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Retirement News for Employers - Winter 2011 - Desk Side Chat With Monika Templeman-Compliance Checks-What Do I Do When I Get a Letter from the EPCU?

Monika Templeman, Director of EP Examinations, responds to questions and offers insights on retirement plan topics uncovered during audits. You may provide feedback or suggest future topics for discussion by e-mailing her at: RetirementPlanComments@irs.gov.

Monika, along with standard examinations, your office is performing more compliance checks. Why do both?

We need to be proactive in assisting plans to stay in compliance. Performing compliance checks in addition to standard examinations allows us to leverage our examination resources, significantly increasing coverage and expanding our enforcement presence through correspondence-based contacts. This approach has proven so successful that we have expanded the Employee Plans Compliance Unit to three work groups. The EPCU is able to resolve many issues without an audit, such as determining whether a record-keeping or reporting requirement is being met or matching information to resolve errors or discrepancies, while helping to educate taxpayers at the same time. We also use Compliance Check Questionnaires to learn more about compliance issues and behaviors impacting the health of retirement plans.

What are the differences between a compliance check and an examination of a return?

There are several key differences. A compliance check contact is not an audit or an investigation under Code §7605(b) and does not preclude a plan sponsor’s use of IRS correction programs to inexpensively correct plan errors. Although a compliance check involves verifying Information on a return filing, books and records are not inspected. In comparison, an examination involves a revenue agent visitation to determine tax liability and involves inspection of the books and records. The agent verifies that the plan is in overall compliance in form and in operation. A significant difference is that, unlike a compliance check letter from the EPCU, upon receipt of a written or oral Notice of Audit, the plan sponsor is prohibited from filing a Voluntary Correction Program application under EPCRS.

How are taxpayers contacted for compliance checks?

Generally, EPCU uses written correspondence and/or telephone calls to contact plan sponsors. The IRS does not initiate communications with taxpayers through e-mail.

What steps should plan sponsors take if they receive a letter from the EPCU?

First, read the correspondence and make sure you understand the request. If you have questions about it, contact the person whose name appears on the letter. Then, gather and provide the information requested in the letter.

Can the plan sponsor send more information?

The plan sponsor can always provide more information, including documents to help resolve any issue that the EPCU raises.

What could happen if the plan sponsor does not answer the EPCU letter?

Failure to answer the correspondence could result in further action, including examination of the plan.

Do taxpayers have the opportunity to see the results of the EPCU projects?

Yes. We include summary reports on completed EPCU projects at www.irs.gov/retirement. These reports provide a recap of the project’s background and results. We encourage plan sponsors to use these reports as an internal control check for their plan.

What are the EPCU current projects?

Our current projects include a SIMPLE IRA project to check for potential non-amenders, a SEP project requesting plan sponsors complete a short questionnaire and international projects on domestic trusts maintained by foreign entities and foreign distributions to confirm reporting and payment of early distribution taxes by individuals with foreign addresses.

For a complete list of current projects and more information, visit the EPCU Web page.

Page Last Reviewed or Updated: 30-Sep-2013