7.2.4 Employee Plans Voluntary Closing Agreement Requests

Manual Transmittal

October 02, 2018

Purpose

(1) This transmits revised IRM 7.2.4, TE/GE Closing Agreements, Employee Plans Voluntary Closing Agreement Requests.

Background

This IRM gives case processing procedures for Employee Plans closing agreement requests associated with tax favored retirement plans.

Material Changes

(1) Added newly created IRM 7.2.4.1 Procedure Scope and Objectives.

(2) Added newly created IRM 7.2.4.1.1 Authority.

(3) Added newly created IRM 7.2.4.1.2 Roles and Responsibilities.

(4) Revised IRM 7.2.4.3.2 Procedure for Receipt of VCAP Requests to list fields that need to be completed when creating the case in Reporting Compliance Case Management System (RCCMS).

(5) Revised IRM 7.2.4.3.3 Processing Closing Agreement Requests under the VCAP to reflect initial processing and assignment of VCAP requests.

(6) Revised IRM 7.2.4.3.3 Processing Closing Agreement Requests under the VCAP, IRM 7.2.4.5 Processing Closing Agreement Sanction Payments and Exhibit 7.2.4-1(5) Links to VC SharePoint Site to reflect that the Kansas City Campus will process sanction payments on and after October 12, 2018.

(7) Updated links and descriptions in Exhibit 7.2.4-1

Effect on Other Documents

This supersedes IRM 7.2.4 dated September 21, 2017.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(10-02-2018)

Catherine L. Jones
Acting Director, Employee Plans
Tax Exempt and Government Entities

Procedure Scope and Objectives

  1. Purpose: This IRM describes the procedures Employee Plans (EP) Voluntary Compliance (VC) follows to process requests for closing agreements under the Employee Plans (EP) Voluntary Closing Agreement Procedures (VCAP).

  2. Audience: EP Employees who process closing agreement requests and any IRS employee who transfers a closing agreement request to VC.

  3. Policy Owner: Director, Employee Plans.

  4. Owner: EP.

  5. Objective: To encourage sponsors of qualified plans, and others that service qualified retirement plans, to voluntarily disclose discovered violations of qualified plan requirements and federal tax requirements that apply to qualified plans to the IRS along with a proposed correction of those violations.

Authority

  1. Delegation Order 8-3 delegates the authority to enter into and approve a written closing agreement with any person relating to their federal tax liability to the EP Director.

  2. Voluntary closing agreement requests are resolved by issuing a Director’s closing agreement authorized by IRM 1.2.47.4, Delegation Order 8-3 (DO 8-3) signed by the appropriate party (e.g. plan sponsor, plan administrator or plan trustee) and IRS representative, as authorized under the Delegation Order.

  3. For closing agreement requests processed under this IRM 7.2.4, the EP Director of EP Rulings and Agreements (R&A) will sign the closing agreement.

Roles and Responsibilities

  1. The VC Manager is responsible for overseeing the processing of voluntary requests for closing agreements to ensure that they’re assigned and collaborates with VC program coordinators to monitor overall progress on reviewing assigned requests.

  2. VC program coordinators review and process assigned closing agreement requests and collaborate with VC specialists to consult and assist on cases assigned to VC specialists or VCP submissions that are resolved with a closing agreement.

Employee Plans Voluntary Closing Agreement Requests Overview

  1. These procedures apply to taxpayer voluntary requests for closing agreements submitted to:

    1. VC under the EPVCAP.

    2. Any IRS employee, including employees of the Office of Chief Counsel, Wage and Investment (W&I), Small Business/Self-Employed (SB/SE), Large Business and International (LB&I) and Tax Exempt and Government Entities (TE/GE) Operating Divisions, who transfers the request to VC.

    3. VC for 457(b) plans (See Rev. Proc. 2013-12 section 4.09 for requests received before January 1, 2017. For requests received on and after January 1, 2017, see Rev. Proc. 2016-51 section 4.09).

    4. VC as a result of an EPCRS VCP submission that is converted to a closing agreement request because the VCP submission includes failures and/or other issues not eligible for correction under EPCRS.

