20.1.8. Employee Plans and Exempt Organizations Miscellaneous Civil Penalties

(1) EO and EP penalties are important tools for IRS enforcement. In addition, penalties provide the IRS with an important tool to achieve that goal because they enhance voluntary compliance by taxpayers. See IRM 1.2.1.12.1, Policy Statement 20–1 (Formerly P-1-18), Penalties are used to enhance voluntary compliance.

(1) IRC 527 – political organizations.

(2) IRC 6404 – abatements.

(3) IRC 6501 – limitations on assessment and collection.

(4) IRC 6651 – failure to file tax return or to pay tax.

(5) IRC 6652 – failure to file certain information returns, registration statements, etc.

(6) IRC 6654 – failure by individual to pay estimated income tax.

(7) IRC 6655 – failure by corporation to pay estimated income tax.

(8) IRC 6662 – imposition of accuracy-related penalty on underpayments.

(9) IRC 6663 – imposition of fraud penalty.

(10) IRC 6664 – definitions and special rules.

(11) IRC 6684 – assessable penalties with respect to liability for tax under chapter 42.

(12) IRC 6685 – assessable penalty with respect to public inspection requirements for certain tax exempt organizations.

(13) IRC 6690 – fraudulent statement or failure to furnish statement to plan participant.

(14) IRC 6692 – failure to file actuarial report.

(15) IRC 6693 – failure to provide reports on certain tax-favored accounts or annuities; penalties relating to designated nondeductible contributions.

(16) IRC 6704 – failure to keep records necessary to meet reporting requirements under IRC 6047(d).

(17) IRC 6710 – failure to disclose that contributions are nondeductible.

(18) IRC 6711 – failure by tax exempt organization to disclose that certain information or service available from federal government.

(19) IRC 6714 – failure to meet disclosure requirements applicable to quid pro quo contributions.

(20) IRC 6720 – fraudulent acknowledgements with respect to donations of motor vehicles, boats, and airplanes.

(21) IRC 6751 – procedural requirements.

(1) The Director, Business Support, is the director responsible for the servicewide civil penalty program.

(2) Overall responsibility for civil penalty programs is assigned to OSP. OSP is a matrix organization residing in the Business Support (Small Business/Self Employed) Function. OSP is charged with coordinating policy and procedures concerning the administration of civil penalty programs, ensuring consistency with the penalty policy statement, reviewing and analyzing penalty information, researching penalty effectiveness on compliance trends, and determining appropriate action necessary to promote voluntary compliance.

(3) Each IRS organization is responsible for establishing an internal process for managing their procedures based upon these Servicewide policies and may develop additional guidance or reference materials for their specific functional administrative needs. However, such reference material must receive approval from OSP prior to distribution and must remain consistent with the policies and general procedural requirements set forth in this IRM, Policy Statement 20-1 (Formerly P-1-18), Penalties are used to enhance voluntary compliance (see IRM 1.2.1.12.1), and any other guidance relating to civil penalties.

(4) All employees should keep the following objectives in mind when handling each penalty case:

1. Similar cases and similarly situated taxpayers should be treated alike.

2. Each taxpayer should have the opportunity to have his or her interests heard and considered.

3. Strive to make a right decision in the first instance. A wrong decision, even though eventually corrected, has a negative impact on voluntary compliance.

4. Provide adequate opportunity for incorrect decisions to be corrected.

5. Treat each case in an impartial and honest way (i.e., approach the job, not from the government’s or the taxpayer’s perspective, but in the interest of fair and impartial enforcement of the tax laws).

6. Use each penalty case as an opportunity to educate the taxpayer, help the taxpayer understand his or her legal obligations and rights, assist the taxpayer in understanding his or her appeal rights, and in all cases, observe the taxpayer’s procedural rights.

7. Endeavor to promptly process and resolve each taxpayer’s case.

8. Resolve each penalty case in a manner which promotes voluntary compliance.

(1) Every function in the IRS has a role in proper penalty administration. It is essential that each function conducts its operations with an emphasis on promoting voluntary compliance. Appropriate reviews should be conducted to ensure consistency with the penalty policy statement (Policy Statement 20-1) and philosophy.

(2) To promote the goal of consistency and fairness, OSP will review semi-annually a sample of penalty assessments, provided by SB/SE Research. See IRM 20.3.1, Civil Penalty Accuracy Review Process. The report of findings is shared with the Director, Business Support, the CFO, and other leadership as needed. The completed report is uploaded to an enterprise shared folder. Reports may be prepared when a significant issue develops, such as a correction to programming that affects many taxpayers.

(1) Internal Management Document Certification: this IRM is annually recertified as required by Servicewide Policy, Directives, and Electronic Resources and regularly updated when new legislation or policy is published.

(1) The table below is a list of terms and acronyms used in this IRM.

(1) Additional forms and resources include:

1. Form 8278 – Assessment and Abatement of Miscellaneous Civil Penalties.

2. The Internal Revenue Code (IRC) provides taxpayers specific rights. The Taxpayer Bill of Rights groups these rights into ten fundamental rights. See IRC 7803(a)(3). IRS employees are responsible for being familiar with and following these rights. For additional information about your taxpayer rights, please see Pub 1, Your Rights as a Taxpayer, or visit irs.gov/taxpayer-bill-of-rights.

3. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service (TAS) if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through normal channels. Refer taxpayers to TAS when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria), or when Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), is attached and steps cannot be taken to resolve the taxpayer's issue the same day. "Same day" includes cases that can be resolved in 24 hours, as well as cases where steps can be taken within 24 hours to begin resolving the issue. See IRM 13.1.7.6, Same Day Resolution by Operations. When making a TAS referral, use Form 911 and forward to TAS in accordance with your local procedures.

4. TAS uses Form 12412, Taxpayer Advocate Service Operations Assistance Request, to initiate the Operations Assistance Request (OAR) process of referring a case to the TS Division, to affect the resolution of the taxpayer's problem. For more detailed information, please refer to IRM 13.1.19, Advocating With Operations Assistance Requests (OARs).

