United States

IRS provides permanent relief for late returns of small retirement plans

TAX ALERT  | 

Rev. Proc. 2015-32 provides a procedure for plan administrators and plan sponsors of retirement plans not subject to Title I of the Employee Retirement Income Security Act of 1974 (ERISA) to receive penalty relief for late filed returns without having to demonstrate reasonable cause for the late filing. Rev. Proc. 2014-32, which expires on June 2, 2015, provided similar, but temporary relief. The new permanent procedure becomes effective June 3, 2015. If taxpayers meet the requirements in the procedure, and pay an administrative fee with the late filings, the IRS will not assess penalties for late filings.

Most of the guidance provided in Rev. Proc. 2015-32 is similar to the expiring temporary relief and requires taxpayers to complete and submit the delinquent returns for all delinquent years. Taxpayers that are typically eligible include one-participant plans (plans covering only the business owner and their spouse or one or more partners and their spouses) and certain foreign plans that have not received a notice from the IRS regarding the late returns. The permanent relief does include a filing fee of $500 per delinquent return, up to a maximum of $1,500 per plan. In addition, Rev. Proc. 2015-32 requires a Form 14704, Transmittal Schedule, be submitted with the late returns.

Small taxpayers who have not filed returns for their retirement plans in past years should review the guidance provided in Rev. Proc. 2015-32 to analyze whether they meet the requirements to receive penalty relief. Although the permanent procedure includes an administrative filing fee, the maximum fee is much less than the maximum penalties, which may be assessed if the IRS notifies the taxpayer of the late filings before the taxpayer voluntarily complies with the relief guidance. Consult your tax advisor for assistance complying with the new procedure.

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