      Note:

      With your group manager’s approval along with the approval of the VC Manager, employees may offer a VCP applicant the option to resolve failures or issues by converting the VCP case to a VCAP request.

  2. VC retains complete discretion as to whether to accept any closing agreement request for processing and whether to resolve the matter.

Guidelines for Voluntary Requests for EP Closing Agreements

  1. Generally, VC will consider closing agreement requests for failures or problems that aren’t eligible for resolution under EPCRS.

    Example:

    Some issues ineligible for EPCRS:
    • Excise taxes associated with prohibited transactions.
    • Failure to provide (or accurately provide) Forms 1099-R or W-4P.

    Note:

    A closing agreement request that includes issues in IRM 7.2.4.3 (1), may also include failures that can be resolved under EPCRS.

  2. Requests from a plan, plan sponsor, or entity under any type of IRS exam at the time they mail the closing agreement request to the IRS should be rejected.

  3. Requests from plan, plan sponsor, or any other party to the closing agreement, who was or may have been a party to an abusive tax avoidance transaction, including any entity that makes the request may be rejected.

  4. VC receives requests submitted:

    1. Anonymously by a representative of the taxpayer. The taxpayer’s identity is not disclosed until after the IRS and representative have agreed to the closing agreement terms.

    2. To reduce or relieve penalties associated with a failure to pay and/or failure to file that are in addition to the taxpayer’s liability for income or excise tax amounts.

    3. By an organization involving several plans for an umbrella or mass closing agreement.

  5. Generally, for closing agreement requests under this IRM 7.2.4, requests to negotiate the following will be denied:

    1. Any applicable income or excise tax amounts, including applicable interest owed to the IRS.

      Note:

      A request may be made to waive the 100% excise tax imposed by IRC 4971(b) and 4975(b) in appropriate circumstances.

    2. Minimum funding deficiencies or correction of prohibited transactions. This means that closing agreement requests should not ask to:

    • Reduce a plan’s existing minimum funding deficiency.

    • Settle for less than 100% of the tax imposed by IRC 4971(a) and 4975(a).

    • Accept a reduction of a minimum funding deficiency.

    • Not require correction of prohibited transactions.

    Note:

    For plans subject to Title 1 of ERISA, a plan sponsor should correct a prohibited transaction using the Department of Labor’s Voluntary Fiduciary Correction Program before making a request for a closing agreement.

  6. All corrective actions described in the closing agreement must be completed before the agreement is executed.

  7. Closing agreements issued under this IRM:

    1. Provide administrative convenience to allow taxpayers to address tax consequences other than plan disqualification (such as the imposition of excise tax or additional income tax) by paying their full tax liability, interest, and, if applicable, penalties.

    2. Won’t be open-ended, prospective or relate to future periods.

  8. An entity making a closing agreement request doesn’t receive audit protection, so the request doesn’t preclude the IRS from subsequently examining the plan or plan sponsor. However, if the VCAP request includes items eligible for EPCRS, we’ll exempt those items from exam while working the VCAP request if originally made by an identified plan and plan sponsor.

  9. For anonymous closing agreement requests, if the plan or plan sponsor is under examination after they have submitted their request, but before they have disclosed their identity to the IRS, then VC cannot consider their request and the request will be closed by VC without issuing a closing agreement and returned to the representative. Instead, the issues in the closing agreement request will have to be resolved as part of the IRS examination.

  10. VC coordinates with the Director of EP R&A and the Director’s Senior Technical Advisor (Technical Advisor) to evaluate VCAP requests. Where appropriate, VC coordinates with the EP Exam Director, TEGE Division Counsel or TEGE Associate Chief Counsel.

Information Required in Voluntary Closing Agreement Requests

  1. If not submitted anonymously, the plan, plan sponsor (or entity making the request), or the "eligible party" (collectively referred to herein as the applicant), should include the following items in a written VCAP request:

    1. Employer Identification Number (EIN).

    2. Name and address of the party who is expected to sign the closing agreement.

    3. Name of retirement plan, if applicable.

    4. Three digit plan number, if applicable.

    5. Name of plan sponsor, if applicable.

    6. Type of retirement plan, if known.

    7. Six-digit North American Industry Classification System (NAICS)

      Note:

      Find the NAICS code on the filed Form 5500 series return for the retirement plan or choose the appropriate code from the Form 5500 Instructions.

