If your company is required to file the employee benefit plan form 5500 or 5500-EZ, and receives a notice of a proposed penalty, be sure to respond to the notice within 30 days.
When a Form 5500 or 5500-EZ is received and processed by the Department of Labor (DOL) and exceptions to the filing are found, the DOL generally sends two letters requesting any missing information or addressing a late-filed return. If there is no response to either of these letters, the return is processed as is and the information is given to the IRS. At this point, incomplete or late-filed Forms will generate a CP 213 Notice from the Internal Revenue Service (IRS).
The CP 213 Notice is a “last chance” letter containing a proposed penalty amount due to the late-filed or incomplete Form 5500 or 5500-EZ submission, before the account is turned over for collection activity. The proposed penalty listed in the letter will be assessed unless the IRS receives written correspondence that includes a copy of the notice, any supporting documents, evidence that the return was timely filed or a reasonable cause statement or evidence that the return was corrected with an amended return. Penalties under the CP 213 Notice can be $25 per day, up to a maximum of $15,000 assessed by the IRS and up to $1,100 per day, with no maximum penalty, assessed by the DOL.
Even if the notice was sent in error, you have 30 days to respond to the notice, starting from the date the notice was issued. This is your best opportunity to set the record straight. Otherwise, the penalty will be assessed. Your accounting professional can assist you with the response to the notice. However, if you choose to handle the correspondence yourself, be sure to send your response by certified mail or a traceable private delivery service.