Employee Plans Compliance Unit (EPCU) - FAQs - General EPCU Questions
These frequently asked questions and answers are provided for general information only and should not be cited as any type of legal authority. They are designed to provide the user with information responsive to general inquiries. Due to the uniqueness and complexities of Federal tax law, it is imperative to ensure a full understanding of the specific question presented, and to perform the requisite research to ensure a correct response is provided.
- What is a compliance check?
- What should a Taxpayer do upon receiving a letter from the EPCU?
- What do I need to do if I want my representative to answer an EPCU compliance check?
- What occurs during a compliance check?
- Is there a penalty for not responding to a compliance check?
- How often can the EPCU do compliance checks?
- Will the Taxpayer receive a closing letter?
- Does EPCU also conduct examinations?
What is a compliance check?
A compliance check is a review to determine whether the recordkeeping and reporting requirements for the plan are being met. It is also utilized to match information from returns or other information items to resolve errors and other discrepancies. The check is a tool to help educate trustees, administrators, and sponsors about the reporting and filing requirements for the plan and to increase voluntary compliance. A compliance check is not an examination or an audit. It does not directly relate to determining a tax liability for any particular period.
What should a Taxpayer do upon receiving a letter from the EPCU?
Provide the requested information within the requested number of days. Additional documents or clarifying information may also be provided if you believe it would be helpful to address the issue(s) identified in the letter. The response can be either mailed to the address reflected in the letter or faxed to the identified number. Some project letters may also identify an e-mail address designed to receive responses related to that specific project and accordingly, it’s appropriate to utilize that delivery method in addition to those mentioned above. If the response cannot be provided within the requested timeframe, the individual identified in the letter should be contacted and an extension of time may be granted.
What do I need to do if I want my representative to answer an EPCU compliance check?
If you want your representative to respond to your compliance check, you need to authorize EPCU to discuss the contact letter with the representative by sending us either:
- Form 2848, Power of Attorney and Declaration of Representative
- Form 8821, Tax Information Authorization
Complete the appropriate form as you would for an Employee Plans audit, except complete Form 2848, Line 3, Description of Matters, or Form 8821, Line 3d, Specific Tax Matters, with “Compliance Check.”
What occurs during a compliance check?
At the beginning, contact is made with the Taxpayer (usually in the form of a letter). The Taxpayer is notified this is a compliance check and not an examination. We may ask questions concerning particular items reflected on filings or the lack of filings. If we determine an examination is appropriate, the taxpayer will be notified by the IRS.
Is there a penalty for not responding to a compliance check?
No. The Taxpayer may refuse to respond to a compliance check without penalty. However, we have the option of opening a formal examination, whether or not the Taxpayer responds to the compliance check.
How often can the EPCU do compliance checks?
Since a compliance check is a review to determine whether the Plan is adhering to reporting and recordkeeping requirements and is not an examination, it is possible to have more than one compliance check for a tax year if facts and circumstances warrant.
Will the Taxpayer receive a closing letter?
Yes. Once the review is completed by the EPCU, one of two letters will be sent to the Taxpayer. The 1564 letter indicates the compliance check was reviewed and no further action is required by the Taxpayer. The 1564-A letter indicates the compliance check was reviewed but certain items require the Taxpayer’s attention. An enclosure is included with the second letter identifying the item(s) specifically and any questions should be addressed to the person identified on the letter.
Does EPCU also conduct examinations?
Yes. Furthermore, some contacts can result in a referral to an examination agent for future action.