(1) In general, each penalty discussed in this chapter is unique and will stand alone unless otherwise indicated. Exceptions and additional information are noted in the discussions of the specific penalties; however some general procedures apply.

(2) Statute of Limitations: In general, the additions to tax, additional amounts, and assessable penalties are assessed, collected, and paid in the same manner as taxes. To the extent such an item pertains to a tax return, the assessment is subject to the statute of limitation per IRC 6501, Limitations on Assessment and Collection (generally, three years from the later of the due date (unextended) or the filing of the return).

(3) Reasonable Cause: Determination as to whether or not reasonable cause exists must be based on careful consideration of the facts and circumstances of each case prior to the assertion of a penalty. Examiners should consider any reason a taxpayer provides in conjunction with the guidelines, principles, and evaluating factors identified in IRM 20.1.1.3.2, Reasonable Cause, and IRM 20.1.8, Penalty Handbook, Employee Plans and Exempt Organization Miscellaneous Civil Penalties.

(4) Abatements: Information on penalty abatements is provided in IRM 20.1.1.3, Criteria for Relief from Penalties.

(5) Penalty reference numbers (PRN) are used to assess non-tax return related penalties (conduct or information returns).

1. Generally, the "500" series penalty reference numbers are assigned to penalties for computer-matching programs and are used to identify a failure to comply. They are usually asserted by the Campus and Field functions (via Form 8278).

2. Generally, the "600" series penalty reference numbers are assigned to penalties as the result of an examination or other compliance activity. They are usually asserted by area examination.

3. See Document 6209, IRS Processing Codes and Information, or Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties, for a complete list of the current penalty reference numbers.

(6) Other civil penalties common to EP/EO returns are discussed in the following handbooks:

1. IRM 20.1.1, Introduction and Penalty Relief

2. IRM 20.1.2, Failure to File and Failure to Pay

3. IRM 20.1.3, Estimated Tax Penalty

4. IRM 20.1.4, Failure to Deposit

5. IRM 20.1.5, Return Related Penalties

6. IRM 20.1.6, Preparer/Promoter/Material Advisor Penalties

7. IRM 20.1.7, Information Return Penalties

8. IRM 20.1.10, Miscellaneous Penalties

9. IRM 20.1.11, Excise Tax and Estate and Gift Tax Penalties

(1) When a delinquent income, employment, or excise tax return is received from an entity during an examination or if the delinquent return is never received, the TEGE employee will determine whether the failure to file and/or failure to pay penalties under IRC 6651(a)(1), IRC 6651(a)(2), and IRC 6652(a)(3) should be asserted. See IRM 20.1.2, Failure to File/Failure to Pay. The excise tax returns required to be filed in connection with employee plans and exempt organizations are:

1. Form 5330, Return of Excise Taxes Related to Employee Benefit Plans

2. Form 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the IRC

3. Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation

4. Form 730, Monthly Tax Return for Wagers

5. Form 720, Quarterly Federal Excise Tax Return

6. Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts

(2) The income tax returns required of certain exempt organizations and trusts are:

1. Form 990-T, Exempt Organization Business Income Tax Return

2. Form 1041, U.S. Income Tax Return for Estates and Trusts

3. Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations

(3) The employment tax returns required of certain exempt organizations are:

1. Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return

2. Form 941, Employer's Quarterly Federal Tax Return

3. Form 944, Employer's Annual Federal Tax Return

4. Form 945, Annual Return of Withheld Federal Income Tax

(4) There is no statutory prohibition against asserting the fraud penalty under IRC 6663 and the fraudulent failure to file penalty under IRC 6651(f) for the same year. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. See also IRM 20.1.2.3.7.5, Fraudulent Failure to File-IRC 6651(f).

(1) IRC 6662(a) imposes a penalty equal to 20 percent of certain underpayments. IRC 6662(b)(4) and IRC 6662(f) apply to underpayments attributable to deductions for employer contributions to a defined benefit plan or retirement annuity plan where such deductions are based on a substantial overstatement of pension liabilities.

(1) Penalties relating to employee benefit plan forms are assessed as follows:

1. Penalty adjustment case files associated with income tax forms are forwarded via Form 3210, Document Transmittal, to the servicing campus Receipt and Control function. The case file and related source documents should be accompanied by Form 5734, Non-Master File Assessment Voucher;

2. Penalties not associated with income tax forms are forwarded via Form 3210 to the servicing campus Receipt and Control function. Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties, should be kept with the relevant source documents.

   Reminder: Ensure that the most current form is used with the appropriate IRC sections and penalty reference numbers indicated.

(1) A political organization (except those described in IRC 527(j)(5), Coordination With Other Requirements) that accepts a contribution or makes an expenditure for an exempt function during any calendar year shall file a disclosure with the Secretary.

(2) IRC 527(j)(2) requires that such disclosure be made in semiannual, quarterly, or monthly reports.

(3) The applicable disclosure form is Form 8872, Political Organization Report of Contributions and Expenditures.

1. Prior to the Taxpayer First Act (P.L. 116-25), IRC 527(j)(7) required Form 8872, Political Organization Report of Contributions and Expenditures, to be filed electronically by organizations having contributions or expenditures exceeding certain amounts. The Taxpayer First Act amended IRC 527(j)(7) to expand required electronic filing to all political organizations subject to IRC 527(j).

2. The expanded electronic filing requirement is effective for periods beginning after December 31, 2019.

3. Form 8872 reports filed on paper for periods beginning after December 31, 2019 will not be accepted.

(4) IRC 527(j)(1) imposes a penalty for each failure equal to the highest rate of tax specified in IRC 11(b) multiplied by the amount to which the failure relates. It imposes a penalty on:

1. A failure to make the required disclosures under IRC 527(j)(2) at the prescribed time frame and manner, or

2. A failure to include any of the information required to be shown by such disclosures or to show the correct information.

