The goal of this project was to reach out to Form 5500-EZ and Form 5500-SF return filers with missing, incomplete or invalid business code information in order to:
- Enhance current EP records
- Improve future EP records
- Verify information contained in EP records
A random sample of cases identifying 932 filings with a missing or incomplete business code was selected for this project. The taxpayers were asked to:
- Enter the appropriate business code
- Prepare and file an amendment Form 5500-SF or Form 5500-EZ
- Ensure the information on the amended return was correct to prevent the need for further contacts
- Provide a brief explanation why the business code was missing, incomplete or invalid
- Provide contact information for an individual authorized to speak on behalf of the taxpayer
Taxpayer responses are summarized as follows:
|Returns secured||91.1% of taxpayers|
|Taxpayer and external software error||6.1%|
|Referrals/Requests to Exam, bankruptcy and “no change.”||1.4%|
Most of the taxpayers provided a brief explanation of why the business code was missing or invalid on their return. The responses from the taxpayers showed that less than 10% of the sample did not know what business code to use, while the majority of the sample simply missed, omitted or overlooked the question on the form.
This project spot lighted a focus on return filing accuracy and data perfection.
- The primary benefit of the project is that filers of the Form 5500 series were made aware of the importance of completing the business code. These Codes provide critical data for Statistics of Income, Examination, Research and other Service organizations.
- The taxpayers were given the opportunity to submit an amended return with the (correct) business code.
- EP benefited by learning that there is an awareness gap among Form 5500 filers regarding the importance of the business code entry on the form.
Form 5500 series Line 2(d) requires an entry of the Filer’s Principal Business Activity Code. However, not all Form 5500 returns complete Line 2(d), or if completed, sometimes the information is incomplete or invalid. The business code that best defines the nature of the plan sponsor’s business should be selected from a list of business codes provided in the Form Instructions.