    8. Explanation of the issue(s) in detail, including how and why it occurred and the number of people, plans or IRAs affected.

    9. Explanation of a proposed solution of the issue(s) and why the proposed solution is the best course of action.

    10. Explanation of the method used and computations for the tax, interest or penalties, if applicable.

    11. Proposal of the sanction amount and an explanation supporting why the sanction amount is appropriate,

    12. Number of plan participants and the total amount of plan assets. If not readily available, provide estimates if possible.

    13. Exhibits and/or spreadsheets with additional details.

    14. Statement as to whether the plan sponsor or plan is under any IRS exam..

    15. Penalty of perjury statement signed by the party that indicates the submitted information is accurate and complete to the best of their knowledge.

    16. Form 2848, Power of Attorney and Declaration of Representative if a representative is appointed.

  2. For anonymous submissions, the representative making the request should include items H-N, above, and the following items:

    1. A unique identifying number the representative has assigned to the closing agreement request. The identifying number should not be used for any other closing agreement request.

    2. A penalty of perjury statement signed by the representative stating:

      Under penalties of perjury, I declare that I am an authorized representative of the taxpayer who would be party to any closing agreement. I comply with the power of attorney requirements described in 26 C.F.R. §§ 60.1501-601.509. I will submit an executed Form 2848 upon the disclosure of the identity of the taxpayer to the IRS. I also declare that the issues and information included with this request are true, correct, and complete to the best of my knowledge and belief.

  3. VCAP requests should be sent to:

    Internal Revenue Service
    TE/GE:EP:VC: Group 7554
    Request for Voluntary Closing Agreement
    9350 Flair Drive, 3rd Floor
    El Monte, CA 91731

  4. Other IRS functions (including TEGE Division Counsel and TEGE Associate Chief Counsel) that receive VCAP requests involving tax-favored retirement plans should mail the requests to the El Monte, CA address.

Procedure for Receipt of VCAP Requests

  1. When VC Group 7554 receives a VCAP request (either from a plan sponsor, POA or other business unit), the assigned employee establishes the request on the Headquarters Employee Plans System of TE/GE Rulings and Agreements Control (HQEP -TRAC) to obtain a unique identifying number that will be inputted as the "Work Unit" number in the Reporting Compliance Case Management System (RCCMS).

  2. The assigned employee will complete the identifying information and all required fields in the General (1 of 2) and Codes/Checksheets tabs for establishing cases in RCCMS:

    • TIN (i.e., EIN)

    • Name

    • Type as "Voluntary Request for Closing Agreement"

    • Work Unit

    • Plan Type

    • Plan Number

    • Return Received as the postmark date of the request

    • Name Control

    • Project Code as the code that applies to the plan type submitted to VCAP

    • Status Code

    • Activity Grade

  3. The assigned employee will scan all documents received in the VCAP request into Adobe Portable Document Format (PDF).

  4. After the case is established in RCCMS, the assigned employee uploads the scanned documents to the Office Documents folder in RCCMS.

Processing Closing Agreement Requests under the VCAP

  1. The VC Manager designates a program coordinator to:

    Action Steps
    Conduct or request IDRS search to see if the applicant and/or plan is under audit.
    • Use AMDIS, EMFOLT and BMFOLT IDRS commands.

    • Place results in the “Office Documents” folder in RCCMS or note findings in workpapers.

    • Discuss indications of exam activity with the VC Manager.

    Check EDS to see if there is an open determination letter application.
    • Applies to requests involving a single plan sponsor and an IRC 401(a) retirement plan.

    • Discuss any case with an open determination letter request with the VC Manager.

    Coordinate with the VC Manager to assign the case to a VC Specialist.
    • Notify Manager of VC of newly received requests.

    • Transfer cases to the VC Manager for assignment.

    Send an email to other program coordinators and the VC Manager to have a preliminary discussion of any requests.
    • Circulate summaries of requests (using template) for discussion.

    • Schedule a teleconference to discuss requests.

