The Internal Revenue Service’s Employee Plans function is pilot-testing a new pre-examination retirement plan compliance program, starting this month, as a way to shorten the length of time needed for exams.
The IRS said in an email Friday it would notify plan sponsors by letter if their retirement plan was selected for an upcoming examination. The letter will give a plan sponsor a 90-day window to review their plan’s document and operations and see if they meet current tax law requirements. If a plan sponsor doesn’t respond within 90 days, the IRS will then contact them to schedule an exam.
Retirement plan sponsors will have an opportunity to correct any mistakes on their own. If the review reveals mistakes in the plan’s documents or operations, they may be able to self-correct the mistakes using correction principles in the IRS’s
“If you find mistakes during your review that aren’t eligible to be self-corrected, you can request a closing agreement,” said the IRS. “We’ll use the Voluntary Correction Program
The IRS said it would review the plan’s documentation and determine whether it agrees with the sponsor’s conclusions and that it appropriately self-corrected any mistakes. It will then issue a closing letter or conduct either a limited or full-scope examination.
“Our goal with this program is to reduce taxpayer burden and reduce the amount of time spent on retirement plan examinations,” said the IRS. “At the end of this pilot, we’ll evaluate its effectiveness and determine if it should continue to be part of our overall compliance strategy.”
