Notices from IRS (CP 403 and CP 406 Notices) - Delinquency Notices
The CP 403 and 406 Notices are delinquency notices about filing Form 5500-series returns. The below FAQs will help you draft a response if you receive a notice.
These FAQs provide general information and should not be cited as any type of legal authority. They provide general information. Because these answers do not apply to every situation, yours may require additional research.
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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. Why are CP 403 and 406 Notices for Forms 5500 generated? Neither the CP 403 nor CP 406 Notices are bills. They are requests for a missing/non-filed Form 5500, 5500-EZ or 5500-SF 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 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 30 days to prevent further account action. What should be done upon receiving a 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? The following should be submitted:
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 thought the notice was mistakenly sent. What should be done if the information on the copy of the return matches the information in the CP 403/406 Notice? Form 5500/5500-SF: If you filed the return within the last four weeks and used the name, EIN and plan number shown on the notice, then you may ignore the CP 403 Notice. However, if you receive a CP 406 Notice, you must respond by returning the CP 406 Notice with Section I completed. Form 5500EZ: If the return was already filed timely, submit:
What should be done if a final Form 5500 series return was filed in a previous year? Review the copy of the previously filed Form 5500/5500-SF or 5500-EZ to determine if:
If the copy of the return indicates all of the above then respond to the CP 403/406 Notice with Section II completed. 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 be filed until the plan has zero assets and zero participants or the previously filed return must be amended. You should respond to the notice that you will/have filed the missing return and complete Section III of the CP403/406 Notice. What should be done if the filer is exempt from filing a Form 5500-EZ (assets less than $100,000 for plan years beginning on or after Jan 1, 1994 or $250,000 for plan years beginning on or after Jan 1, 2007) and filed incorrectly in the past? If exempt from filing, the following should be submitted:
What should be done if the filer is exempt from filing a Form 5500 series return per the instructions and filed incorrectly in the past? If exempt from filing, the following should be submitted:
Who is responsible for the Form 5500 series filing? The plan sponsor and plan administrator are ultimately responsible for the filing of the annual Form 5500, 5500-EZ or 5500-SF. 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-series 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-series 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, 5500-EZ or 5500-SF were filed in the past, filing information may be researched at www.free.erisa.com . Instructions for Form 5500 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. 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).
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. 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 DFVC. Please review the Notice and DFVC Program to determine eligibility to file under these programs to have DOL penalties reduced and IRS penalties abated. IRS Notice 2002-23 provides administrative relief from the penalties under sections 6652(c)(1), (d), (e), and 6692 of the Code for failure to timely comply with the annual reporting requirements under sections 6033(a), 6057, 6058, 6047, and 6059 of the Code for Form 5500. This administrative relief applies to late filers who both are eligible for and satisfy the requirements of the DFVC program. 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.
Who should be contacted with questions about a CP 403/406 Notice? Call Customer Account Services at (877) 829-5500 (toll-free) for questions about the Notices and Form 5500, 5500-EZ or 5500-SF filing requirements. Where should replies to CP 403/406 Notices be sent? The address to send responses is listed in the upper left-hand corner of the Notices and the fax number is listed in the body of the Notices. Only employees in Ogden can adjust accounts. Write or fax the EP Entity Unit in Ogden using the following contact information: Internal Revenue Service Fax Number: (801) 620-7116
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