    Send an e-mail to:
    • VC Manager

    • EP Director of R&A

    • EP Technical Advisor

    • Other program coordinators

    Include closing agreement summary template for each request, any other helpful documents and proposed sanction (if provided).
    Schedule a teleconference to discuss the closing agreement request.
    • The program coordinator assigned the case (or assisting the VC Specialist assigned the case) should present the case to the group.

    • Discussion should address whether the IRS should:

      • proceed with addressing the issue disclosed in the closing agreement request.

      • accept the proposed correction or consider an alternative.

      • accept the proposed sanction or propose an alternative.

  2. For some cases, the VC Manager or program coordinator may consult a local IRS Field Actuary, EP Exam, including area managers and/or area coordinators for technical assistance.

    Example:

    Some issues/failures that may require additional coordination:
    • IRC 412(i) plan issues
    • IRC 409(p) failures
    • Rollovers as Business Startups (ROBS) failures

  3. For program coordinators working cases, unless noted otherwise, they should follow the same procedures as the specialist to process the case.

  4. The VC Manager may assign some VCAP requests to specialists after discussing with their group manager. The specialist works with the program coordinator and VC Manager to finalize the closing agreement and sanction payment.

  5. Specialist: Upon receipt, see IRM 7.2.2.6, Actions Upon Receipt of Newly Assigned VCP Cases and IRM 7.2.2.6.1, Required Use of Form 5464 and WebETS for additional directions and requirements.

  6. Specialists should maintain workpapers that document:

    1. analysis and research.

    2. explain conclusions.

    3. conversations that led to a conclusion or recommendation.

  7. After the case has been fully developed and all parties (specialist, program coordinator, VC Manager and the entity) agree on the correction method and sanction the individual assigned the case will:

    Action Steps
    Draft a DO 8-3 closing agreement.
    • Use sample agreement on the VC SharePoint.

    • If the case is assigned to a specialist, the specialist will:

      1. ask a program coordinator for a sample closing agreement.

      2. send a draft of the closing agreement to a program coordinator for review.

      3. if there are requested revisions, discuss any questions about those changes.

      4. revise the agreement in accordance with suggested revisions and comments.

    Send the draft agreement to the VC manager for review and comments. If the case is assigned to a specialist, the program coordinator will:
    • Send the draft agreement to the VC manager.

    • make any suggested revisions.

    • if changes are made, e-mail an updated version to the Specialist.

    For cases assigned to a program coordinator, the program coordinator will e-mail the draft agreement to the VC Manager and make any suggested revisions.
    Fax the draft approved by the VC manager to the plan sponsor or POA for their review and comment. Inform the plan sponsor or POA that:
    • The draft closing agreement isn’t necessarily the final version.

    • The existence of the draft doesn’t mean that the IRS has agreed to enter into a closing agreement.

    • The Director of EP R&A has the final decision on the closing agreement terms and acceptance.

    Secure the plan sponsor’s or POA’s informal consent to the draft document.
    • Consider any requested changes by the POA or submitter and coordinate with the VC manager, if needed.

    • If the case is assigned to a specialist., the Specialist will:

      1. if the POA or plan sponsor requests changes, discuss those changes with the program coordinator.

      2. inform the program coordinator that the draft agreement was accepted.

  8. Program coordinator: e-mail the closing agreement draft, including attachments, to the EP R&A Director and his/her Technical Advisor for review.

  9. If the Technical Advisor requests changes to the draft closing agreement, then the program coordinator will make any requested changes and fax or mail the revised agreement to the plan sponsor or POA. If the case is assigned to a specialist, the program coordinator will send the revised draft agreement to the specialist and the specialist will fax or mail it to the plan sponsor or POA.

  10. For anonymous cases:

    1. Fax or mail the representative the revised agreement along with a letter requesting the following identifying information:

      1. Employer Identification Number (EIN).

      2. Name and address of the entity who will sign the closing agreement.

      3. Name of retirement plan, if applicable.

      4. Three digit plan number, if applicable.

      5. Type of retirement plan, if not previously provided.

      6. Six-digit North American Industry Classification System (NAICS)

        Note:

        Find the NAICS code on the filed Form 5500 series return for the retirement plan or choose the appropriate code from the Form 5500 Instructions.

