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IRS Reminds Small Businesses About Relief for Unfiled Retirement Plan Returns

The IRS in a July 14 news release encouraged eligible small businesses that did not file certain retirement plan returns to take advantage of a low-cost penalty relief program enabling them to quickly come back into compliance. The IRS intends the program to help small businesses that may have been unaware of the reporting requirements applicable to their retirement plans.

The reminder centered around small business’ Form 5500 filing responsibilities, which often involve the Form 5500-EZ. The points it raised were as follows:

  • In most cases, 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.

  • Small businesses that fail to file required annual retirement plan returns can face stiff penalties of up to $15,000 per return.

  • By filing late returns under the program outlined in Revenue Procedure 2015-32, 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, the IRS encourages program applicants to include multiple late returns in a single submission.

  • The program is generally open to small businesses with plans covering a 100% owner or the partners in a business partnership, and the owner’s or partner’s spouse (but no other participants), and certain foreign plans. Those who have already been assessed a penalty for late filings are not eligible.