Small Businesses Can Get IRS Penalty Relief for Unfiled Retirement Plan Returns

IRS Penalty Relief For Failure To File Form 5500

IRS Penalty Relief for Failure To File Your Retirement Plan Form 5500

Have you failed to file your retirement plan reporting form for your retirement plan?

If you have failed to do so, the Internal Revenue Service on July 14, 2015 provided eligible small businesses a low-cost penalty relief program enabling them to quickly come back into compliance with IRS filing rules.

Penalty Relief Designed To Help Small Businesses

The program is designed to help small businesses that may have been unaware of the reporting requirements that apply to their retirement plans. In most cases, retirement plan sponsors and administrators need to know that  a return must be filed each year for the plan by the end of the seventh month following the close of the plan year. For plans that operate on a calendar-year basis, as most do, this means the 2014 return is due on July 31, 2015.

Penalty Reduction

Small businesses that fail to file required annual retirement plan returns, usually Form 5500-EZ, can face stiff penalties – up to $15,000 per return! However, by filing late returns under this program, eligible filers can avoid these penalties by paying only $500 for each return submitted, up to a maximum of $1,500 per plan. For that reason, program applicants are encouraged to include multiple late returns in a single submission.

Program Coverage

The program is generally open to small businesses with plans covering a one hundred percent (100%) owner or the partners in a business partnership, and the owner’s or partner’s spouse (but no other participants).

Key Point:  However, those who have already been assessed a penalty for late filings are not eligible.  As a result, it is important to move quickly to use this program before the IRS catches up to you.

As a historical side note, this program started as a one-year pilot, and the IRS made this program permanent in May 2015.  The IRS has received about 12,000 late returns since the pilot program began in June 2014.


The correct payment must be included with each submission. The amount of the payment is $500 per delinquent return up to a maximum of $1,500 per submission (that is, the payment is equal to $500 for a single return, $1,000 for two returns for the same plan, and $1,500 for three or more returns for the same plan). All payments under this program must be submitted by a check payable to the United States Treasury and must be attached to the Form 14704 that is included as part of the submission. The applicant’s employer identification number (EIN)  and the plan number should be written on the check.

Submission limited to a Single Plan

Multiple delinquent returns for a single plan may be submitted in a single submission, but separate submissions are required for separate plans.

For example, if an employer maintains a defined contribution plan and a defined benefit plan, and returns for each plan are delinquent for three plan years, the applicant must submit two separate submissions, one for each plan.

Note that the Department of Labor offers a similar relief program for businesses with retirement plans that include employees known as the Delinquent Filer Voluntary Compliance Program.

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