      7. Statement as to whether the plan sponsor or plan is under any IRS exam.

      8. Statement to certify neither the plan nor the plan sponsor has been involved with an abusive tax avoidance transaction.

      9. If not previously provided, the number of plan participants and the total amount of plan assets. If not readily available, provide estimates if possible.

      10. Plan documents, corrective amendments, exhibits and/or spreadsheets that are not redacted.

      11. Any other identifying information needed to properly draft a closing agreement.

      12. Penalty of perjury statement signed by the plan sponsor or eligible party that indicates the submitted information is accurate and complete to the best of their knowledge.

      13. A signed and fully completed Form 2848, Power of Attorney and Declaration of Representative.

    2. Once the identifying information is received take the following actions:

    • Check IDRS (or request an IDRS check) to see if the plan or plan sponsor is under IRS exam. If there are indications of exam activity discuss with the VC manager (or the program coordinator, if the case is assigned to a specialist).

      Note:

      If the plan sponsor or plan is under exam, a voluntary closing agreement may not be issued.

    • If there is no exam activity, update the approved anonymous closing agreement draft with the identifying information and fax or mail it to the POA for review.

  11. If the POA (or plan sponsor for cases where there is not a representative) approves the revised draft, the program coordinator (or specialist, if the case is assigned to a specialist) should:

    • Mail the closing agreement to the plan sponsor/applicant requesting an authorized employee of the party sign the agreement. Use a sample cover letter for closing agreement requests that do not involve 457(b) plans and includes information about sanction payments through Pay.gov.

    • Request the sanction payment, if applicable, in the form of a Cashier’s Check or Certified Check for the sanction payable to the "United States Treasury" or by direct debit of a bank account through the Pay.gov website.

      Note:

      Taxpayers have the option of paying the sanction through the pay.gov website. Coordinate with a program coordinator for further instructions if payment will be made through pay.gov.

    • request evidence that the plan sponsor made all corrective actions under the closing agreement before signing it.

  12. Review the documents received from the POA/taxpayer:

    Action Steps
    Review documents
    • Check to see if the closing agreement was signed by an authorized employee of the party.

    • Verify that the sanction check or pay.gov payment is the correct amount. Specialists should contact a VC program coordinator to ask them to secure pay.gov receipt.

    • For paper checks verify that check is:

      1. a certified or cashier’s check

      2. made payable to U.S. Treasury or United States Treasury

    • Review documents that confirm completion of correction demonstrate that corrective actions are complete.

    • If there are problems, contact the taxpayer or POA to fix them.

    Scan the sanction check or save a copy of pay.gov deposit receipt Keep original check in a secure location in accordance with the guidelines in IRM 5.1.2.2.1.
    E-mail signed closing agreement (include supporting documents) to the EP R&A Director for signature E-mail EP R&A Director to request signature on closing agreement, attach:
    • A scanned version of the taxpayer signed closing agreement.

    • A scanned copy of sanction check (or deposit receipt if payment made through pay.gov).

    • Correspondence verifying that the agreement was reviewed by the EP Technical Advisor.

    Note:

    If you don’t receive a response from the EP R&A Director within 7 days from your e-mail, send a follow-up e-mail.

     

  13. Specialist: When you receive the closing agreement signed by the EP R&A Director, prepare the sanction payment package in accordance with IRM 7.2.4.5, Processing Closing Agreement Sanction Payments and process it timely in accordance with IRM 5.1.2.3.

  14. Once the sanction payment is received and processed in Kansas City (as evidenced by the receipt of the signed acknowledgment copy of Form 3210) close the VCAP request:

    Action Steps
    Prepare taxpayer closing letter and POA letters (maintain copy for case file) Obtain sample letters from program coordinator.

    Note:

    Get sample documents from a program coordinator or on the VC SharePoint.

    Prepare case file for closure
    • Record failure and correction codes in RCCMS.

    Note:

    For cases assigned to Specialists, contact the program coordinator to discuss specific failure and correction codes to record in RCCMS.

    • Print copies of the signed closing agreement for the taxpayer, representative(s) and upload copy into RCCMS.

