7.2.4 Employee Plans Voluntary Closing Agreement Requests

Manual Transmittal

October 12, 2021

Purpose

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

Material Changes

(1) Revised throughout to reflect that effective January 1, 2022, requests for closing agreements may not be submitted on an anonymous basis.

(2) Revised IRM 7.2.4.1.2 to reference section 4 of Rev. Proc. 2021-4 regarding EP R&A authority to enter into closing agreements.

(3) Revised IRM 7.2.4.1.3 (1) to provide that the VC Manager oversees the processing of voluntary requests for closing agreements and pre-submission conferences.

(4) Revised IRM 7.2.4.3 (1) to provide that generally VC will consider closing agreement requests and beginning on January 1, 2022 requests for pre-submission conferences for failures or problems that are not eligible for resolution under EPCRS.

(5) Revised IRM 7.2.4.3 (4) to provide that VC will consider closing agreement requests made anonymously, if received before January 1, 2022.

(6) Revised IRM 7.2.4.3.1 (3) to reflect that effective July 20, 2021, closing agreement requests should be submitted via facsimile (instead of on paper to the El Monte, California address).

(7) Revised IRM 7.2.4.3.4 to reflect assignment of VCAP requests and processing of VCAP inventory.

(8) Revised IRM 7.2.4.4 to reflect updates to processing 457(b) submissions.

(9) Revised IRM 7.2.4.5 to reflect that, except in limited cases where approval is provided for accepting a paper check, sanction payments must be paid through the Pay.gov website (instead of by certified or cashier’s check) and to reflect changes to documents that are sent to Kansas City for sanction processing.

(10) Added IRM 7.2.4.6 to provide procedures for converting a VCAP request to a VCP submission.

(11) This IRM is updated for plain language, to make editorial changes, and to reflect current versions of annual revenue procedures and case processing IRM procedures.

Effect on Other Documents

This supersedes IRM 7.2.4 dated November 23, 2020 and incorporates the applicable provisions of Interim Guidance on Letter Consolidation, TEGE-04-0221-0003.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(10-12-2021)

Eric D. Slack
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.

Acronyms, Terms and Definitions

  1. This table lists commonly used terms and provides their definitions.

    Term or Acronym Definition
    ACH Automated Clearing House
    Code Internal Revenue Code of 1986, as amended
    EP The Employee Plans Division
    EPCRS Employee Plans Compliance Resolution System
    IDRS Integrated Data Retrieval System
    POA Power of Attorney. For purposes of this IRM, an individual designated on a signed and completed Form 2848 authorized to represent the plan sponsor or taxpayer before the IRS.
    R&A Employee Plans’ Rulings and Agreements
    R&A Director EP R&A Director or Delagatee
    RCCMS Reporting Compliance Case Management System
    Specialist Any Internal Revenue Agent or Tax Law Specialist in EP that processes VCP submissions or VCAP requests.
    TE/GE Tax Exempt and Government Entities
    VC Employee Plans’ Voluntary Compliance Function
    VCAP Voluntary Closing Agreement Procedures
    VCAP Pre-Submission Conference Request Voluntary Closing Agreement Procedures Requests for telephone conferences to discuss a potential submission (can be done anonymously). These conference requests are not considered VCAP requests.
    VCP Employee Plans’ Voluntary Correction Program

Authority

  1. The IRS Commissioner may enter into and approve a written closing agreement with any person for his/her liability with respect to any internal revenue tax for any taxable period ending before or after the date of such agreement. (IRC 7121 and the regulations thereunder).

  2. Treasury Regulation Section 301.7121-1(a) permits the IRS to enter into a closing agreement in any case in which there appears to be an advantage to permanently and conclusively closing the case, or if the taxpayer shows good and sufficient reasons for a closing agreement, and the Commissioner determines that the United States will not sustain any disadvantage through consummation of an agreement.

  3. The Commissioner delegates to the Commissioner, Tax Exempt and Government Entities Division (TE/GE) in cases under his or her jurisdiction the authority to enter into and approve a written agreement with any person for internal revenue tax liability of such person, or the person or estates for whom he or she acts as authorized by IRM 1.2.2.9.3 and Delegation Order 8-3. (DO 8-3).

