Glass Half Full: Good News for Sponsors of Plans Undergoing IRS Audit

IRS recently announced a new pilot program for retirement plans that are selected for an IRS audit.

  • And why is my glass half full, you ask?

The plan sponsor / employer first receives an IRS Audit Notice stating they have been selected for audit. The program allows 90 days for the employer to review and correct issues that might otherwise be identified under audit.

  • New vintage, same great taste

As in the past, whatever defects or mistakes surface in an IRS audit must be corrected. Nothing about this step has changed. Such corrections may require plan amendments, updated documents, employer contributions to the plan, or other corrections, based on the defects or mistakes that need correction. Depending on each fact pattern, the correction requirement can be the most expensive part of an IRS audit or a plan correction.

Again, as in the past, even with an audit notice in hand, the employer may use the Self-Correction Program (SCP) to correct insignificant violations or significant violations which have already been substantially corrected. (The definitions of Insignificant and Significant Violations are not changed by this pilot program. Please contact JULY for more information or if you have questions.)

  • Happy hour prices

For issues identified during the initial 90 day period, which are not eligible for SCP, employers may now correct these defects or mistakes and request an IRS Audit Closing Agreement using the VCP (Voluntary Compliance Program) fee schedule, which at a maximum sanction of $3,500 is considerably cheaper than the penalties otherwise assessed under the Audit Closing Agreement Program. 

  • Place your orders early

Employers wishing to take advantage of this pilot program will be required to notify IRS during the 90 days following receipt of the IRS Audit Notice. IRS will review the correction(s) and must approve them. A correction IRS considers to be insufficient may therefore become more expensive, but the lower VCP fee schedule would still apply for an employer taking advantage of the pilot program.

If IRS does not receive an employer letter during the 90 days, they will move forward with the IRS Audit.

  • Cheers!

Please contact your JULY Sales Representative or Client Service Manager for more information.

Related Posts

Categories

You May Also Like…

JULY’s Secure 2.0 Decoded

JULY’s Secure 2.0 Decoded

January 31, 2024

JULY’s Blake Willis will walk you through the latest on Secure 2.0, including highlights of the bill, what the changes (and modifications) mean to you, your business, and your clients, as well as feature new related opportunities.