(5) The amount imposed shall be assessed and collected in the same manner as penalties imposed by IRC 6652(c).

1. Assessed using PRN 662.

(6) IRC 527(l) provides that the Secretary may waive all or any portion of the:

1. Tax assessed for the failure to comply with IRC 527(i) (requirement to notify the IRS of operating as a IRC 527 organization), or

2. Amount imposed under IRC 527(j) for a failure to comply.

   Note: (6)(a), (6)(b) - applicable provided that such failure was due to reasonable cause and not due to willful neglect. See Rev. Proc. 2007-27.

(7) The request for "penalty relief" due to reasonable cause must be made in the form of a written statement providing all the facts to substantiate reasonable cause. The statement must contain a declaration, made by the appropriate individual, that the statement is made under penalties of perjury.

(8) See IRM 20.1.1.3.2, Reasonable Cause, and Exhibit 20.1.8-3, EP and EO Reasonable Cause Guidelines.

(1) Penalties applicable under IRC 6652(c).

(1) IRC 6684 provides that a penalty may be asserted on any person (as defined in IRC 7701) liable for tax under Chapter 42, Private Foundations and Certain Other Tax Exempt Organizations (other than sections 4940 and 4948(a)). See Treas. Reg. 301.6684-1(a). The act or failure to act must not be due to reasonable cause and either:

1. The person was previously liable for excise tax under Chapter 42, or

2. The act or failure to act is both willful and flagrant.

(2) The amount of the penalty is equal to the amount of the excise tax for which it is determined the person is liable.

(3) The term "willful and flagrant" under IRC 6684 has the same meaning as such term possesses in section 507(a)(2)(A) and the regulations thereunder (i.e., an act “which is voluntarily, consciously, and knowingly committed in violation of any provision of Chapter 42, and which appears to a reasonable man to be a gross violation of any such provision.”) See Treas. Reg. 301.6684-1(c) and Treas. Reg. 1.507-1(c)(2).

(4) The IRC 6684 penalty:

1. Is assessed on Form 8278 (see IRM 20.1.8.2.4, How to Assess and Abate - Exempt Plan Procedures, for assessment procedures and IRM 20.1.1. 4, Methods of Appealing Penalties, for post-assessment appeal procedures).

2. Does not apply if the reasonable cause for the act or failure to act can be affirmatively shown by the person upon whom the penalty is imposed.

(1) IRC 6685 imposes a $5,000 penalty on any person who is required to, and willfully fails to, comply with the public disclosure requirement of IRC 6104(d).

1. This penalty will be assessed on Form 8278.

2. The civil penalty in IRC 6685 is in addition to the criminal penalty imposed by IRC 7207 (relating to fraudulent returns, statements, or other documents).

(2) Before asserting penalties for failure to comply with the public disclosure requirements of IRC 6104(d), the IRS should obtain a statement from an individual denied inspection, or a copy of an application for recognition of exemption or an annual information return. The statement should describe the request, including the date the request was made and the reason for the individual's belief that the denial was in violation of the legal requirements. The IRS should also obtain a response from the person required to disclose its application and annual information returns.

(3) The amount of the penalty is $5,000 with respect to each such return or application. There is no maximum amount of penalty.

(4) The penalty may not be waived for reasonable cause.

(1) IRC 6710 imposes a penalty on an organization that fails to meet the requirement of IRC 6113 with respect to a fund-raising solicitation required to disclose that contributions or gifts made to the organization (or on behalf of the organization) are not deductible as charitable contributions for federal income tax purposes.

(2) IRC 6113 requires certain fund-raising solicitations to disclose (in a conspicuous and easily recognized format) that contributions or gifts made to the organization are not deductible as charitable contributions for federal income tax purposes.

(3) Generally, the penalty applies to organizations, which are not described in IRC 170(c), but are described in IRC 501(c) or (d) and tax exempt under IRC 501(a). The fund-raising disclosure requirement does not apply to organizations with annual gross receipts that normally do not exceed $100,000.

(4) The penalty also applies to a political organization (as defined in IRC 527(e)).

(5) This penalty is assessed on Form 8278.

(6) IRC 6710(a) provides for a penalty of $1,000 per day each day the failure occurred up to a maximum of $10,000 during any calendar year.

(7) IRC 6710(c) provides an exception to the maximum annual penalty of $10,000. When it is shown that the failure was due to intentional disregard, the penalty for the day on which such failure occurred shall be the greater of:

1. $1,000, or

2. 50 percent of the combined cost of all the solicitations which occurred such day where a failure to disclose occurred.

(8) The penalty shall not be taken into account in applying such limitations to other penalties under IRC 6710(a).

(9) Consider the following conditions when determining the day a failure to meet the requirement occurred.

(10) IRC 6710(b) provides that no penalty should be asserted if any failure is due to reasonable cause. See IRM 20.1.1.3.2, Reasonable Cause, and Exhibit 20.1.8-3, EO and EP Reasonable Cause Guidelines.

(1) IRC 6711 provides that when a tax exempt organization offers to sell (or solicits money for) specific information or offers to provide routine service for any individual that could be readily obtained by such individual free of charge (or for a nominal charge) from an agency of the federal government, the tax exempt organization must, when making such offer or solicitation make "an express statement" in a conspicuous and easily recognizable format that the information can be obtained from the federal government.

(2) Material and/or services available from the federal government for less than $2.50, including postage and handling costs, meet the nominal charge requirement. See Notice 88-120.

(3) A penalty applies if the failure to make such express statement is due to the intentional disregard of this requirement.

(4) This penalty is assessed on Form 8278.

(5) See IRM 20.1.1.4, Methods of Appealing Penalties, for post-assessment appeal procedures.

(6) The penalty may not be waived for reasonable cause.

(7) For each day a failure occurred, the penalty shall be the greater of:

1. $1,000 per day, or

2. 50 percent of the daily combined cost for all the offers and solicitations that occurred on that day.

