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Erroneous Form 8955 and Form 5500 Penalty Notices

Posted 5:49 PM by

Recently, the Internal Revenue Service (IRS) acknowledged two processing glitches. First, in August approximately 4,000 plan sponsors received notices that erroneously informed them that the IRS was assessing a penalty due to their "filing a late or incomplete" Form 8955-SSA. The IRS has contacted or is contacting the affected taxpayers to inform them that the penalty assessment was an error.

Second, the IRS has experienced a problem processing the Form 5500 filed under approved extensions. Most of the situations appear to follow a consistent pattern: first, the Form 5558 was filed in late July 2013 (the due date was July 31, 2013); the Form 8955-SSA and/or Form 5500 was then filed in the early part of August 2013 (typically, within the first two weeks of the month); and, finally, the plan sponsor received a penalty notice.

The American Society of Pension Professionals & Actuaries (ASPPA) has been speaking with a representative of the IRS regarding this issue. The representative stated that the issue seems to stem from the timing of the submission of the various forms. The Form 5500 and Form 5558 are processed through different computer programs. Because the Form 5500 has a lower number, it is processed first. Then, the Form 5558 is processed. If the Form 5500 (which was submitted in early August) is processed before the Form 5558 (which was timely submitted in late July), then an erroneous penalty notice will be produced and sent to the plan sponsor.

According to the representative, plan sponsors or their representatives can contact the IRS regarding the issue and the penalty will be abated (assuming the Form 5558 was timely filed). The IRS representative also recommended that if practitioners and plan sponsors are going to file the Form 5558 in late July, then they should not  file the Form 8955-SSA and/or Form 5500 in the first part of August.

Source: ASPPA