IRS Confirms 8955 Filers Need Not Respond to Penalty Notices Dated Before Sept.1

There is another lesser-known but equally loathsome computer glitch to be aware of. For the third time in three years, one of my clients received a letter from the IRS assessing a $16,500 penalty for failure to attach the scanned copy of the signed Schedule SB to the Form 5500-SF EFAST filing. I will own up without hesitation to the role my firm and I had in this matter since we are the ones who coordinate the electronic 5500 filing. Frankly, I am embarrassed that it has happened to us so often. Nevertheless, not only is the penalty way out of proportion to the infraction, but there is no support for a penalty of that specific amount. Failure to complete a Schedule SB is $1,000. Failure to file a 5500 period is $25 per day. So where do they get $16,500 from? Who knows? It's nowhere on the letter. The 5500 was due only a couple months ago. We would have been better off not filing the 5500 at all than filing everything but failing to include the signed SB. The good news is we managed to get the penalties removed the first two times, and I have confidence that we will this time as well. However, an IRS letter with a proposed penalty is scary for the client, and it sucks up our time to write letters and try to reach the IRS by phone. It is shameful that when we challenged these letters previously no one at the IRS saw fit to fix this glitch and spare plan sponsors the shock of receiving such a letter and service providers the time it takes to get the matter resolved. I don't have the clout to reach a live person at the Service with whom to discuss this matter, but perhaps someone in ASPPA-land does.