IRS TE/GE Office Outlines 2020 Priorities

The IRS Office of Tax Exempt and Government Entities has outlined its priorities for fiscal year (FY) 2020. 

“In FY 2019, we implemented and provided additional guidance on TE/GE-related provisions of the Tax Cuts and Jobs Act, and in FY20 we’ll continue to look for ways to help taxpayers and their representatives navigate the many changes made by TCJA,” wrote TE/GE Commissioner Tamera Ripperda in a program letter. “In addition, we have begun to assess the impact of the latest legislation, enacted in July 2019—the Taxpayer First Act. This legislation will change not only IRS tax administration processes but possibly our future operating structure.” Ripperda added that she anticipates that the TE/GE in FY20 will refine its programs and seek to improve its work with customers. 

Compliance Strategies 

Compliance Strategies are issues approved by TE/GE’s Compliance Governance Board to identify, prioritize and allocate resources within the TE/GE filing population. Using a web-based portal, TE/GE employees submit suggestions for consideration by the Board. Once approved, these issues are considered priority work. Below we share the strategies that the Board has approved so far. As more issues are developed and approved, those with a higher priority may potentially replace 

The TE/GE’s priorities in pursuing compliance include the following issues.

• 403(b)/457 Plans: examine 403(b) plans for universal availability, excessive contributions and proper use of catch-up contributions under Code Section 414(v); examine 457(b) plans for excessive contributions and proper use of the special three-year catch-up contribution rule. 
• Salary Reduction Simplified Employee Pension (SARSEP) Plans: determine whether the deferral test is met, as well as the participation rules and the Code Section 416 top-heavy contribution requirements. 
• Simplified Employee Pension (SEP) IRA Plans: determine if the plan properly includes all employees who have met the plan’s eligibility requirements, including those working for related employers. 
• Terminated Cash Balance Plans: assess terminated plans with cash balance features that may have exceeded Code Section 415 limitations or generated a reversion which is subject to an excise tax. 

Data-Driven Approaches 

The TE/GE seeks to use data and queries to select work based on quantitative criteria, which it says allows it to allocate resources that focus on issues that have the greatest impact. Regarding employee plans, it plans to sample the results of data queries and models to test indicators of noncompliance for different plan types. 

Referrals, Claims and Other Casework Referrals 

Regarding employee plans, TE/GE priorities include:

• Referrals: continue to pursue referrals received from internal and external sources that allege possible noncompliance by a retirement plan.
• Claims: continue to address requests for refunds or credits of overpayments of amounts already assessed and paid. Such requests can include tax, penalties and interest, or requests for an adjustment of tax paid or credit not previously reported or allowed. 
• Other casework: continue to investigate nonbank trustees (NBT) to verify that they have satisfied the NBT regulations and pursue promoter investigations. 

Compliance Contacts 

The TE/GE Compliance Units address potential noncompliance, primarily using correspondence contacts known as compliance checks and soft letters.
 
A compliance check is correspondence with an organization to inquire about an item on a filed return to determine if specific reporting requirements have been met or to determine whether its activities are consistent with its stated tax-exempt purpose. A compliance check is not considered an examination; however, there may be situations when a compliance check is referred for examination. 

A soft letter is correspondence with an organization that provides notification of changes in tax-exempt law or compliance issues. A response to such a letter is not expected; however, responses may be received and converted into a compliance check. 

Regarding employee plans, TE/GE plans to use these tools to determine whether a retirement plan is adhering to recordkeeping and information reporting requirements, including: 

• funding deficiencies;
• indirect service requirements in which employees may have been improperly excluded;
• missing codes, such as business codes, plan characteristics; 
• nonfilers of Form 5500-EZ; and
• stop filers of Form 5500/5500-SF.

Voluntary Compliance and Other Technical Programs 

Regarding employee plans, TE/GE priorities concerning voluntary compliance include training and integrating new hires into the voluntary compliance function, and focusing on actuarial letter rulings, 60-day rollover waivers and technical assistance work for its taxpayers.