- Why was this notice sent?
- Why are CP 403 and 406 Notices for Forms 5500 and 5500-EZ generated?
- What should be done initially upon receiving an IRS CP 403/406 Notice?
- What should be done if the EIN, Plan Name, or Plan Number on the copy of the return does not match the Notice?
- What should be done if the CP 403/406 Notice was sent by mistake?
- What should be done if the information on the copy of the return matches the information in the CP 403/406 Notice?
- What should be done if a final Form 5500 or Form 5500-EZ was filed in a previous year?
- What shouuld be done if the filer is exempt from filing Form 5500-EZ (assets less than $100,000) and filed incorrectly in the past?
- What should be done if the filer is exempt from filing Form 5500 or form 5500-EZ per the instructions and filed incorrectly in the past?
- Who is responsible for the Form 5500 or 5500-EZ filing?
- Is it possible to call or write to get an extension of time to reply to the CP 403/4065 Notice?
- What are the penalites on late-filed or incomplete returns?
- Is there any recourse to being subject to the penalties?
- Who should be contacted with questions pertaining to a CP 403/406 Notice?
- Where should replies to CP 403/406 Notices be sent?
Why was this notice sent?
These notices are sent to filers who did not file a Form 5500-series return for a particular plan year and our records indicate the plan is still active.
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Why are CP 403 and 406 Notices for Forms 5500 and 5500-EZ generated?
Neither the CP 403 nor CP 406 Notices are bills. Instead they are requests for a missing/non-filed Form 5500 or Form 5500-EZ.
The CP 403 Notice is mailed to the filers fifteen (15) months after the original due date of the return. This allows enough time for the Department of Labor (DOL) to process timely filed returns. The CP 403 has a 30-day response date. If a response is not received by the response date, a Final Notice (CP 406) is mailed fifteen (15) weeks after the CP 403.
The CP 406 Notice also has a 30-day response date. Responses must be received within the 30-day timeframe to prevent further action on accounts.
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What should be done initially upon receiving an IRS CP 403/406 Notice?
- Records should be reviewed to determine if a Form 5500/5500-EZ was filed.
- Review the copy of the filed return to ensure the EIN, Plan Name, and Plan Number on the copy of the return match the notice received.
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What should be done if the EIN, Plan Name, or Plan Number on the copy of the return does not match the notice?
The following should be submitted:
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A copy of the CP 403/406 Notice received,
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A complete copy of the return or the information if different, and
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A statement explaining the information on the Notice does not match the information on the return (the statement should explain why the return was filed under a different sponsor name/EIN/ plan number/ etc.).
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What should be done if the CP 403/406 Notice was sent by mistake?
A copy of the Notice should be sent to the address shown below (in the last FAQ) along with a statement explaining why it is felt the notice was sent in mistake.
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What should be done if the information on the copy of the return matches the information in the CP 403/406 Notice?
If the return was already filed timely, submit:
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A copy of the CP 403/406 Notice received,
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A copy of the Form 5500/5500-EZ (make sure the copy is signed by the plan sponsor/ administrator),
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A signed letter indicating this is a copy of a previously submitted return,
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Any appropriate supporting documents, and
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Evidence the return was timely filed. Evidence regarding the timely filing of the return can be:
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A copy of the timely filed extension and the date the original return was filed,
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A statement filed under the DOL's Delinquent Filer Voluntary Compliance (DFVC) Program. The statement can be very brief stating the IRS should assess no penalty since a DFVC filing was completed. The statement should indicate when the filer became a participant in the DFVC program, or
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A copy of the request for penalty abatement due to reasonable cause (generally submitted with the late return). The statement must be in writing and include the reason why the return was late and be signed by a person in authority.
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What should be done if a final Form 5500 or 5500-EZ was filed in a previous year?
Check the copy of the Form 5500 or 5500-EZ to determine if:
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The final return box was checked,
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If the return indicated zero assets, and
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If the return indicated zero participants at year end.
If the copy of the return indicates all of the above, resubmit a copy of the prior year final return with a statement the plan was terminated in a prior year.
If the copy of the return does NOT indicate all of the above, then our records will not indicate a final return was filed. A return must continue to filed until the plan has zero assets and zero participants or the previously filed return must be amended.