(8) There is no maximum amount of penalty.

(9) Consider the following when determining the day a failure to meet the requirement occurred.

(1) IRC 6714 imposes a penalty on organizations that did not disclose quid pro quo contributions in excess of $75 as required under IRC 6115(a).

(2) IRC 6115(b) defines "quid pro quo contribution" as a payment:

1. Made partly as a contribution and partly in consideration for goods or services provided to the payor (donor) by the donee organization; and

2. Not made to a religious organization, in return for which the taxpayer received only an intangible religious benefit that generally would not be sold in a commercial transaction.

(3) IRC 6115 provides that organizations described in IRC 170(c) (except governmental instrumentalities described in IRC 170(c)(1)) are required to provide a written statement to each donor in connection with the solicitation or receipt of the quid pro quo contribution.

1. That statement must provide the donor with a good faith estimate of the value of the goods and services provided by the organization.

2. That statement must also inform the donor that the amount of the deductible contribution is limited to the excess of any money (and the value of any property other than money) contributed by the donor, that exceeds the value of the goods or services received.

(4) IRC 6714 provides for a penalty of $10 per failure to provide the required written statement to the payor (donor). The maximum penalty per fund-raising event or mailing shall not exceed $5,000.

(5) The penalty does not apply if the organization can establish that the failure to provide the written statement was due to reasonable cause.

(6) This penalty is assessed on Form 8278.

(7) See IRM 20.1.1.4, Methods of Appealing Penalties, for post-assessment appeal procedures.

(1) IRC 170(f)(12)(A) requires the donee organization to furnish a contemporaneous written acknowledgment to a donor who donates a qualified vehicle (motor vehicle, boat, or airplane) the claimed value of which exceeds $500.

(2) IRC 6720 provides for a penalty for any donee organization which knowingly furnishes a false or fraudulent acknowledgement, or which knowingly fails to furnish such acknowledgment in the manner, at the time, and showing the information required under IRC 170(f)(12), or the regulations thereunder.

(3) IRC 6720 provides that for each act or for each failure, the penalty is equal to, in the case of:

1. a qualified vehicle to which IRC 170(f)(12)(A)(ii) applies, the greater of – (i) the product of the highest tax rate specified in IRC 1 and the sales price stated on the acknowledgement, or (ii) the gross proceeds of such vehicle, and

2. any other qualified vehicle to which IRC 170(f)(12) applies, the greater of – (i) the product of the highest tax rate specified in IRC 1 and the claimed value of such vehicle, or (ii) $5,000.

(4) The penalty is:

1. Input on IDRS using information provided on Form 8278,

2. assessed using PRN 630, and

3. applicable to contributions made after December 31, 2004. See section 884(c) of P.L. 108-357.

(1) The criteria for establishing "reasonable cause" for penalty relief are contained in IRM 20.1.1, Introduction and Penalty Relief. See IRM 20.1.1.3, Criteria for Relief From Penalties.

(1) IRC 6652(d)(1) and IRC 6652(d)(2) discuss the registration and the notification of the change of status applicable under IRC 6652(d).

(1) IRC 6652(e) imposes a penalty for failure to file annual returns and statements by the due date and in the prescribed manner required under:

1. IRC 6058 relating to certain plans of deferred compensation, and

2. IRC 6047(d) relating to certain trusts, annuities, and bond purchase plans.

(2) In general, IRC 6058(a) requires the employer or the plan administrator of each funded plan of deferred compensation, to file an annual return (Form 5500 (series), Annual Return/Report of Employee Benefit Plan). See Exhibit 20.1.8-1, Plans Filing Requirements, and Exhibit 20.1.8-2, Plans Exempt From Filing.

(3) In general, the due date for the Form 5500, Annual Return/Report of an Employee Benefit Plan, and appropriate schedules and attachments is:

1. Full Plan Year: The appropriate Form 5500 and its applicable schedules and attachments must be filed by the last day of the 7th month after the plan year ends.

2. Short Plan Year:Form 5500 and its applicable schedules and attachments must be filed by the last day of the 7th month after the short plan year ends.

(4) Extension of time to file:

1. A one time extension of time to file Form 5500 and its required schedules and attachments (up to the 15th day of the 10th month following the last day of the plan year) will be granted by filing Form 5558, Application for Extension of Time to File Certain Employee Plan Returns.

2. Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, starts the statute of limitations running with respect to particular excise taxes, including those under IRC 4975. The statute of limitations for IRC 4975 excise taxes begins to run with the filing of the Form 5500 provided the prohibited transaction is sufficiently disclosed. See IRM 4.70.12.3.8.1.

   Reminder: The filing of Form 5330 may be extended for up to six months.

3. Form 5558 must be filed on or before the original due date for filing the Form 5500 (series) and Form 5330. For plan years beginning on or after January 1, 2023, Form 8868 is the form that must be used to request the extension to file the Form 5330.

(5) Plans are automatically granted extensions of time to file Form 5500 and its required schedules until the extended due date of the federal income tax return of the employer and are not required to file Form 5558, if all the following conditions are met:

1. The plan year and the tax year of the employer are the same;

2. The employer has been granted an extension of time to file its federal income tax return to a date later than the normal due date for filing the Form 5500; and

3. A copy of the extension of time to file the federal income tax return is no longer required to be attached to the Form 5500 or Form 5500-SF, "The Short Form Annual Return/Report of Small Employee Benefit Plan," when filed electronically. However, a copy of the extension should be kept with the plan's records.

(6) Plans granted an extension under the conditions in (5) above, cannot further extend the due date by filing a Form 5558.

(7) In general, IRC 6058(b) requires a plan administrator to file an actuarial statement of valuation evidencing compliance with IRC 401(a)(12), in the case of a merger, consolidation, or transfer of assets or liabilities from one plan to another.

1. Form 5310-A, Notice of Plan Merger or Consolidation, Spin-off, or Transfer of Plan Assets or Liabilities; Notice of Qualified Separate Lines of Business, has been designated by the IRS as the form to be used for satisfying this requirement.

