What is the “IRS Correction Program” and how can I benefit from it?
The Internal Revenue Service (IRS) offers the Employee Plans Compliance Resolution System (EPCRS) so that sponsors of retirement plans may maintain the qualified status of their plan. The EPCRS has three parts: the Self-Correction Program (SCP), the Voluntary Correction Program (VCP) and the Audit Closing Agreement Program (Audit CAP).
The SCP allows plan sponsors of retirement plans who have experienced certain operational failures to correct those errors with no obligation to notify the IRS.
The VCP involves a correction by the plan sponsor before the IRS discovers the error. In these cases, the plan sponsor pays a filing fee and negotiates a correction with the IRS..
The Audit CAP occurs if an error has been identified by the IRS during an audit. The IRS then will assess a penalty, the magnitude of which will depend on the severity of the error discovered in the audit.
The IRS emphasizes that plan sponsors who do not voluntarily avail themselves of the EPCRS may be at risk of increased tax liability. If you have questions about the taxation of your retirement plan or how you may benefit from participation in the EPCRS, please contact a Nyhart retirement professional.
This article was last updated on March 5, 2013