International Retirement Plan Audit Efforts


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International issues are an IRS-wide priority as is improving large corporations’ and high-wealth individuals’ compliance with tax law. We continue to work closely with the IRS's Large Business and International Division (LB&I) to address international issues involving retirement plans, to improve examination coverage and to develop voluntary compliance programs in the U.S. territories. Retirement plans range from those of multi-national corporations to IRAs maintained by retirees overseas, and everything in-between. The impact of non-compliance left unchecked can be costly to plan sponsors and individuals, whether in the U.S. or oversees.

What’s the status of your Puerto Rico efforts?

Our Hacienda Project with Puerto Rico continues to be a success. We provided an extensive training program for the Hacienda Project and audited about 50 dual jurisdiction plans with Puerto Rico. We are working with the Hacienda to establish a voluntary compliance program for retirement plans. We’re also establishing an information reporting system and referral process for them to use. In the near future, we’ll have Hacienda-related information on /retirement.

Is Employee Plans expanding international efforts to other locations?

We completed a Memorandum of Understanding to conduct audits with Virgin Islands, started these audits, and will continue to help them with training and voluntary compliance efforts. We may develop memorandums for other locations as well.

The Employee Plans Compliance Unit (EPCU) has launched two international project compliance checks. What are these projects?

The first project involves domestic trusts. It’s our goal to determine the total number of existing domestic trusts maintained by foreign entities, verify compliance and check whether they can be identified by their EIN (usually beginning with the number 98).

The second project involves foreign distributions from retirement plans. EPCU is contacting a random sample of individuals with an address outside the U.S. or in a U.S. territory, who received a distribution from a retirement plan or IRA and who may not have reported the distribution or paid the 10% early distribution tax under Code §72(t). We asked these individuals to provide information so we could determine whether they properly included the distribution, as reported on the Form1099-R issued to them, on their tax return and paid the correct tax due, if any.

We’ll post summary reports on both projects on the EPCU Web page when they’re completed.

Do agents receive special training before working these examinations or compliance checks?

We developed a two-year international training plan and are focusing on new training needs so agents can identify complex international transactions, and recognize significant risk target areas impacting potential abuse in retirement plans.

Does the corporate approach for training and examinations work best?

Absolutely. Together, we’re working to ensure appropriate use of IRS-wide customer-tailored strategies to provide targeted guidance and outreach. We aim to strengthen our partnership with tax professionals and third parties to ensure effective international tax administration.