Top Mistakes in Voluntary Correction Program (VCP) Submissions

 

Before you (or your representative) send your VCP submission to the IRS, check to make sure it's error-free. If your submission has errors, it takes longer to review and delays the issuance of the compliance statement.

The top mistakes noticed in VCP submissions are listed below. Review the list to make sure you avoid the errors when completing your VCP submission.

Online VCP Submission Process

  • The VCP submission procedures described in Revenue Procedure 2019-19, Section 11.03 and in this IRS Video were not followed due to:
     
    • Failure to convert required VCP submission documents to PDF files.
    • Failure to combine PDF documents into a single PDF file that does not exceed 15MB.
    • Failure to properly upload the PDF file with the submission document.
    • Incorrect completion of the Pay.gov Form 8950.
    • Failure to pay the correct user fee.
       
  • Multiple submissions of the same VCP case were made on Pay.gov after the initial submission was accepted and a pay.gov receipt was issued. Taxpayers usually make multiple submissions to correct errors they identified after their submission was accepted. These errors include:
     
    • Incorrect completion of Form 8950,
    • Mistakes in the VCP submission documents that were uploaded with the PDF file, or
    • Payment of the incorrect user fee.

Don't make multiple submissions of the VCP case if you discover an issue after the case was submitted to the IRS via Pay.gov. Always contact the VCP status line at 626-927-2011 to discuss how to resolve these problems.

  • After the VCP submission is made and accepted by Pay.gov, the remitted user fee is rejected due to:
     
    • errors with the bank account/routing information, or
    • an unauthorized payment (the applicant's bank believes the payment request is not authorized).

Remit the correct VCP fee using the Pay.Gov version of Form 8951, Additional User Fee Payment for Open Application for Voluntary Correction Program (VCP).

  • The uploaded PDF wasn't complete and didn't contain all required documents. Fax any documents that can't be uploaded due to the file size limitation to the IRS at 855-203-6996.

If you experience a problem with the submission process or the fees required, please contact the VCP status line 629-927-2011.

Form 8950: Application for VCP Submission

  • The applicant failed to complete the Pay.gov version of Form 8950.
     
  • Line 1a: The name of the plan sponsor didn't match the name on the other documents and files submitted.
     
  • Lines 1b-1h: The plan sponsor's address wasn't complete or didn't match IRS records.
     
  • Line 1i: The Employer Identification Number (EIN) wasn't correct or didn't match the plan sponsor's EIN. If you don't have one, apply for an Employer ID Number.
     
    • Don't use a Social Security number
    • Don't use the EIN of the company that holds the assets of the plan.
       
  • Line 3:  The correct VCP submission type wasn't chosen. Selecting the wrong type could lead to a failure to pay the correct user fee.
     
  • Line 4c and 4d: Participant count information and plan assets totals weren't accurate. Inputting the incorrect amount of plan assets could lead to a failure to pay the correct user fee.
     
  • Line 6: Don't check the "Yes" box unless the plan is a terminating orphan plan. An incorrect response will result in a failure to pay the correct user fee.
     
  • The submitted Form 8950 wasn't signed by the correct person.
     
    • An officer of the plan sponsor didn't sign the form when the plan sponsor completed the form.
    • The signer didn't properly sign and print their name on the form.
    • The signer's title was incorrect. The signer shouldn't use terms like "plan administrator" or "trustee."

Form 2848: Power of Attorney and Declaration of Representation

  • Part I, Line 3. Act authorized was incomplete or wasn't completed properly, because:
     
    • The current EPCRS revenue procedure wasn't listed.
    • The VCP program wasn't listed or referenced.
    • The Form 8950 wasn't listed or referenced.
    • The "Years or Periods" column wasn't blank.
       
  • Part I, line 5.a. Other acts authorized was not completed or was completed incorrectly for VCP submissions that were submitted on behalf of the plan sponsor by their representative.
     
  • Part I, line 7. Signature of taxpayer was not signed or dated by the officer of the plan sponsor.
     
    • The form was missing the printed name of signer, the signer's title, or the plan sponsor's name.
       
  • Part II. Declaration of Representative was signed by the representative more than 45 days after the taxpayer signed and dated Part 1, line 7.