2. Form 5310-A should be filed when there is a plan merger, consolidation, spin-off, or when there is a transfer of assets or liabilities to another plan. When meeting this criteria, Form 5310-A should be filed by the plan administrator or plan sponsor for a pension plan, profit-sharing plan, or a deferred compensation plan (except a multi-employer plan covered by the Pension Benefit Guaranty Corporation (PBGC) insurance).

3. Form 5310-A must be filed at least 30 days prior to a plan merger, consolidation, spin-off, or transfer of liabilities to another plan. The form is late if not filed at least 30 days before any of these referenced activities.

(8) The instructions for Form 5310-A provide that a Form 5310-A is not required to be filed for:

1. An eligible rollover that is paid directly to an eligible retirement plan in a direct rollover as described in IRC 401(a)(31), Direct Transfer of Eligible Rollover Distributions; or

2. Any plan merger, consolidation, spin-off, or transfer of plan assets and liabilities complying with: i) Treas. Reg. 1.414(l)-1(d), Merger of Defined Contribution Plans, ii) Treas. Reg. 1.414(l)-1(h), De Minimus Rule for Merger of Defined Benefit Plan, iii) Treas. Reg. 1.414(I)-1(m), Spin-off of a Defined Contribution Plan, or iv) Treas. Reg. 1.414(I)-1(n)(2), Spin-off of a Defined Benefit Plan, De Minimus Rule.

(9) In general, IRC 6047(d) requires Form 1096, (Annual Summary and Transmittal of U.S. Information Returns) and Form 1099-R, (Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.) to be filed by:

1. the employer maintaining or the plan administrator (within the meaning of IRC 414(g)) of a plan from which designated distributions (as defined in IRC 3405(e)(1)) may be made; and

2. any person issuing any contract under which designated distributions may be made.

(10) Designated distributions are defined in IRC 3405(e)(1) and include, generally, any includible non-wage distributions from an employer deferred compensation plan, an IRA, or a commercial annuity.

(11) A separate Form 1099-R must be made for each payee, but is not required if the aggregate payment to the payee is less than $10.

(12) Form 1099-R is required to be filed with the IRS following the year of the distribution. File Form 1099-R as follows:

1. Furnish Copies B, C, and 2 of this form to the recipient by January 31.

2. File Copy A of this form with the IRS by February 28.

3. If filing electronically, the due date is March 31. Information Returns Intake System (IRIS) has an online portal in which no special software is needed to e-file. Please refer to Pub 5717 or www.irs.gov/iris. IRIS also has Application to Application (A2A) functionality for e-filing information returns which does require special software. Please refer to Pub 5718 and Pub 5719 or www.irs.gov/iris. File Information Returns Electronically (FIRE) is another A2A e-filing option for information returns. Special software is required. Please refer to Pub 1220 or www.irs.gov/fire.

(13) Form 1096 is required to be filed with the IRS following the year of the distribution. File Form 1096 as follows:

1. With Forms 1097, 1098, 1099, 3921, 3922, or W-2G, file by February 28.

2. With Forms 5498, file by May 31.

(14) Penalties under IRC 6652(e) are assessed against the plan administrator as defined in IRC 414(g), Plan Administrator. The employer and/or contract issuer may also be liable.

(15) The penalty is assessed using PRN 167.

(16) The penalty under IRC 6652(e) will be assessed on BMF (MFT 74). It is computed after the return is processed on the master file, or it may be asserted by an EP/EO specialist.

(17) The penalty imposed by IRC 6652(e) for failing to file any form required under IRC 6058 and IRC 6047 on the due date in the prescribed manner is equal to:

1. $250 for each failure multiplied by the number of days the failure continues.

2. The penalty shall not exceed $150,000 for the failure to file any return.

(18) IRC 6652(e) provides for non-assertion of the penalty if reasonable cause can be shown.

(19) The request for "penalty relief" due to reasonable cause must be made in the form of a written statement providing all the facts to substantiate reasonable cause. The statement must contain a declaration by the appropriate individual that the statement is made under penalties of perjury.

(20) In Alton OB-Gyn, Ltd. v. United States, 789 F.2d 515 (7th Cir. 1986), the taxpayer's reliance on a bank, as plan trustee, to handle ministerial duties of taxpayer's pension and profit-sharing plans, did not constitute reasonable cause for the failure to timely file the required Form 5500 series return.

(21) See IRM 20.1.1.3.2, Reasonable Cause, and Exhibit 20.1.8-3, EP and EO Reasonable Cause Guidelines, for a discussion of reasonable cause penalty relief. See IRM 20.1.1, Introduction and Penalty Relief, for a general discussion of penalty relief.

(22) The penalty is imposed against the person responsible for the failure to file as reflected in the chart below:

(1) IRC 6652(h) imposes a penalty for each failure to give notice concerning withholding to recipients of distributions from an employer's deferred compensation plan or an Individual Retirement Account (IRA) as required by IRC 3405(e)(10)(B). The penalty is imposed on the payor.

(2) In general, IRC 3405(e)(10)(B) requires that the "payor" of:

1. Any annuity or similar periodic payment must provide the "Payee" a notice of the right to elect not to have withholding made on such payment; or

2. Any distribution which is not in the form of an annuity or a periodic distribution must provide the "Payee" a notice of the right to elect not to have withholding made on such payment.

(3) In general, these requirements pertain to payments and distributions made from employer deferred compensation plans, individual retirement plans, and commercial annuities.

(4) Due Date: The notice of election must be transmitted no earlier than six months before the first payment and no later than when the first payment is made. For periodic payments, notice must also be provided at least once in each calendar year of the right to make and revoke the election. See Treas. Reg. 35.3405-1T D-21, D-22, D-25, and D-26 for examples of notices that can be used to satisfy the notice requirements.

(5) The penalty under IRC 6652(h) is identified by the Tax Exempt/Government Entities (TE/GE) specialist.