    • Specialists closing cases should generally follow the procedures in IRM 7.2.2.23, with the exception that the closing letters should be those for VCAP requests.

    • Upload all documents and complete required fields for case closure in RCCMS.

  15. Group manager/designated employee: should take appropriate actions to issue closing letters, signed closing agreements and to close the case on RCCMS by following the procedures in IRM 7.2.2.24, Closing Procedures for Group Managers, as applicable to closing agreement cases.

Voluntary Submissions for 457(b) Plans

  1. Rev. Proc. 2016-51, 4.09, permits plan sponsors to voluntarily submit a closing agreement request (either disclosed or anonymously) for their 457(b) plan if they're either:

    • Government entities.

    • Tax exempt organizations (in limited circumstances, such as a plan that was erroneously established to benefit the entity’s non-highly compensated employees).

  2. EP VC will apply standards similar to those under EPCRS to these submissions.

  3. Plan Sponsors/POAs should mail submissions to the IRS address in the Form 8950 Instructions and include:

    1. Signed and completed Form 8950, Application for Voluntary Correction Program (VCP) Submission under the Employee Plans Compliance Resolution System (EPCRS).

    2. Description of the failure and proposed method of correction. Filers may find Form 14568Model VCP Compliance Statement helpful in understanding what information the IRS needs.

      Note:

      The issues and correction methods in the model schedules (Form 14568-A through 14568-I) generally don’t apply to 457(b) plans. Governmental plan sponsors may find Form 14568-E, Schedule 5 and Form 14568-H, Schedule 8 helpful if their 457(b) plan has participant loans that don’t comply with IRC 72(p) or a failure to comply with minimum required distributions.

    3. Copy of the 457(b) plan document in effect during the period of failure.

    4. Exhibits and spreadsheets showing additional details for the description of the failure and/or proposed correction.

      Note:

      Plan sponsors shouldn’t send Form 8951, User Fee for Application for Voluntary Correction Program (VCP) because there is no fee required at the time of filing. However, if they do send a fee, we’ll accept and process it to offset any closing agreement sanction.

    5. Proposal of the sanction amount and an explanation supporting why the sanction amount is appropriate.

  4. While the submission may include the Form 14568 series, those documents are not model agreements for 457(b) submissions and will not be issued to resolve the failures disclosed in the submission.

  5. During the screening process, these submissions are identified and assigned to a program coordinator.

    1. If a Specialist receives a 457 case, the Specialist should notify the his or her group manager to determine if VC should work the case.

    2. The group manager should notify a program coordinator of the case.

  6. The VC manager of VC and program coordinators may consult EP and TEGE Division Counsel to determine if VC will accept the case for processing and issue a closing agreement.

  7. Cases accepted for processing may be assigned to a VC Group. For cases that are assigned to a VC Group, the program coordinator or group manager will document acceptance and places it in the case file.

  8. Process 457(b) submissions, using the case processing procedures in IRM 7.2.4.3.3, Processing Closing Agreement Requests under the VCAP, to the extent applicable.

  9. If VC doesn’t accept the 457 case for processing, the program coordinator or specialist should:

    Document reasons as to why VC won’t process this request.
    Step: Prepare workpaper that explains why VC won’t process the closing agreement request.
    Inform the plan sponsor/POA.
    Step: Call the plan sponsor/POA and inform them that the IRS has declined to process the closing agreement request.
    Step: Document this call in the Form 5464, Case Chronology Record, (CCR).
    Prepare VC closing letters.
    Step: Complete Letter 5360 VC Closing Letter Decline to Process 457(b).
    Step: For cases with a representative under Form 2848, Power of Attorney and Declaration of Representative under or Form 8821, Tax Information Authorization, prepare Letter 5354,Voluntary Correction Program Closing Letter to POA with Compliance Statement.
    Step: On Letter 5354, change “Enclosure list” to refer to the special closing letter.
    Complete Case Closure in RCCMS.
    Step: Use Disposal Code 777-Declined.
    Step: Use appropriate Principal Issue Code from the 153 series.
    Step: Complete all required closing field in the closing record.
    Step: Request case closure within RCCMS.
    If applicable, refund any submitted payment.
    Step: Follow refund procedures in IRM 7.2.2.10, Procedures for User Fee Issues, and IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP User Fees.
  10. Generally, VC accepts cases involving governmental 457(b) plans that have operational failures limited to 401(a)(9) required minimum distribution failures and/or participant loans that didn’t comply with IRC 72(p) and specialists may work those cases. However, specialists should still work with a program coordinator.

