Filed form 5500-EZ late for Solo 401k conversion - Is there a first-time abatement available?

Thank you so much for this detailed response! When you say "formal letter," is there a specific format I should follow? Or specific language I should use? I'm worried about messing this up and making things worse.

There's no required form for penalty abatement requests, but you should keep it professional. Include your name, address, tax ID numbers, and the notice number at the top. Start with a clear request for "First-Time Abatement Relief" for the Form 5500-EZ penalty. Be factual and concise - explain when you converted the SEP-IRA, when you learned about the filing requirement, and when you actually filed. Include the phrase "reasonable cause" and explicitly state your history of compliance with tax obligations. End with a clear request for full abatement of the penalty. Keep the tone respectful and avoid emotional language. Make a copy of everything before sending, and consider using certified mail so you have proof of delivery.

How exactly does the service work? Do I just upload the penalty notice I received and it tells me what to do? I'm confused about how an AI would know all the specific IRS regulations.

I've seen a lot of these "AI solutions" that claim to handle tax issues, but do they really have access to actual IRS procedures? My accountant charges $350/hr and says these penalty abatements need a professional touch. Seems too good to be true that software could replace that expertise.

You upload your penalty notice and any relevant documents, then the system analyzes everything against the current IRS regulations and procedures. It identifies applicable rules and precedents specifically for Form 5500-EZ penalties and first-time abatement eligibility. The system then drafts customized response documents with the exact legal language that IRS agents look for when reviewing these requests. AI actually has advantages for these situations because it can analyze thousands of successful abatement cases to identify patterns and language that work. Traditional accountants typically handle a limited number of these specific cases in their career. The system doesn't replace professional advice - it augments it by providing comprehensive analysis of your specific situation against current IRS precedents.

Wait, how is this even possible? The IRS phone system is completely broken - I've tried calling at least 10 times and either get disconnected or they say the wait time is "greater than 2 hours" and hang up! How does this service actually get through when nobody else can?

This sounds like a scam. Nobody can magically get through the IRS phone system. I bet they just take your money and tell you they "tried" but couldn't get through. Has anyone actually verified this works?

They use a combination of predictive analytics to determine the best times to call and specialized dialing technology that maintains your place in the queue. When an agent answers, they bridge the call to your phone. It's not magic - just smart technology tackling a broken system. I was connected within 19 minutes when I had been trying unsuccessfully for days. The service doesn't claim to bypass the IRS system - they just handle the frustrating wait time for you. It's like having someone stand in line at the DMV while you do something productive instead. And no, they don't just claim they tried - you only pay if you actually get connected to an agent. I was extremely skeptical too until I tried it myself.

Yes, there is a time limit! You generally need to respond within the timeframe specified on your notice (usually 30-60 days). BUT - all is not lost if you've missed that window. You can still file a formal abatement request, but you might need to pay the penalty first and then request a refund. The IRS can still grant abatement after the initial response period, especially for first-time abatement requests where you have a clean compliance history. I'd recommend getting professional help at this point since you're outside the standard response window. The longer you wait, the more complicated it gets and additional penalties and interest may continue to accrue.

That's really helpful, thank you! The notice definitely said 60 days and I'm well beyond that now. Do you think I should pay the full amount first before requesting abatement, or would that somehow hurt my case by making it look like I'm admitting fault?

Paying the penalty doesn't hurt your abatement case at all - the IRS doesn't view it as an admission of fault. In fact, it actually stops additional interest and penalties from accruing while your request is processed. If your abatement is approved, they'll refund the payment. However, if the penalty amount is very large and would cause financial hardship, you can include that information in your abatement request and ask for the penalties to be abated before payment. You might also want to look into setting up an installment plan as a backup if the abatement isn't approved. The most important thing is to take action now rather than letting more time pass.

None of the mainstream tax software handles Form 5500-EZ properly! I asked this same question to my CPA after getting hit with a similar penalty. Apparently TurboTax, H&R Block, and TaxAct don't include 5500-EZ filing reminders because it's technically not part of your tax return - it's a separate filing requirement for retirement plans. There are specialized small business accounting packages that include compliance calendars for these types of filings, but they're much more expensive than regular tax software. This is honestly one of those things where you either need a knowledgeable CPA who specializes in small business retirement plans, or you need to set calendar reminders yourself for July 31st each year (the 5500-EZ deadline).

Thanks for explaining that! I feel slightly better knowing it wasn't just me missing something obvious in the software. I'll definitely set up those calendar reminders going forward. It's crazy that they can hit us with such massive penalties for forms that aren't even mentioned in the most popular tax software.

This is exactly what I needed to hear! Thank you for sharing your success story. Can you clarify what you mean by "callback services"? Are you referring to something like the Claimyr service that Benjamin mentioned earlier? I'm willing to try anything at this point to get through to someone who actually understands these penalty situations. Also, when you say "good faith effort to file once discovered" - did you mention the specific timeline of when you found out versus when you filed? I'm wondering if my December 2022 filing date after discovering it late in the year would count as prompt action.

Yes, I used Claimyr exactly like Benjamin described - it was a game-changer for actually reaching someone knowledgeable at the IRS. And absolutely mention your specific timeline! The fact that you filed in December 2022 immediately after discovering the requirement in late 2022 is actually a strong point in your favor. That shows you took prompt corrective action as soon as you became aware of the obligation. In my letter, I included a timeline section that showed: when I established the Solo 401k, when I first learned about the 5500-EZ requirement, and when I filed the form. The IRS agent I spoke with specifically said that voluntary compliance after discovery (rather than waiting until you receive a penalty notice) demonstrates good faith. Your December 2022 filing definitely qualifies as prompt action - you didn't wait around or ignore it once you found out about it. One more tip: when you call through the callback service, ask to speak with someone in the Employee Plans department specifically. They handle 5500-EZ penalties and are much more knowledgeable about abatement procedures than the general customer service agents.