(6) The penalty is assessed on BMF (MFT 74). It is computed after the return is processed on the master file, or it may be asserted by an Employee Plan/Exempt Organization (EP/EO) specialist.

(7) The penalty under IRC 6652(h) is $100 for each failure to give notice, up to a maximum penalty of $50,000 for all such failures per calendar year.

(8) IRC 6652(h) provides for non-assertion of the penalty if the payor can show that the failure was due to reasonable cause and not due to willful neglect.

(9) The request for "penalty relief" due to reasonable cause must be made in the form of a written statement providing all the facts to substantiate reasonable cause. The statement must contain a declaration by the appropriate individual that the statement is made under penalties of perjury. See IRM 20.1.1.3.2, Reasonable Cause, and Exhibit 20.1.8-3, EP and EO Reasonable Cause Guidelines, for a discussion of reasonable cause penalty relief. See IRM 20.1.1, Introduction and Penalty Relief, for a general discussion of penalty relief.

(1) IRC 6652(i) imposes a penalty for each failure to timely provide a written explanation of an eligible rollover distribution as required by IRC 402(f), Written Explanation to Recipients of Distributions Eligible for Rollover Treatment.

(2) In general, IRC 402(f) requires plan administrators of qualified plans to provide a written explanation to recipients of eligible rollover distributions that explains:

1. The rules under which a recipient may elect a direct rollover to an eligible retirement plan;

2. Withholding of income tax if there is no direct rollover;

3. The rules which permit tax deferral on the distribution if it is rolled over into an eligible retirement plan within 60 days of distribution;

4. If applicable, the provisions of IRC 402(d), Taxability of Beneficiary of Certain Foreign Situs Trusts, and IRC 402(e), Other Rules Applicable to Exempt Trusts; and

5. The provisions under which distributions from the eligible retirement plan receiving the distribution may be subject to restrictions and tax consequences which are different from those applicable to distributions from the plan making such distributions.

(3) In general an eligible retirement plan includes the following:

1. IRC 408(a), Individual Retirement Accounts

2. IRC 408(b), Individual Retirement Annuity (other than an endowment contract)

3. IRC 401(a), Trusteed Pension Plans

4. IRC 403(a), Annuity Plans

5. IRC 403(b), 403(b) Plans

6. IRC 457(b), Governmental 457(b) Plans

(4) An eligible rollover distribution means any distribution to an employee of all or part of the balance to the credit of the employee in a qualified trust, other than certain periodic payments, hardship distributions, and distributions required by IRC 401(a)(9).

(5) Due Date: The explanation must be provided no less than 30 days and no more than 90 days before the date of the distribution.

(6) The penalty under IRC 6652(i) is identified by the EP specialist.

(7) The penalty is assessed on Business Master File (BMF) Master File Transaction (MFT 74). It is computed after the return is processed on the master file, or it may be asserted by an EP specialist.

(8) The penalty under IRC 6652(i) is $100 for each failure to provide a written explanation, up to a maximum penalty of $50,000 for all such failures per calendar year.

(9) IRC 6652(i) provides for non-assertion of the penalty if the payor can show that the failure was due to reasonable cause and not due to willful neglect.

(10) The request for "penalty relief" due to reasonable cause must be made in the form of a written statement providing all the facts to substantiate reasonable cause. The statement must contain a declaration by the appropriate individual that the statement is made under penalties of perjury. See IRM 20.1.1.3.2, Reasonable Cause, and Exhibit 20.1.8-3, EP and EO Reasonable Cause Guidelines, for a discussion of reasonable cause penalty relief. See IRM 20.1.1, Introduction and Penalty Relief, for a general discussion of penalty relief.

(1) IRC 6690 imposes a penalty on a plan administrator who:

1. Willfully fails to furnish a statement to a plan participant showing the information at the time and in the manner required by IRC 6057(e), Individual Statement to Participant, or

2. Willfully furnishes a false or fraudulent statement.

(2) In general, the individual statement to a participant required by IRC 6057(e) must include the following:

1. A description of the participant's deferred vested retirement benefit;

2. Information filed with respect to the participant on Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits, and

3. Notice to the participant of any benefits that are forfeitable in the event the participant dies before a certain date. See IRC 6057(a).

(3) Due Date: The due date for delivering the statement to the individual is no later than the due date (including extensions) for the Form 8955-SSA that reports information with respect to the individual.

(4) The penalty under IRC 6690 can be identified by the EP specialist.

(5) The penalty is assessed using PRN 168.

(6) The penalty is assessed on BMF (MFT 74). It is computed after the return is processed on the master file, or it may be asserted by an EP specialist.

(7) The penalty under IRC 6690 is not subject to deficiency procedures described in IRM 20.1.1.4.2, Deficiency Procedures.

(8) The penalty is imposed at $50 for each act or failure with no maximum.

(9) IRC 6690 provides a penalty for willfully failing to provide the statement, or willfully furnishing a false or fraudulent statement. Therefore, this code section does not provide for reasonable cause consideration.

(1) IRC 6692 imposes a penalty on the plan administrator of a defined benefit plan to which IRC 412, Minimum Funding Standard, applies, when the plan administrator fails to file an actuarial report (Form 5500, Schedule SB or MB), in the time and manner as required by IRC 6059, Periodic Report of Actuary.

(2) The penalty under IRC 6692 is imposed if there is a failure to file Schedule SB, Single Employer Defined Benefit Plan Actuarial Information, or Schedule MB, Multi-employer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information, which must be filed as an attachment to the appropriate Form 5500 (series) return.

(3) The penalty is imposed on the plan administrator. If more than one plan administrator is responsible for the failure, all are jointly and severally liable.

(4) The penalty under IRC 6692 is assessed on BMF (MFT 74).

(5) The penalty may be computed when the return is filed or asserted by the EP specialist.

(6) The penalty is assessed using PRN 169.

(7) The penalty is imposed at $1,000 for each failure to file with no maximum.

