Update on Recent Improper IRS Penalties Regarding 2022 Form 8955-SSA: 

As explained in the September 2023 edition of The Speed Reader, in the IRS’s September 1, 2023 edition of its Employee Plans News publication, the IRS addressed a programming issue in its system that receives Forms 8955-SSA. As a result of that issue, the IRS distributed CP 283-C penalty notices to many plan sponsors that filed a timely, complete 2022 Form 8955-SSA. The penalty notices erroneously indicated that a late or incomplete filing of such Form 8955-SSA had occurred. Per that IRS publication, plan sponsors that timely filed a complete Form 8955-SSA for 2022 do not need to respond to these penalty notices if dated prior to September 1, 2023. The IRS also stated that it had resolved the programming issue and was updating its records to reflect the timely and complete filings.

A related issue has arisen, however. Some plan sponsors that received an erroneous Form 8955-SSA penalty notice have had a portion of their tax refunds (e.g., payroll tax refunds) withheld to satisfy the erroneous Form 8955-SSA penalties. The IRS is now stating that it plans to establish a systematic correction that will be in place by the 2023 corporate tax return deadline. The correction will abate the erroneous penalties and allow the IRS to process refunds of those improperly-withheld penalty amounts.