ADVANCE RELEASE Documents: Voluntary Correction Program (VCP) User fees

By Joe Nagel, Esq., LL.M., CPA

For taxpayers who have filed or intend to file under the voluntary correction program, the IRS has recently issued this helpful notice concerning reduced user fees under certain circumstances. See Revenue Procedure 2017-4 for more information on the determination of applicable user fees for the voluntary compliance program. Should you have any questions or concerns regarding this information please feel free to give us a call at 404-255-7400 or email us at info@hoffmanestatelaw.com.

Avoid Overpaying User Fees for Your Voluntary Correction Program Submission

The Employee Plans Voluntary Compliance function (VC) has noticed an increase in submissions with incorrect user fees. Many of these submissions include user fees higher than what is required.

To avoid the overpayment of user fees by plan sponsors, we want to remind plan sponsors and their representatives:

• The current Employee Plans Compliance Resolution System (EPCRS) Revenue Procedure 2016-51 no longer lists Voluntary Correction Program (VCP) user fees.
• Plan sponsors need to refer to Rev. Proc. 2017-4 , Appendix A.08 to determine the appropriate VCP user fees for submissions made in 2017.
• As of February 1, 2016, we lowered the user fees for many types of 401(a) and 403(b) plan VCP submissions.
• Only use the 2016 version of Form 8951 (Rev. September 2016) , Compliance Fee for Application for Voluntary Correction Program (VCP), to determine specific user fee amounts; don’t use the pre-2016 versions of this form as they contain inaccurate information.

Determining the VCP User Fee

To determine the correct VCP submission user fee, plan sponsors may:

• Refer to the annual Employee Plans revenue procedure for user fee amounts. See Rev. Proc. 2017-4 , Appendix A.08, which contains all the user fee amounts and other information for VCP submissions in 2017; or
• Visit the Voluntary Correction Program (VCP) Fees webpage. While less comprehensive, it lists current user fees.

The number of participants in a plan generally determines the user fees for 401(a) and 403(b) plans. See Rev. Proc. 2017-4, Appendix A.08, for how to determine this number. When looking at the user fee table, be sure you use the fee that lines up with the number of plan participants.

For 401(a) (including 401(k)) and 403(b) plan sponsors , do not overlook these common situations in which you may be eligible for a reduced fee:

• If you maintain a 401(a) or 401(k) IRS pre-approved defined contribution plan and didn’t amend it by April 30, 2016, for the Pension Protection Act, you’re eligible for a 50% reduced fee if you correct the failure and mail your VCP submission to the IRS by April 30, 2017.
• If your submission is limited to participant loans that didn’t comply with Internal Revenue Code Section 72(p), lower fees may apply. See Rev. Proc. 2017-4, Appendix A.08.
• If your submission is limited to a failure to make minimum required distributions, lower fees may apply. See Rev. Proc. 2017-4, Appendix A.08.