(8) The penalty is assessed on BMF (MFT 74). It is computed after the return is processed on the master file, or it may be asserted by an EP specialist.

(9) IRC 6692 provides for non-assertion of the penalty if the responsible party can show that the failure was due to reasonable cause.

(10) The request for "penalty relief" due to reasonable cause must be made in the form of a written statement providing all the facts to substantiate reasonable cause. The statement must contain a declaration by the appropriate individual that the statement is made under penalties of perjury.

(11) See IRM 20.1.1.3.2, Reasonable Cause, and Exhibit 20.1.8-3, EP and EO Reasonable Cause Guidelines, for a discussion of reasonable cause penalty relief. See IRM 20.1.1, Introduction and Penalty Relief, for a general discussion of penalty relief.

(1) Covered under this sub-section are each of the penalties imposed by IRC 6693:

1. IRC 6693(a), Reports - Person required to report;

Note: The penalty under IRC 6693(a) does not apply to any report which is an information return described in IRC 6724(d)(1)(C)(i). IRC 6724(d)(1)(C)(i) refers to information returns required under IRC 408(i).

2. IRC 6693(b)(1), Overstatement of Designated Nondeductible Contributions;

3. IRC 6693(b)(2), Failure to File Form; and

4. IRC 6693(c), Penalties Relating to Simple Retirement Accounts.

(2) IRC 6693(a) imposes a penalty on the failure to furnish a report required by IRC 408(i) and IRC 408(l).

(3) IRC 408(i) and associated regulations (e.g., Treas. Reg. 1.408-5 and Treas. Reg. 1.408-6) require that:

1. Annual calendar year reports be made on Form 5498, IRA Contribution Information, concerning the status of the account or annuity.

2. Each trustee or issuer required to file Form 5498 is also required to furnish the participant a statement containing the information required to be furnished on Form 5498 plus the value of the account or annuity at the end of the calendar year. A copy of the Form 5498 may be used to satisfy this requirement.

3. The disclosure statements and copies of the governing instruments be provided to benefited individuals. A benefited individual is the individual for whom an individual retirement account, individual retirement annuity, or an endowment contract is established. A benefited individual also includes both the working and non-working spouse in the case of spousal individual retirement accounts.

Note: The penalty for failure to satisfy these requirements of IRC 408(i) is imposed on the trustee of an individual retirement account or, in the case of an individual retirement annuity or endowment contract, the issuer. This includes an account or annuity that is part of a SEP or a SIMPLE IRA plan.

(4) IRC 408(l) and associated regulations require that an employer who:

1. Makes contributions to a simplified employee pension (SEP) on behalf of employees make reports to employees upon adoption of the SEP indicating its adoption, contribution requirements, and allocation basis.

2. Adopts a SEP furnish employees a written statement each calendar year indicating the amount of employer contribution to the employee's IRA. This requirement is satisfied if the information is contained on the employee's W–2 for the calendar year in which the contribution is made.

   Note: The penalty for failure to satisfy these requirements of IRC 408(I) is imposed on the employer maintaining the SEP.

(5) Due dates for certain forms required to filed under IRC 6693(a) :

1. The annual report is to be filed, accompanied by transmittal Form 1096, on or before May 31 following the calendar year for which the Form 5498 is required.

2. In general, the disclosure statement and a copy of the governing instrument must be received by the benefited individual at least seven days preceding the earlier of the date of establishment or purchase of the account, annuity, or endowment contract.

3. Reports required on the adoption of a SEP are to be furnished to an employee no later than a reasonable time after the later of the time the employee becomes employed or the time of the adoption of the simplified employee pension arrangement.

4. SEP contribution reports made on Form W-2 are required to be furnished to the employee no later than the later of 30 days after the contribution or January 31 after the calendar year for which the contribution was made.

(6) IRC 6693(a) penalty also applies to reports required to be filed under:

1. IRC 220(h) relating to medical savings accounts ("MSAs"), assessed using PRN 553, input on IDRS using information provided on Form 8278 ;

2. IRC 223(h) (relating to health savings accounts), assessed using PRN 554;

3. IRC 529(d) (relating to qualified State tuition programs);assessed using PRN 555, input on IDRS using information provided on Form 8278;

4. IRC 529A(d) (relating to qualified ABLE (Achieving a Better Life Experience) programs), assessed using PRN 568, input on IDRS using information provided on Form 8278; and

5. IRC 530(h) (relating to Coverdell education savings accounts), assessed using PRN 556, input on IDRS using information provided on Form 8278.

(7) The Stephen Beck, Jr., Achieving a Better Life Experience Act (ABLE Act) was enacted on December 19, 2014, as part of The Tax Increase Prevention Act of 2014 (P.L. 113-295). Generally, the ABLE Act permits a state (or a state agency or instrumentality) to establish and maintain a tax-advantaged savings program (under IRC 529A of the Internal Revenue Code). Contributions may be made to a IRC 529A account established for a designated beneficiary to pay for qualified disability expenses. ABLE programs will use two forms (Form 1099-QA, Distributions from ABLE Accounts and Form 5498-QA, ABLE Account Contribution Information) to report relevant account information annually to designated beneficiaries and the IRS.

1. Any State or its agency or instrumentality that establishes and maintains a qualified ABLE program must file a Form 1099-QA, Distributions from ABLE Accounts, with the IRS for each ABLE account from which any distribution was made or which was terminated. The filing may be done by either an officer or employee of the State or its agency or instrumentality having control of the qualified ABLE program, or the officer’s or employee’s designee. If Form 1099-QA is required to be filed, then a statement must also be furnished to the designated beneficiary of each ABLE account reporting their distribution, and to each contributor who received a returned contribution (plus earnings) attributable to the calendar year. A copy of Form 1099-QA or an acceptable substitute statement must be furnished to each recipient.

