Frequently asked questions on pension plans in the U.S. Virgin Islands.
Can the IRS audit U.S. Virgin Island retirement plans?
Yes, the IRS can audit U.S. Virgin Island retirement plans.
Which Internal Revenue Code sections apply to U.S. Virgin Island retirement plans?
Income from the U.S. Virgin Islands is subject to taxation under a "mirror" income tax system. The Internal Revenue Codes’ procedural rules, regulations and other interpretations of the U.S. Virgin Island’s Code are also mirrored in the U.S. Virgin Islands.
Under the mirror system, the U.S. Virgin Islands adopts the U.S. Internal Revenue Code as if it were the territory’s code, except that the name of the territory is substituted for the United States, and vice versa. Thus, the income tax requirements for retirement plans under the two Codes are the same. Rules pertaining to estate, gift and excise taxes are not mirrored.
What is the tax effect if Virgin Islands plans fail any qualification requirements?
U.S. Virgin Islands plans may use the EPCRS program to correct any plan failure covered under that program. These plans may self-correct if the provisions of Revenue Procedure 2013-12 are satisfied or may enter into the IRS Voluntary Correction Program. The Director of the Virgin Islands Bureau of Internal Revenue must sign all Virgin Islands closing agreements. The Bureau collects and retains the closing agreement sanction amount.