  4. Delegation Order 8-3 (DO 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 and the Director, EP Rulings and Agreements (R&A).

  5. R&A considers voluntary closing agreement requests to resolve certain income and excise tax issues that are ineligible for resolution under EPCRS. (Rev. Proc. 2021-4, Section 4).

  6. Voluntary closing agreement requests are resolved by issuing a Director’s closing agreement authorized by IRM 1.2.2.9.3, DO 8-3 signed by the appropriate party (for example, the plan sponsor, plan administrator or plan trustee) and IRS representative, as authorized under the Delegation Order.

  7. For approved closing agreement requests processed under this IRM 7.2.4, the R&A Director will sign the closing agreement.

Roles and Responsibilities

  1. The VC Manager oversees the processing of voluntary requests for closing agreements and requests for pre-submission conferences, assigns them to specialists and collaborates with VC program coordinators to monitor the overall progress on assigned requests.

  2. VC program coordinators review and process assigned closing agreement requests and requests for pre-submission conferences and collaborate with specialists assigned closing agreement requests, requests for pre-submission conferences and VCP submissions that are resolved with a closing agreement.

Employee Plans Voluntary Closing Agreement Requests Overview

  1. These procedures apply to closing agreement requests submitted to:

    1. VC under the EP VCAP.

    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. 2021-30, Section 4.09).

    4. VC as a result of an EPCRS VCP submission converted to a closing agreement request because the VCP submission includes failures and/or other issues ineligible to be corrected under EPCRS, as authorized under Rev. Proc. 2021-4, Section 4.

      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. In such instances, the specialist should request a new Form 2848 if the description of “Matters” in Line 3 would not address resolving the issues under VCAP.

  2. VC has discretion to determine whether to accept or reject any closing agreement request or pre-submission conference request. VC has discretion to determine whether to resolve the issues disclosed in the request.

Guidelines for Voluntary Requests for EP Closing Agreements and VCAP Pre-Submission Conference Requests

  1. Generally, VC will consider closing agreement requests and, beginning on January 1, 2022, requests for pre-submission conferences, 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 are resolvable under EPCRS.

  2. Requests from a plan sponsor or entity or requests involving a plan that is under any type of IRS exam at the time they send the closing agreement request to the IRS should be rejected.

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

  4. VC receives requests submitted:

    1. Anonymously, if made before January 1, 2022, 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.

    4. Anonymously, by a representative of the taxpayer, for a pre-submission conference request made on and after January 1, 2022.

  5. Generally, for closing agreement and pre-submission conference 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.

      Exception:

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

    2. Minimum funding deficiencies or correction of prohibited transactions. Taxpayers shouldn’t ask for the following actions in closing agreement and pre-submission conference requests:

    • 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 I 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. Generally, all corrective actions described in the closing agreement must be completed before the agreement is executed. The Manager of VC must approve any request to allow correction to be completed after the closing agreement is executed.

  7. Closing agreements issued under this IRM:

    1. Provide administrative convenience allowing taxpayers to address tax consequences other than plan disqualification (such as 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 or pre-submission conference 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 they were originally made by a disclosed plan and plan sponsor.

  9. For anonymous closing agreement requests submitted before January 1, 2022 and pre-submission conference requests received on and after January 1, 2022, if the plan or plan sponsor is under examination after they 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. Instead, the issues in the closing agreement request or pre-submission conference request will have to be resolved as part of the IRS examination.

  10. VC coordinates with the R&A Director to evaluate VCAP requests. Where appropriate, VC coordinates with the EP Exam Director, TEGE Division Counsel or EEE (Employee Benefits, Exempt Organizations and Employment Taxes) Associate Chief Counsel.

  11. Except as noted below, for VCP submissions that are converted into a VCAP, the full sanction amount should be paid without any offset of any VC user fee previously collected. VCP user fees should be refunded to the applicant. (IRM 7.2.4.5(7)).

    Exception:

    Do not refund VCP user fees for VCP submissions that are converted into a VCAP due to the situations described in IRM 7.2.2.10(2)(b), (c) and (f).

