Employee Plans Voluntary Closing Agreements


Retirement plan sponsors can submit voluntary closing agreement (VCAP) requests to the IRS Employee Plans (EP) Voluntary Compliance function. These requests are for issues that can't be addressed under the Employee Plans Compliance Resolution System (EPCRS).

We have established a uniform system for handling VCAP requests in EP Voluntary Compliance:

  • Submit all voluntary closing agreement requests to EP Voluntary Compliance using the procedures below. All requests must be faxed to the IRS.
  • Don’t submit voluntary closing agreement requests to the EP Examinations or Determinations functions.

When is an EP voluntary closing agreement request appropriate?

Plan sponsors may request a closing agreement to resolve certain income or excise tax issues involving tax-deferred retirement plans established under Internal Revenue Code (IRC) Sections 401(a), 403(a), 403(b), 408(k) or 408(p) that can’t be corrected through EPCRS. The IRS will decide whether entering into a closing agreement is appropriate.

Don't use in these situations

Employee Plans will not consider a request for a voluntary closing agreement in the following situations:

1.  Under examination or investigation - The plan, plan sponsor or entity responsible for signing the closing agreement:

  • is under any IRS examination or investigation at the time the request is submitted, or
  • has any matters in Appeals or before the Tax Court.

    If, after the entity submits their request, the IRS later examines them, the entity must inform EP Voluntary Compliance. Depending on the situation, this may prevent the IRS from processing the request for a closing agreement.

2.  Issues that can be resolved under the Voluntary Correction Program (VCP) -- If the issue is eligible for resolution under VCP, then it should be resolved using Revenue Procedure 2021-30. The VCAP is not intended to be an alternative to VCP. If a submission has issues that are eligible for VCP and issues that are not eligible for VCP, we may conclude that a closing agreement is necessary. However, the IRS will consider the provisions of Revenue Procedure 2021-30 to determine the appropriate resolution for the issues that were eligible for VCP.

3.  457(b) plans - Plan failures related to IRC Section 457(b) should be resolved using Revenue Procedure 2021-30, Section 4.09. Complete and submit Form 8950, Application for Voluntary Correction Program (VCP) PDF electronically using the Pay.gov website. Include a cover letter that describes the problem, proposed solution, and any feedback as to what sanction amount should be charged with your submission documents. Follow these Form 8950 instructions. No upfront user fee is applicable.  See 457(b) Plan Submissions.

4.  457(f) plans - IRC Section 457(f) plans aren’t eligible for VCAP.

5.  Abusive tax avoidance transactions - If the plan, plan sponsor or any other party to the closing agreement was or may have been a party to an abusive tax avoidance transaction, the IRS may determine that it is inappropriate to enter into a closing agreement.

6.  Willful tax evasion - A voluntary closing agreement is generally not appropriate when there has been a willful or intentional plan to evade paying or reporting taxes.

Guidelines for submitting EP voluntary closing agreement requests

  1. In most cases, the IRS won’t bargain or negotiate over any income or excise tax amounts, including interest, but may discuss penalty abatement.
  2. 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.
  3. All actions identified in the closing agreement must be completed by the date the taxpayer signs the closing agreement.
  4. A closing agreement request does not prevent any IRS examination of the plan or plan sponsor. If the plan or plan sponsor is examined after submitting a voluntary closing agreement request, EP Voluntary Compliance will consult with the examination function to see if the issue under consideration should be excluded from the examination while EP Voluntary Compliance considers the closing agreement request. For anonymous VCAP requests made before January 1, 2022, if the plan or plan sponsor is audited after they submit their VCAP request but before they have disclosed their identity to the IRS, then EP Voluntary Compliance can't consider their request. Instead, the issues in the closing agreement request will have to be resolved as part of the IRS examination.
  5. Don’t request a VCAP submission for a future event that may impact the tax-favored status of a retirement plan or to seek guidance on issues or actions that may impact retirement plans.
  6. If the IRS determines that there was a willful or intentional plan to evade paying or reporting taxes, EP reserves the right to convert the VCAP submission into an examination referral.

What should a plan sponsor show in an EP closing agreement request?

The IRS is more likely to agree to a VCAP if taxpayers can show:

  • they’re willing to furnish necessary facts and documentation to establish their tax liabilities,
  • the VCAP is in the best interest of both the IRS and the taxpayer,
  • the federal government won’t be disadvantaged by entering into the closing agreement, and
  • any IRC violation or tax deficiency was unintentional.

Who can request a VCAP?

The individual submitting the request must be:

  • an authorized employee of the plan or plan sponsor, or
  • a legally authorized representative of the affected taxpayer who is eligible to sign Form 2848, Power of Attorney and Declaration of Representative
  • When completing Form 2848, Line 3 Matters, enter the following: “Employee Plans Voluntary Closing Agreement request per Rev. Proc. 2022-4 (and its annual successors)” in the 1st column. In the column for “Forms” and “Years” enter “Not applicable” or “N/A” as VCAP requests are not examinations or compliance checks and there is no application form at the present time.

How to request a VCAP

1. Written request for agreement

Submit a detailed letter that includes:

  • Identifying information:
    • Applicant name and address
    • Applicant’s EIN
    • Name of plan and three-digit plan number, if applicable
    • 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.
    • Six-digit North American Industry Classification (NAICS) code
  • an explanation of the problem, how and why it occurred, number of people affected, and contribution/distribution amounts,
  • an explanation of how you will correct the identified problem or issue,
  • an explanation of how you calculated the tax, interest, and penalties,
  • calculations of any tax or correction method included in your request, and
  • a proposed sanction and an explanation of the proposed amount. Sanctions are not due up front and will be determined later.

2. Anonymous requests (not permitted after December 31, 2021)

The IRS no longer permits voluntary closing agreement requests to be submitted anonymously.
If a VCAP request is submitted anonymously, it will not be processed until all identifying information is provided to the IRS.

3. Pre-submission conference 

Beginning January 1, 2022, representatives can submit a written request for an anonymous pre-submission conference to discuss a likely VCAP request. Include the following items when making the request:

  • The information listed above under “Written request for agreement”. Don’t include the identifying information items.
  • The name and full business address of the representative.
  • The EIN of the representative’s business or firm (not the EIN of the employer)
  • A unique identifying number that’s assigned by the person who makes the pre-submission request.
  • A three digit “fake plan number”. Use “401” for your 1st pre-submission conference request. For subsequent requests, use the next number following 401(for example 402, 403, 404, etc..); and  
  • 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. Sections 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."
  • We’ll schedule a video or telephone conference call to discuss the request. The purpose of the meeting is to provide feedback on the request. The discussion will not cover the sanction amount the IRS might impose as part of a successful closing agreement.  The conference is not binding on the IRS, and it won’t provide any reliance. Don’t request a pre-submission conference if the representative’s client or plan is under audit.

We’ll schedule a telephone conference call to discuss the request. The purpose of the meeting is to provide feedback on the request. The discussion will not cover the sanction amount the IRS might impose as part of a successful closing agreement.  The conference is not binding on the IRS, and it won’t provide any reliance. Don’t request a pre-submission conference if the representative’s client or plan is under audit.

4. Submitting documents

The IRS no longer accepts VCAP requests by mail. Submit your VCAP or VCAP pre-submission conference request and all attachments by fax to 855-240-1585.

5. Questions?

Call Paul Hogan at 206-946-3472 or Stephanie Bennett at 818-440-0245 with questions about submitting an Employee Plans voluntary closing agreement request.

Additional resources