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What should be done if the filer is exempt from filing a Form 5500-EZ (assets less than $100,000) and filed incorrectly in the past?
If exempt from filing, the following should be submitted:
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A copy of the CP 403/406 Notice received, and
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A statement indicating:
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The requirements to be exempt from filing a Form 5500-EZ were met, and
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The combined assets in all retirement plans (not including IRAs, SEP-IRAs, and SIMPLE IRAs) has been $100,000 or less for every plan year beginning on or after January 1, 1994.
NOTE: The Form 5500-EZ Instructions state that if the total assets were over $100,000 for every plan year beginning on or after January 1, 1994, then you must continue to file regardless of whether the assets have fallen below $100,000 until all assets have been distributed.
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What should be done if the filer is exempt from filing a Form 5500 or Form 5500-EZ per the instructions and filed incorrectly in the past?
If exempt from filing, the following should be submitted:
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A copy of the CP 403/406 Notice received, and
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A detailed explanation in writing stating which exemption has been met or why the return is not required to be filed.
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Who is responsible for the Form 5500 or 5500-EZ filing?
The plan sponsor and plan administrator are ultimately responsible for the filing of the annual Form 5500 or 5500-EZ.
In some cases, the plan sponsor and plan administrator may have a contract with an outside administrator who may actually complete the annual Form 5500 or 5500-EZ filings. However, the plan sponsor and plan administrator are responsible for the accuracy of the filing and they must sign the return. In order to determine if completion of the Form 5500 or Form 5500-EZ is covered under a contract with the outside administrator, the plan sponsor and plan administrator should review their contract with the outside administrator.
To find out what Forms 5500 or 5500-EZ were filed in the past, filing information may be researched at www.free.erisa.com .
Link to Instructions for Form 5500
Link to Instructions for Form 5500-EZ
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Is it possible to call or write to get an extension of time to reply to the CP 403/406 Notice?
Extensions to reply to the CP 403/406 Notice are not allowed. The CP 403 has a 30-day response date. If a response is not received by the response date, a Final Notice (CP 406) is mailed fifteen (15) weeks after the CP 403. A response must be received within the 30-day timeframe to prevent further action on accounts.
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What are the penalties on late-filed or incomplete returns.?
The IRS penalties for late filing are $25 per day up to a maximum of $15,000.
The DOL penalties can run up to $1,100 per day (no maximum).
Types of Plans
|
IRS Penalty
|
DOL Penalty
|
Pension |
X
|
X
|
Welfare Plan |
|
X
|
Welfare/Fringe Benefit Plan |
|
X
|
All Form 5500-EZ Filers |
X
|
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Note: An incomplete return is not considered filed until it is complete. Incomplete returns are subject to late-filing and/or incomplete penalties from the IRS and/or DOL.
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Is there any recourse to being subject to the penalties?
Yes, both IRS and DOL have programs to deal with penalties on the Form 5500.
Notice 2002-23 was issued in conjunction with the publication in the Federal Register of modifications to the DOL's Delinquent Filer Voluntary Correction (DFVC) program at 67 Fed. Reg. 15051 (Mar. 28, 2002). To determine eligibility to file under these programs to have DOL penalties reduced and IRS penalties abated, please review the Notice and the DFVC Program.
IRS Notice 2002-23 provides administrative relief from the penalties under sections 6652(c)(1), (d), (e), and 6692 of the Internal Revenue Code for failure to timely comply with the annual reporting requirements under sections 6033(a), 6057, 6058, 6047, and 6059 of the Internal Revenue Code with respect to Form 5500. This administrative relief applies to late filers who both are eligible for and satisfy the requirements of the DFVC program as administered by the DOL's Employee Benefits Security Administration.
Note: The DFVC program does not apply to Form 5500-EZ filers.
Only the IRS can assess penalties on Form 5500-EZ. The DOL does not have any jurisdiction over Form 5500-EZ, and cannot assess penalties against delinquent Form 5500-EZ filings, and therefore cannot include them in their DFVC Program. The IRS will consider a “reasonable cause” statement submitted explaining why the return is late.
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Who should be contacted with questions pertaining to a CP 403/406 Notice?
For questions regarding the Notices and Form 5500 or 5500-EZ filing requirements, call the Customer Account Services at 1-877-829-5500 (toll-free).
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