Information Required in Voluntary Closing Agreement Requests and VCAP Pre-Submission Conference Requests

  1. The plan, plan sponsor, (or entity making the request), or the "eligible party" , (collectively referred to as the applicant), should include the following items in a VCAP request. (See IRM 7.2.4.3.1(2) for anonymous VCAP requests submitted on or before December 31, 2021).

    A Employee Identification Number (EIN).
    B Name and address of the party expected to sign the closing agreement.
    C Name of Retirement Plan, if applicable.
    D Three digit plan number, if applicable.
    E Name of plan sponsor, if applicable.
    F Name of retirement plan, if known.
    G Six-digit North American Industry Classification (NAICS) code

    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 for making the request.

    H Explanation of the issue(s) in detail, including how and why it occurred, the number of people impacted, the plans or IRAs affected and the period of time the issue occurred.
    I Explanation of a proposed solution of the issue(s) and why the proposed solution is the best course of action.
    J Explanation of the method used to compute and computation of the tax, interest or penalties, if applicable.
    K Proposed sanction amount and an explanation of why it’s appropriate.
    L Number of plan participants and the total amount of plan assets. If not readily available or for a request covering multiple plans, provide estimates if possible.
    M Exhibits and/or spreadsheet with additional details.
    N Statement as to whether the plan sponsor, plan, or entity making the request is under any IRS exam.
    O Statement to certify the plan sponsor, plan, or entity making the request, has not been involved with an abusive tax avoidance transaction.
    P Signed penalty of perjury statement that the submitted information is accurate and complete to the best of their knowledge.
    Q Form 2848, Power of Attorney and Declaration of Representative, if a representative has been appointed.
  2. For anonymous submissions submitted before January 1, 2022 and anonymous pre-submission conference requests made on and after January 1, 2022, the representative making the request should include items H-N, above, and the following:

    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. The EIN of the representative’s employer.

    3. 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. § § 601.501-601.509. 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 made on or after July 20, 2021 should be faxed to (855) 240-1585, for VCAP requests made before July 20, 2021, requests were mailed 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 notify the VC Manager that they received a VCAP request and fax the request to (855) 240-1585.

Procedure for Receipt of VCAP Requests and VCAP Pre-Submission Conference Requests

  1. The VC Manager assigns an employee to convert paper VCAP requests into electronic records and establish those requests, and any faxed VCAP requests or VCAP pre-submission conference requests, as a Compliance Activity on the Reporting Compliance Case Management System (RCCMS).

  2. When a VCAP request or pre-submission conference request is sent to the VCAP fax number or a paper request is mailed on or before December 31, 2021 (either from a plan sponsor, POA or other business unit), the assigned employee:

    1. 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 a newly established RCCMS Activity.

    2. Completes the identifying information and all required fields in the General (1 of 2) and Codes/Checksheets tab for establishing cases in RCCMS:

      1. TIN (i.e., EIN) or SSN, but only for instances where closing agreement covers an individual.

      2. Name.

      3. Type as the appropriate type of case "Voluntary request for Closing Agreement," "Voluntary Closing Agr-Gp Submission," "Closing Agreement Pre-Submission Conference," for pre-submission conference requests received on and after January 1, 2022, or for anonymous requests made before January 1, 2022,"Voluntary Closing Agr-Anonymous."

      4. Work unit.

      5. Plan type.

      6. Plan number.

      7. Return received, as the postmark date of the request.

      8. Statute, as two years from the date entered in the "Return Received" field.

      9. Name control.

      10. Project code as the code that applies to the plan type submitted to VCAP.

      11. Status code.

      12. Activity grade.

      13. NAICS Code (use "111100--Oilseed and Grain Farming" for cases involving an individual who has never maintained a trade or business.

    3. For paper submissions, scans all paper documents received in the VCAP request into an Adobe Portable Document Format (PDF) file.

    4. Posts the PDF file to the Office Documents folder in RCCMS, after the request to establish the RCCMS case is approved.

