The Internal Revenue Service (IRS) recently released an article citing errors on Form 5500 filings that are used by the IRS to select cases for compliance audits. These errors have been detected in connection with the IRS Employee Plans Compliance Unit (EPCU) Projects. The IRS states, “Entering incorrect information on the return or report or leaving a field blank when there would be an entry increases the likelihood that you’ll be selected for an EPCU compliance check.” The IRS identified several areas in which it commonly finds errors, including submitting incorrect participant counts, incorrectly coding elective deferrals, incorrectly identifying the plan’s termination status and reporting the fidelity bond amount on the wrong line item, which inadvertently reports that the plan incurred a loss due to fraud or dishonesty.
It is important to review your Form 5500 each year, whether it is prepared internally or by a third party and ensure that the answers on the form match up to the corresponding question. Additionally, plan sponsors should ensure that they have developed an internal review process that is being performed by the right individuals within the organization. Ultimately, if errors are found, the IRS recommends filing an amended return or information report as quickly as possible. Don’t let avoidable mistakes lead to a burdensome process.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.