2. Any State or its agency or instrumentality that establishes and maintains a qualified ABLE program must file, for each ABLE account, a Form 5498-QA, ABLE Account Contribution Information, with the IRS. The filing may be done by either an officer or employee of the State or its agency or instrumentality having control of the qualified ABLE program, or the officer’s or employee’s designee. If Form 5498-QA is required to be filed with the IRS, then a statement must be furnished to the designated beneficiary. A copy of Form 5498-QA or an acceptable substitute statement must be furnished to each beneficiary.

   Note: The penalties under IRC 6721 and IRC 6722 do not apply to Form 1099-QA and Form 5498-QA. The penalty for failure to timely file Form 1099-QA and Form 5498-QA is $50 per return (under IRC 6693) with no maximum, unless the failure is due to reasonable cause.

(8) IRC 6693(b)(2) imposes a penalty on the failure to furnish information under IRC 408(o)(4).

(9) IRC 408(o)(4) requires that an individual who makes designated nondeductible contributions to any IRA for any taxable year or receives a distribution from any IRA to which nondeductible contributions have been made for any taxable year report such contributions or distribution, as well as other information. This information is reported on Form 8606, Nondeductible IRAs.

(10) IRC 6693(b)(1) imposes a penalty on the overstatement of designated nondeductible contributions made on Form 8606.

(11) The penalty for failure to satisfy the requirements of IRC 408(o) is imposed on the taxpayer who made the contributions or received the distribution.

(12) Due Date. Form 8606, Nondeductible IRAs, is required to be filed as an attachment to the Form 1040 (series). If no 1040 return is required, the Form 8606 must still be filed by the due date of the Form 1040.

(13) The penalty under IRC 6693(a) and IRC 6693(b):

1. Can be identified by the EP field agent;

2. Is assessed on BMF (MFT 74); and

3. Is not subject to deficiency procedures described in IRM 20.1.1.4.2, Deficiency Procedures.

(14) IRC 6693(c) imposes a penalty on the failure to furnish certain information required under IRC 408(i) and IRC 408(l)(2) to participants in SIMPLE IRA plans described in IRC 408(p).

1. IRC 408(l)(2) requires that the trustee or issuer of an IRA set up to receive contributions under an employer's SIMPLE IRA plan each calendar year furnish the employer a summary description containing information regarding the SIMPLE IRA plan, the employer maintaining the plan, and the trustee or issuer.

2. IRC 408(l)(2) also requires that an employer maintaining a SIMPLE IRA plan notify eligible employees of their right to participate in the plan. Such notice must include a copy of the applicable summary description.

3. IRC 408(i) requires that the trustee or issuer of SIMPLE IRAs provide the SIMPLE IRA owners within 31 days after each calendar year a statement showing the account balance at the close of the calendar year and the account activity during that calendar year. A copy of the Form 5498 may be used to satisfy this requirement.

(15) The penalty for failure to satisfy the requirement of IRC 408(i) and IRC 408(l)(2) described above is imposed on:

1. The trustee or issuer of IRAs set up to receive contributions made under a SIMPLE IRA plan, in the case of the summary description and the statement requirement.

2. The employer, in the case of the notice requirement.

(16) Due Date:

1. The employer's notice to employees must be provided before the 60-day election period (during which eligible employees can make or change salary deferral elections) described in IRC 408(l)(2)(C) and IRC 408(p)(5)(C).

2. The summary description must be provided to the employer by the trustee or issuer in time for the employer to meet its notice requirement, described above. (In most cases the summary description will be due the employer shortly before the second day of November of each calendar year).

3. The statement from the trustee or issuer is due to the IRA owner no later than 31 days after the end of the calendar year.

(17) The computations for the penalties are as follows:

(18) IRC 6693 provides for non-assertion of the penalty if it is shown that the failure is due to reasonable cause.

1. A penalty imposed on a trustee under IRC 6693(c) does not apply when the trustee timely provides the required information directly to the employee covered by the SIMPLE IRA plan.

2. A penalty imposed on an employer under IRC 6693(c) does not apply when an employee covered by the SIMPLE IRA plan has selected his or her own trustee and the information regarding that trustee is not available at the time the employer is required to provide the notice containing such information to the employee, provided the employer takes steps to ensure the missing information reaches the employee as soon as reasonably possible.

(19) The request for "penalty relief" due to reasonable cause must be made in the form of a written statement providing all the facts to substantiate reasonable cause. The statement must contain a declaration, made by the appropriate individual, that the statement is made under penalties of perjury. See IRM 20.1.1, Introduction and Penalty Relief, for a discussion of penalty relief.

(20) See IRM 20.1.1.3.2, Reasonable Cause, and Exhibit 20.1.8-3, EP and EO Reasonable Cause Guidelines, for a discussion of reasonable cause penalty relief. See IRM 20.1.1, Introduction and Penalty Relief, for a general discussion of penalty relief.

(1) IRC 6047(d) requires the employer maintaining a plan or the plan administrator of a plan from which designated distributions may be made or any person issuing any contract under which designated distributions may be made, to make returns and reports regarding such plan or contract to:

1. The Secretary,

2. The participants, and

3. The beneficiaries

(2) IRC 6704(a) imposes a penalty on any person who:

1. Has a duty to report or may have duty to report any information under IRC 6047(d), and

2. Fails to keep such records for the purpose of providing the necessary data base for either current reporting or future reporting.

(3) IRC 6704(b) provides for a penalty of $50, per each calendar year, multiplied by the number of individuals in relation to whom such failure occurred.

(4) The maximum amount of penalty shall not exceed $50,000 per calendar year.

(5) IRC 6704(c)(1) provides for non-assertion of the penalty if it is shown that the failure is due to reasonable cause and not due to willful neglect.

(6) The request for "penalty relief" due to reasonable cause must be made in the form of a written statement providing all the facts to substantiate reasonable cause. The statement must contain a declaration, made by the appropriate individual, that the statement is made under penalties of perjury. See IRM 20.1.1, Introduction and Penalty Relief, for a discussion of penalty relief.