The Internal Revenue Service recently announced a new pilot pre-examination retirement plan compliance program initiated in June. If you are a plan sponsor, do not play ostrich should you receive an IRS Pre-Examination Retirement Plan Notice. Failure to respond timely to the pre-examination notice may result in larger legal, accounting and/or audit fees and the imposition of larger sanctions.
Under the new program you have 90 days to do a self-audit of the plan that is the subject of the Pre-Examination Notice and correct document or operational errors. Any errors that you identify that cannot be self-corrected under Revenue Procedure 2021-30 (“EPCRS”) may be corrected by requesting a closing agreement.
If the IRS agrees with your corrective actions, the fee structure under Rev. Proc. 2021-30 for filings under its voluntary compliance program will be used to determine the penalty to be paid in connection with the closing agreement thus avoiding the more onerous audit closing agreement program fees. If the IRS does not agree with your corrective actions, or you do not respond within the 90-day correction period, the IRS will conduct an examination.
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