    5. For a VCAP requests, conducts or requests IDRS search to see if the applicant and/or plan is under audit.

      • Use AMDIS, EMFOLT, INOLE 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.

    6. For VCAP Requests, sends a letter to the applicant (or the representative, if filed anonymously before January 1, 2022) notifying them of receipt of the request and the assigned Work Unit number.

    7. Requests establishment of new VCAP request on RCCMS. Once the case is established on RCCMS, request a transfer of the case to Group 7550 so the VC Manager can assign the request to a specialist.

       

Processing Closing Agreement Requests under the VCAP

  1. The VC Manager designates a program coordinator to follow the steps below for the VCAP request:

    Action Steps
    Email the other program coordinators and the VC Manager to have a preliminary discussion of any requests, after the case has been developed by the specialist working the request and the program coordinator has a summary of the request.
    • Circulate summaries of requests (using template) for discussion.

    • Schedule a teleconference for the group to discuss requests and make a determination whether the request is ready to be presented to the R&A Director or needs to be developed further.

    Schedule a teleconference with:
    • VC Manager.

    • R&A Director.

    • Other program coordinators.

    Include closing agreement summary template for each request, any other helpful documents and proposed sanction (if provided).
    Participate in a discussion.
    • The program coordinator assigned the case (or assisting the 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. The VC Manager, group manager or program coordinator may consult a local IRS Field Actuary, and EP Exam, including area managers 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 assigns VCAP requests to VC groups. Group managers, unless noted otherwise, should follow the same procedures that are in IRM 7.2.2.5 when assigning VCAP requests to specialists. The specialist works with the program coordinator and group 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 develop and keep 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, a summary of the case has been circulated, the case has been discussed internally by the program coordinators and VC Manager, and the group agrees that the request should be denied, the specialist should follow the process outlined in IRM 7.2.4.4(9) using the appropriate letters for VCAP cases posted on SharePoint.

  8. After the case has been fully developed, a summary of the case has been circulated, 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 applicable to your case.

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

      1. Ask a program coordinator if there is a relevant sample closing agreement, in instances where the samples posted on SharePoint do not cover the issues in your case.

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

      3. If the program coordinator requests revisions, discuss any questions about those changes.

      4. Revise the agreement according to 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, email an updated version to the specialist.

    Note:

    For cases assigned to a program coordinator, the program coordinator will email 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 R&A Director 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. Discuss any requested changes with the program coordinator.

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

      3. Discuss if the applicant has requested additional time to complete corrective actions.

  9. Program coordinator: email the closing agreement draft, including attachments, to the R&A Director or delegatee for review.

  10. If the R&A Director or delegatee 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.

  11. For anonymous requests submitted before January 1, 2022:

    1. Send the representative the revised agreement along with a letter requesting the identifying information, noted in the table below. Use the sample cover letter located on the VC SharePoint website for closing agreement requests that includes instructions for the applicant to make the sanction payment through Pay.gov.

      Note:

      We anticipate replacing the sample letter posted on SharePoint with an official IRS letter by retitling Letter 5359 and revising it so it’s designed for all requests for closing agreements.

      A Employer Identification Number (EIN).
      B Name and address of the entity who will sign the closing agreement.
      C Name of retirement plan, if applicable.
      D Three-digit plan number, if applicable.
      E Type of retirement plan, if not previously provided.
      F Six-digit North American Industry Classification System (NAICS) code

      Note:

      Should be the NAICS code on the filed Form 5500 series return for the retirement plan. For other entities the filer should choose the appropriate code from the Form 5500 Instructions.

      G Statement as to whether the plan sponsor, plan, or entity making the request, is under any IRS exam.
      H Statement to certify neither the plan, the plan sponsor, or entity making the request, has not been involved with an abusive tax avoidance transaction.
      I If not previously provided, the number of plan participants and the total amount of plan assets. If not readily available, or for a request covering multiple plans, provide estimates if possible.
      J Plan documents, corrective amendments, exhibits and/or spreadsheets that are not redacted.
      K Any other identifying information needed to properly draft a closing agreement.
      L 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.
      M A signed and fully completed Form 2848, Power of Attorney and Declaration of Representative.