Form 14568: Model VCP Compliance Statement and Forms 14568-A through 14568-I

  • The applicant did not check the correct boxes or checked too many boxes.
     
  • The applicant did not include the plan name, EIN and plan number as a header on every page submitted.
     
  • The plan sponsor signed the form in the wrong place.
     
  • The applicant did not submit Form 14568 even though it was indicated they meant to do so.
     
  • The applicant modified the Form 14568 or the Forms 14568 A–I series.
     
    • The applicant deleted items on the forms that did not apply.
       
  • The applicant failed to submit every page of the forms.
     
  • The tax relief check boxes were selected on Form 14568, Section VI but were not applicable (the tax would not apply based on the failures reported in the submission).
     
  • The applicant requested special tax relief on Form 14568, Section VI but did not include justification for the request.

Required Narrative: Details of Plan Failures and the Correction Methods

  • The descriptions of failures weren't detailed enough or easy to understand.
     
  • The descriptions of operational failures didn't specify:
    • The plan sections not followed.
    • The number of participants affected by the failure.
       
  • The method used to determine the earnings to correct contributions or distributions wasn't clear.
     
  • The correction narrative refers to discontinued letter forwarding programs.
     
  • The submission didn't state a plan qualification failure under IRC Section 401(a). The IRS won't review your submission to identify the plan failure for you.
     
  • The applicant didn't include specific proposed changes to administrative procedures, or the proposed changes didn't address how they would prevent the failure from happening again.

Submissions Involving Participant Loans and IRC 72(p)

  • Copies of loan agreements and amortization schedules for affected participants were missing.
     
  • A copy of a referenced "Loan Policy" wasn't included.
     
  • In cases where the participant loan is being reamortized, it wasn't clear if the participant owed additional interest on missed payments and how it would be paid.
     
  • The reamortized loan didn't meet the requirements of the EPCRS revenue procedure or the Form 14568-E, Model VCP Compliance Statement - Schedule 5: Plan Loan Failures (Qualified Plans and 403(b) Plans)  PDF, because it exceeded the five-year period that applied to the original participant loan.
     
  • No explanation was provided as to how the deemed distribution amount reported on Form 1099-R issued in the year of correction complies with Treas. Reg. 1.72(p)-1, or no accrued interest was included in the amount of the deemed distribution.

Other Important Items Missing from VCP Submissions

  • For operational failures:
     
    • detailed computations showing how corrective amounts were determined
    • detailed computations showing how earnings were determined and how they impacted the computation of the corrective amounts
    • not including a copy of the plan section (or plan document) in effect during the failure period
    • not including additional documents and explanations discussed in IRM 7.2.2.19 for failures being corrected by plan amendment that conform the plan document to the plan's operations
       
  • For failures to timely amend for tax law changes shown on Form 14568-B Model VCP Compliance Statement - Schedule 2: Other Nonamender Failures and Failure to Adopt a 403(b) Plan Timely  PDF, a copy of the plan document in effect before the corrective plan amendments were adopted.

Late Plan Amendments (Form 14568-A, Model VCP Compliance Statement - Schedule 1: Interim Nonamender Failures and Form 14568-B, Schedule 2 - Other Nonamender Failures and Failure to Adopt a 403(b) Plan Timely)

  • The applicant did not specify the particular tax law items that were not timely reflected in the plan.
     
  • The applicant did not specify the plan section that includes the amendment not timely adopted.
     
  • The plan sponsor listed plan amendments as failures for tax law provisions that the plan was not required to adopt on Form 14568-A.
     
    • Example: A 401(k) plan should not report the failure to amend the plan to reflect law provisions that only apply to defined benefit plans.
       
  • The late amendment failure was not reported on the appropriate Form 14568-A  PDF or Form 14568-B . PDF
     
    • If interim amendments are adopted late, but before the end of the plan's remedial amendment cycle for that item, their late adoption is reported on Form 14568-A PDF
    • If interim amendments are adopted after the end of the cycle during which they are required to be adopted, the failure is reported on Form 14568-B PDF as a failure to comply with the changes required by the Cumulative List used to review plans in that cycle.