  11. For assigned cases with a 457(b) plan sponsored by a governmental entity:

    Action Steps
    Contact the plan sponsor/POA.
    Step: Verify they’re aware of the self-correction option in IRC 457(b) and Treas. Reg. 1.457-9, but still want to proceed with the submission.
    Document actions and describe the plan sponsor/POA response.
    Step: Explain response on Form 5464, Case Chronology Record or Specialist prepared workpapers.
    Close case if the plan sponsor/POA no longer wants to pursue a closing agreement.
    Step: Use RCCMS Disposal Code 778-Withdrawn.
    Step: Prepare Letter 5361,VC No Action Closing Letter-457(b) Governmental Plan using SCP.
    Step: If a payment was made with the submission, refund any payments.

    Note:

    Follow the refund procedures in IRM 7.2.2.10, Procedures for User Fee Issues and procedures in IRM 7.2.2.10.2,Refund Procedures and Instructions for VCP User Fees.

  12. For processing procedures for 457(b) cases, see IRM 7.2.4.2.3 (5) through IRM 7.2.4.2.3 (15).

    Exception:

    Use the most current version of Letter 5359 that includes language for the optional use of pay.gov to pay the sanction, (VC Letter used to Request a Signed DO 8-3 Closing Agreement for 457(b) case) to request the signed agreements, sanction payment, if applicable and evidence of correction.

    Exception:

    Use Letter 5362, VC Favorable Closing Letter-457(b) plan as the favorable taxpayer closing letter.

Processing Closing Agreement Sanction Payments

  1. When you receive the signed closing agreements from the Director, prepare the following items for mailing to Kansas City:

    Action Steps
    Prepare Form 3244Payment Posting Voucher Using the sample posted on SharePoint, complete the following:
    • Taxpayer name, address, and ZIP code. Information comes from page one of the closing agreement.

    • SSN/EIN. Should be the information on page one of the closing agreement and add an “N” to the end of that number.

    • Form number/MFT. Enter 28.

    • Tax Period. Enter the year and month (i.e. YYYYMM) that the director signed the agreement.

    • Plan/Report Number. If applicable, enter three digit plan number.

    • Transaction/ Received date. Enter the date the Director signed the closing agreement.

    • Remarks. Enter "Closing Agreement- see attached"

    • Transaction Data. To the left of Code 670 for "Subsequent Payment" , enter total amount of sanction that will be sent to Kansas City.

    • Total Payment. Make sure that the amount entered to the left of Code 670 also shows up to the left of this item.

    • Prepared by. Enter specialist’s name and telephone number.

    Prepare Form 5734 Non-Master File Assessment Voucher Using the sample posted on SharePoint, complete the following:
    • Line 1- Name and address. Enter name and address of entity signing the closing agreement. Information comes from page one of the closing agreement.

    • Line 3- Taxpayer Identification Number. Enter EIN/SSN listed on page one of the closing agreement.

    • Line 4- Type of Tax. Enter CLOSING AGREEMENT.

    • Line 5- Form number. Enter N/A- Voluntary Agree. No exam

    • Line 6- Period. Enter the year and month that the Director signed the agreement and three digit plan number if applicable (i.e. YYYYMM Plan 00X).

    • Line 7- MFT code. Enter 28

    • Line 8-Abstract number. Enter 139

    • Line 10- Penalty.

      • I.R. Code Section or Type of Penalty. Enter IRC 7121

      • Trans. Code. Enter 240

      • Amount. Enter total amount of the sanction that will be sent to Kansas City

    • Line 12- Total. Enter the same number that was entered into "Amount" on Line 10.

    • Line 13- Reason for assessment. Enter Closing Agreement-See Attached

    • Line 14- Signature of Preparer. Enter name of specialist working the case and the Specialist’s phone number.

    • Line 15- Date. Enter date the form is completed.