    2. Once you receive the identifying information take the following actions:

    • Check IDRS (or request an IDRS check) to see if the plan, plan sponsor, or entity making the request, 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.

  12. If the POA (or plan sponsor for cases without a representative) approves the revised draft, the specialist/program coordinator:

    1. Mail the closing agreement to the plan sponsor/applicant requesting an authorized employee of the entity 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.

    2. Request the sanction payment, if applicable, by direct debit of a bank account or for sanctions less than $25,000 via credit/ card through the Pay.gov website.

      Note:

      Generally, taxpayers must pay the sanction through the Pay.gov website. If the sanction is $25,000.00 or more, it must be paid via direct debit of a bank account on Pay.gov.

      Exception:

      Coordinate with your group manager if they cannot pay via the Pay.gov website. If your manager approves payment of the sanction via a paper check, document the approval in your CCR and request the sanction payment in the form of a Cashier’s Check or Certified Check payable to the “United States Treasury.” Follow IRM 7.2.4.3.4(13) process for paper checks.

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

  13. Review the documents you receive from the POA/taxpayer:

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

    • Verify that the Pay.gov payment is the correct amount. Specialists should contact a VC program coordinator to ask them to get a Pay.gov deposit ticket to confirm receipt of the payment.

      Note:

      Program Coordinators will wait 7 to 10 days from the payment date to take action in order to ensure that the sanction payment was successfully received and posted.

    • For Pay.gov payments, review deposit ticket information:

      1. Verify that "Transaction Amount" is the amount of the sanction.

      2. For ACH payments, make sure the payment was processed, by verifying that "Collection Status" is "Settled." If it shows "Retired" or anything else the payment could not be processed. Look to the Pay.gov "Transaction Detail " report for additional information. A new payment will need to be requested.

      3. For credit/debit card payments, make sure the payment was processed by verifying that the Collection Status is "Successful."

      4. Request a new or additional payment for any payment that was not the correct amount or was unsuccessfully processed.

    • If the sanction is paid via a paper check: (Generally paper checks are not allowed. However, EPCRS does allow the taxpayer to request an exception if they don’t have a computer or other hardship and can’t access pay.gov to make a payment. We don’t expect this to be common.)

      1. Verify that the sanction check payment is the correct amount.

      2. Verify that the check is: (i) certified check or cashier’s check and (ii) made payable to U.S. Treasury or United States Treasury.

      3. Scan a copy of the sanction check and keep the original check in a secure location in accordance with the guidelines in IRM 5.1.2.2.1.

    • Record sanction payment information in the POA/Misc. tab of RCCMS.

    • Review documents that show completion of correction to verify that corrective actions are complete.

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

    Email signed closing agreement (include supporting documents) to the R&A Director for signature. Email R&A Director to request signature on closing agreement, attach:
    • A scanned version of the taxpayer signed closing agreement.

    • Deposit receipt for sanction paid via Pay.gov (if payment was secured via a paper check, include a scanned version of the paper check).

    • Correspondence verifying that the agreement was reviewed by the R&A Director.

    Note:

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

     

  14. Specialist: When you receive the closing agreement signed by the R&A Director, prepare the forms for the sanction payment package by following the instructions in IRM 7.2.4.5 Processing Closing Agreement Sanction Payments, and process timely per IRM 5.1.2.3.

    Note:

    If the sanction was paid via paper check, the sanction payment package must be mailed to Kansas City using UPS/Fed Ex overnight service.

  15. Once Kansas City receives and processes the sanction payment (as indicated by your receipt of their signed acknowledgment copy of Form 3210) close the VCAP request:

    Action Steps
    Prepare taxpayer closing letter and POA letters (keep copy for case file). Get sample letters from a program coordinator or on the VC SharePoint.
    Prepare case file for closure.
    • Record failure and correction codes in RCCMS.

    Specialists: contact the program coordinator to discuss specific failure and correction codes to record in RCCMS.
    • Upload the signed closing agreement into RCCMS.

    • Generally follow the procedures in IRM 7.2.2.23, except if a separate letter is needed, use the closing letters for VCAP requests.

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

  16. Group manager/designated employee: issue closing letters, signed closing agreements and 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. 2021-30, Section 4.09, allows plan sponsors to voluntarily submit a closing agreement request (with identity disclosed or, if submitted before January 1, 2022, anonymously by following the procedures in Rev. Proc. 2019-19) 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 applies standards similar to those under EPCRS to these submissions.

  3. Plan Sponsors/POAs should file submissions electronically via Pay.gov by completing the online Form 8950application and include:

    1. Description of the failure and proposed method of correction. Filers may find Form 14568Model VCP Compliance Statement helpful to understand 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.

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

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

      Note:

      Plan sponsors shouldn’t submit a user fee because there is no fee required at the time of filing.

    4. Proposed sanction amount and an explanation supporting why it’s appropriate.

  4. While the submission may include the Form 14568 series, those documents are not model agreements for 457(b) submissions and we don’t issue them to resolve the failures disclosed in the submission.

  5. During the screening process, identify these submissions and make notes in screening that will help the VC specialist and remind the VC specialist to coordinate with a program coordinator on the case.

  6. The VC Manager and program coordinators may consult EP and TEGE Division Counsel to discuss a 457(b) submission.

  7. 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.

  8. If VC declines to process the 457(b) case, the program coordinator/specialist should:

    Action Steps
    Document reasons why VC won’t process this request. Prepare workpaper that explains why VC won’t process the closing agreement request.
    Inform the plan sponsor/POA.
    • Call the plan sponsor/POA and inform them that the IRS has declined to process the closing agreement request.

    • Document this call in the Form 5464, Case Chronology Record, (CCR) or the integrated CCR in RCCMS.


    .
    Prepare VC closing letters.
    • Complete Letter 5360 VC Closing Letter Decline to Process 457(b).

    • For cases with a representative under Form 2848, Power of Attorney and Declaration of Representative under or Form 8821, Tax Information Authorization, prepare Letter 937-A, Transmittal of Information to Power of Attorney.

    Complete Case Closure in RCCMS.
    • Use Disposal Code 777-Declined.

    • Use appropriate Principal Issue Code from the 153 series.

    • Complete all required closing fields in the closing record.

    • Request case closure within RCCMS.



     

  9. 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). Specialists should still work with a program coordinator on the submission.

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

    Action Steps
    Contact the plan sponsor/POA. Verify that they’re aware of the self-correction option in IRC 457(b) and 26 CFR 1.457-9, but still want to proceed with the submission.
    Document actions and describe the plan sponsor/POA response. 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.
    • Use RCCMS Disposal Code 778-Withdrawn.

    • Prepare Letter 5361, VC No Action Closing Letter-457(b) Governmental Plan using SCP.

    Action Steps
    Contact the plan sponsor/POA.
    Step: Verify that 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.

  11. For processing procedures for 457(b) cases, see IRM 7.2.4.3.3 (5) through IRM 7.2.4.3.3 (16).

    Exception:

    Use the most current version of the sample letter posted on SharePoint to request the signed agreement, sanction payment, if applicable, and evidence of correction.

    Note:

    We anticipate replacing the sample letter posted on SharePoint with an official IRS letter by retitling Letter 5359 and revising it so it’s designed for all requests for closing agreements.

    Exception:

    Use Letter 5362, Approved Case-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 using the most current version of the document posted on SharePoint, to send to Kansas City:

    Action Steps
    Prepare Form 3244 Payment 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 you will send 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 you will send to Kansas City.

    • Line 12- Total. Enter the same number 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 you complete the form.

    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.

    • Plan Name: Enter name of plan covered by the closing agreement, if applicable.

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

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

      Note:

      If the sanction is paid via a paper check, contact a program coordinator and request the Form 3210 that is designed for payments made via a paper check.

    • Release Date: Enter date emailed to Kansas City.

    • Remarks. Enter Voluntary Closing Agreement- monetary sanction deposited through Kansas City Submission Processing Center, ALC #09.

    • 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.

      • "Type of Payment" : Input whether sanction was paid via credit card or ACH.

