and plan sponsors of retirement plans that are not subject to the reporting requirements of Title I of ERISA and hence are used to satisfy only the reporting requirements of the Internal Revenue Code.

A late filer is subject to a penalty of $25 for each day the failure continues, up to $15,000 for each Form 5500-EZ.

The Internal Revenue Service (IRS) established a one-year pilot program a year ago that provided administrative relief from the penalties imposed for a failure to timely comply with the annual reporting requirement. The relief applied to“one-participant plans” and certain foreign plans, which are not subject to the annual reporting requirements of Title I of ERISA.

Under the pilot program, applicants were required to file a complete Form 5500-EZ return for each year for which the applicant is seeking penalty relief.

Effective June 3, 2015, the IRS established a permanent program to provide administrative relief from penalties imposed for failure to timely file Form 5500-EZ.

The relief is only available to the plan administrator or plan sponsor of small business (owner-spouse) plans and plans of business partnerships (together, “one-participant plans”) and foreign plans. A one-participant plan is a retirement plan with one or more participants that covers only the owner of the entire business (or the owner and the owner’s spouse) or covers only one or more partners (or partners and their spouses) in a business partnership, and does not provide benefits for anyone except the owner (or the owner and the owner’s spouse) or one or more partners (or partners and their spouses).

A foreign plan is a retirement plan maintained outside the United States primarily for nonresident aliens.

The most significant change is the addition of a payment requirement with all submissions. The payment for each submission is $500 for each delinquent return for each plan, up to a maximum of $1,500 per plan.

As under the pilot program, the permanent program requires that a Form 5500-EZ return be filed even though the applicant could have filed a Form 5500-SF return electronically if the return had been timely filed.

The permanent program provides that the applicant must submit the delinquent return on the Form 5500-EZ that applied for the plan year for which the return was delinquent. An exception is provided for returns for plan years prior to 1990 because those returns are more difficult for applicants to obtain. For returns for plan years prior to 1990, the applicant may use a current-year Form 5500-EZ filled out with the beginning and ending dates for the plan year for which the return was delinquent.

Late filers may instead file for the relief currently available for a failure to timely file that is due to reasonable cause.  However, a filer who is denied relief for reasonable cause with respect to a particular delinquent return will receive a notice for the regular penalty of $25 for each day the form was late, up to $15,000.

Revenue Procedure 2015-32 contains the details on this permanent relief program.