    Prepare Memorandum Using the sample posted on SharePoint, complete the following:
    • Date: Enter date mailed to Kansas City.

    • From: Enter Name of Specialist working the case.

    • Payer’s Name: Enter entity’s name that is entering into the closing agreement.

    • Payer’s EIN: Enter EIN/SSN listed on page one of the closing agreement.

    • Payer’s Address: Enter an address of entity signing the closing agreement. Information comes from page one of the closing agreement.

    • Payer’s Name: Enter name of entity signing the closing agreement.

    • Phone Number: Enter specialist’s phone number who’s working the case.

    Prepare Form 3210 Document Transmittal
    • Prepare Form 3210 using sample posted on SharePoint

      Note:

      If the sanction is paid through pay.gov, request the Form 3210 that is designed for pay.gov payments from a program coordinator. The "REMITTANCE" section of that Form 3210 will list deposit information from pay.gov instead of information about the check.

    • Release Date: Enter date mailed to Kansas City.

    • Remarks. Enter Voluntary Closing Agreement- monetary sanction deposited through Cincinnati Submission Processing Center, ALC #17 (replace Cincinnati with Kansas City and ALC #17 with ALC #09, if mailed for processing on or after October 31, 2018).

    • Document Identification: List (one item per line) the following:

      • "Cover Memorandum- Submission Processing Center"

      • "Closing Agreement"

      • "Payment Posting Voucher-Form 3244"

      • "Non-Master File Assessment Voucher- Form 5734"

      • "REMITTANCE" :

      • "Name" Enter entity’s name that is entering into the closing agreement.

      • "EIN" : Enter EIN listed on page one of the closing agreement.

      • "Check #" :Input number(s) from sanction check(s).

      • "Amount:" Add amount of check.

      • "Plan #:" Add three digit number, if applicable.

    • From: Enter the address and name of the specialist working the case.

    • Releasing Official: Enter the name of the specialist working the case.

    • Originator Telephone Number. Enter specialist’s telephone number.

  2. E-mail the attachments below to group manager for approval

    • Copy of signed closing agreement

    • Copy of sanction check(s) or pay.gov deposit receipt

    • Copies of completed Forms 3244, 5734, 3210 and memo to Kansas City

  3. The group manager (or VC Manager) should review the documents for completeness and accuracy and resolve any issues with the Specialist.

    • Confirm closing agreement was properly signed

    • Confirm sanction payment matches amount in closing agreement

    • Confirm check is a cashier’s check or certified check

    • Confirm the check is made payable to "United States Treasury" or "U.S. Treasury"

    • Review Forms and Memorandum

    • Once review is complete and any issues are addressed, notify specialist that documents can be submitted to Kansas City

  4. Group manager (or VC Manager, if applicable) must retain copies of the following:

    • Signed closing agreement

    • Copy of sanction check(s) or pay.gov documents, if applicable

    • Copy of e-mail to Specialist that authorizes them to send the closing agreement, sanction payment and applicable forms and documents to Kansas City

  5. After receiving managerial approval, the specialist sends the following to Kansas City at the address on the 3210 via next day mail:

    • Form 3210 Document Transmittal

    • A copy of the signed closing agreement

    • The check or pay.gov documents

    • Form 3244 Payment Posting Voucher

    • Form 5734 Non-Master File Assessment Voucher

    • Memorandum

    Note:

    Follow IRM 10.2.13.4.4.1, Shipping Personally Identifiable Information (PII) procedures when mailing the package.

  6. The Specialist should wait for the 3210 acknowledgment and upload that document to RCCMS showing receipt of sanction payment.

Links to the VC SharePoint site

Internet links to the VC SharePoint site for documents, forms and other helpful information:
(1) Summary Listing of Published VC Letters
(2) Failure and correction codes for Voluntary Closing Agreements
(3) Sample Closing Agreement letters for non-457(b) plans
(4) RCCMS VC Codes
(5) Sample: Form 3244-A, Form 5734, Memorandum and Sample Form 3210 used to process closing agreement sanction payments
(6) VC Refund Form mentioned in IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees
(7) Sample Form 3210, Document Transmittal mentioned in IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees