What CP295 means
CP295 is a follow-up. The IRS previously charged a penalty for filing a late or incomplete Form 5500, Annual Return/Report of Employee Benefit Plan, and it never received a reply. Now it wants the penalty paid, the missing information supplied, or a reason to remove it.
The IRS's Form 5500-EZ relief page identifies the original penalty notice as CP283, Penalty Charged on Your Form 5500 Return. If you received a CP283 and set it aside, CP295 is what comes next.
Why you got it
Plan sponsors and administrators must file an annual return for many retirement and benefit plans. IRC 6058 requires it, and IRC 6652(e) penalizes a late or missing return. When the penalty notice went unanswered, the IRS sent CP295.
The silence is the problem. The penalty may or may not be valid. But nobody told the IRS either way.
The size of the penalty
IRC 6652(e) imposes $250 for each day the failure continues, up to $150,000 for any one return, unless the failure is due to reasonable cause. The IRS states the same figures on its retirement plan penalty relief page, noting the amounts as amended by the SECURE Act, plus interest.
The IRS says additional penalties and interest accrue if you don't pay by the due date.
Two hundred fifty dollars a day does not feel like much until you count the days.
Your three moves
1. Pay
The IRS says to pay electronically or by mail to avoid more penalty and interest. If you mail a payment, use the address on the notice and write the employer identification number, plan number, type of plan, plan year ending date, and form number on it. If you can't pay in full, pay what you can now and request a payment plan.
2. Supply missing information
If the return was incomplete, the IRS says you must provide the missing or incomplete information. You can fax it to 877-792-2864. An incomplete return can keep the penalty running, so this step matters even if you plan to ask for relief.
3. Request removal
The IRS says you can send a signed statement requesting removal if you have an acceptable reason the return was late or incomplete. Identify which penalty you want reconsidered and why. Provide any missing information with it. Send a signed Form 843, Claim for Refund and Request for Abatement, by mail to the address on the notice, or fax your reasonable cause statement and missing information to 877-792-2864. The IRS says it will let you know in approximately 45 days whether it accepts your explanation.
Building a reasonable cause request
Reasonable cause is about facts. A good request explains what happened, when, why it was outside your control or why you acted with ordinary care anyway, and how quickly you fixed the problem once you could. Attach proof. Examples include serious illness of the person responsible, a disaster that destroyed records, or reliance on a service provider combined with evidence you monitored that provider.
A request that says the plan administrator forgot is not reasonable cause. A request that shows the administrator was contractually responsible, missed the deadline without warning, and was replaced the moment you found out tells a better story.
Why the relief program probably is not available
The IRS runs a penalty relief program for late Form 5500-EZ filings by certain one-participant and foreign plans under Rev. Proc. 2015-32. But the IRS says if you have already received a penalty notice for the overdue form, you can't use the program for that year's return. By the time you hold a CP295, the CP283 has already gone out. Reasonable cause is the main path for that year.
Check whether other years are also unfiled. Years without a penalty notice may still qualify for the program.
When the problem is an incomplete return
A return can be on time and still draw this penalty if required schedules or information were left off. The penalty in IRC 6652(e) applies to a failure to file a required return or statement "on the date and in the manner prescribed," and an incomplete filing can fall short of that. The IRS's instructions on CP295 treat incomplete returns the same way: you must supply the missing information. Pull the form instructions for the plan year, list every required schedule, and compare it with what was filed.
If a schedule depends on information from a service provider, such as an insurer or trustee, request it in writing and keep the request. That paper trail can support a reasonable cause explanation if the provider was the source of the delay.
What to do now
- Find the original CP283 and your copy of the Form 5500 for the year.
- Confirm the filing date and whether anything was missing.
- Supply missing information right away.
- Decide whether to pay or request removal, and do it before the due date on CP295.
- Review your other plan years for missed filings.
What not to do
Do not ignore a second penalty notice. The IRS says more penalties and interest follow.
Do not request relief without supplying missing information. The IRS says you must provide it.
Do not assume your third-party administrator handled it. Check.
Do not pay and request relief in separate envelopes without referencing each other. Put the notice, the plan number, and the plan year on everything you send so the IRS can match it.
The law behind CP295
IRC 6058 requires annual plan returns. IRC 6652(e) imposes $250 per day, up to $150,000 per return, unless the failure is due to reasonable cause. Form 843 is the abatement request form. Rev. Proc. 2015-32 provides a relief program for eligible late Form 5500-EZ filers that is not available once a penalty notice has issued for that year.
If you received a CP295 and want help with a removal request, call us at (813) 229-7100.