IRS Webpage: Avoid Making Incomplete VCP Submissions (Sept. 18, 2018)
Available at https://www.irs.gov/retirement-plans/avoid-making-incomplete-vcp-submissions
The IRS has created a new webpage that provides a long list of mistakes that plan sponsors are making in their submissions under the Voluntary Correction Program (VCP) portion of the Employee Plans Compliance Resolution System (EPCRS). Under VCP, a plan sponsor that identifies compliance errors can, at any time before an IRS audit begins, pay a fee and submit corrections to the IRS for approval (see our Checkpoint article). All submissions must include Forms 8950 (Application for Voluntary Correction Program (VCP)) and 8951 (User Fee for Application for Voluntary Correction Program (VCP)). Submissions can also use the optional Form 14568 series, which includes a “Model VCP Compliance Statement” and nine schedules for submitting corrections (with or without the model compliance statement) that rely on the IRS’s standardized correction methods.
The new webpage lists more than two dozen mistakes that the IRS has encountered while implementing its streamlined processes for simpler VCP submissions. These mistakes make submissions incomplete, slow down their processing, and delay the issuance of compliance statements. Many of the mistakes are simple data-entry errors. Others involve unexplained internal conflicts in the documents submitted, conflicts with IRS records, and signature errors. One portion of the webpage focuses entirely on submissions concerning participant loans. Loan-related mistakes include failures to provide necessary documents, failures to adequately explain the handling of interest due on missed payments, and proposed loan reamortization periods that are too long. In addition to errors in completing the forms, the webpage notes various problems with narrative attachments, failures to submit correct user fees, and failures to provide detailed computations showing how corrective amounts and earnings were determined.
EBIA Comment: This new webpage adds to a wealth of IRS resources and advice on VCP submissions. A gateway page links to advice, relevant guidance, forms, and other resources. Another webpage provides a list of the most common mistakes in VCP submissions (some of which are repeated on the new webpage). And yet another webpage offers a list of tips for avoiding processing delays. Plan sponsors and their advisors who want to take full advantage of the IRS’s streamlined processes and obtain VCP relief as quickly as possible should consider consulting these resources. For more information, see EBIA’s 401(k) Plans manual at Sections XXXIV (“Correcting Plan Mistakes: Identifying and Fixing Common Errors”) and XXXV.E (“Voluntary Correction Program (VCP) With IRS Approval”).
Contributing Editors: EBIA Staff.