      • "Deposit Ticket or Voucher #" enter information from Pay.gov reports.

      • "Tracking ID" enter the Pay.gov tracking number.

      • "Amount" : Add amount of sanction.

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

      • "Pay.gov Credit Card or ACH Transaction Detail."

      • "Pay.gov Credit Card or ACH Transaction Search Results."

      • For Credit Card Payments "Voucher Summary for [INSERT DATE.]"

    • 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. Email the attachments below to group manager for approval:

    1. Copy of signed closing agreement.

    2. Pay.gov deposit receipt (if payment was made via a paper check, include the sanction check(s)).

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

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

    1. Confirm closing agreement was properly signed.

    2. Confirm sanction payment matches amount in closing agreement by checking "Transaction Amount" in Pay.gov reports (for paper checks, review amount on check, confirm that it is a cashier’s check or certified check and made payable to the “United States Treasury” or “U.S. Treasury”).

    3. Confirm payment of sanction was received and processed by checking "Collection Status" is "Settled" for ACH payments and "Successful" for credit/debit card payments.

    4. Review Forms and Memorandum.

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

  4. The group manager (or VC Manager) keeps copies of the following:

    1. Signed closing agreement.

    2. Pay.gov documents (or copy of sanction check, if applicable).

    3. Copy of email 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 the designated contact in Kansas City (as shown on SharePoint) via email (if the sanction is paid via paper check, the items must be mailed via next day mail to Kansas City at the address on the Form 3210). Follow IRM 10.2.13.4.4.1, Shipping Personally Identifiable Information (PII) procedures when mailing the sanction package.

    1. Form 3210 Document Transmittal.

    2. A copy of the signed closing agreement.

    3. The Pay.gov documents.

    4. Form 3244 Payment Posting Voucher.

    5. Form 5734 Non-Master File Assessment Voucher.

    6. Memorandum.

  6. For VCP submissions that were converted to VCAP (other than a conversion described in IRM 7.2.2.10(2)(b), (c) and (f)), follow the procedures in IRM 7.2.2.10.2 to refund the User Fee once the sanction payment has cleared and the Kansas City Campus has confirmed receipt of applicable processing documents.

Converting a VCAP Request into a VCP Submission

  1. After doing a technical review of a VCAP request and discussing the request with your manager, you might determine that the request can be resolved under VCP.

  2. This may occur if the filing is made as a VCAP request, but the issues disclosed can be resolved under VCP.

  3. Discuss the matter with a program coordinator and secure approval for converting the request to a VCP submission before taking any action.

    Note:

    The program coordinator should discuss the case with the Manager of VC and other program coordinators to determine whether it’s appropriate to treat the disclosed issues under VCP. Once a determination is made, the program coordinator will notify the specialist and group manager of the decision.

  4. Document the necessary approvals by posting any correspondence related to converting the VCAP request to a VCP submission. The conversion should be noted in your workpapers and CCR.

  5. Discuss with the applicant and representative that the issues disclosed in the VCAP request can be addressed under VCP and get their approval to convert the case and address the issues under VCP.

  6. Update WebETS by changing the activity code to "113 Voluntary Correction Program." The project code should stay the same.

  7. Update the RCCMS activity by changing the "Type" in the General 1 of 2 tab to "VCAP Cases Changed to VCP" and the "Activity code" to "113 Voluntary Compliance Program."

  8. Request the following from the applicant:

    1. Form 14568 series, VC model compliance statement, (as applicable).

    2. payment of the VCP user fee from the applicant by following the procedures in IRM 7.2.2.10.1.

    3. a completed copy of the SharePoint version of the Form 8950 , that you send the applicant.

      Note:

      You will need to provide the SharePoint version of the Form 8950 to the applicant (see the link in item 7 of Exhibit 7.2.4-1, below) because we do not want the applicant to complete the form online using Pay.gov which will result in a duplicate case in RCCMS.

    4. Form 2848 if needed to meet the requirements in IRM 7.2.2.12(9).

  9. Process the case in accordance with IRM 7.2.2.

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) Fillable Form 8950 for VCAP requests converted to a VCP Submission