The Voluntary Correction Program (VCP) is part of the IRS Employee Plans Compliance Resolution System. An IRS official who is part of that system offered some insights in an Oct. 24 session at the 2022 ASPPA Annual conference into how it all works.
Stephanie Bennett, a Voluntary Compliance Program Coordinator at the Tax Exempt/Government Entities Office of the IRS, provided an insider’s view of when to turn to the VCP, and what happens if one does. Heather Bader, Partner at Faegre Drinker Biddle & Reath, LLP, moderated the session.
SCP and VCP
Bennett provided some insight into the determination of whether to use the Self-Correction Program (SCP) or the VCP.
When using the SCP, said Bennett, it is fine to use a VCP-style application. “You just have to kind of anticipate and think ahead,” she said, and have some kind of memorialization of what happened.
Just because a plan sponsor is eligible for the SCP does not mean that it cannot submit a VCP application, Bennett noted. Some may want the official certification of an IRS VCP determination, she said.
Bader concurred that she has had clients that have sought the VCP for “an extra layer of protection.”
Does VCP Use Lead to More?
IRS guidance gives its officials the authority to refer a case that arises through the VCP for examination, but Bennett said that such a thing does not happen routinely. The IRS generally works with an applicant, she said, and it is “quite unusual” to not achieve resolution of an issue.
“It’s a voluntary program,” said Bennett, continuing, “we’re not examining the plan.” She added that they will let an applicant know if a failure is greater and covers more time than a more limited correction application.
Further, when asked by Abrigo if the IRS has an issue with plan sponsors that use the VCP every year, Bennett responded that the IRS does not keep a record of how frequently a plan sponsor makes a VCP application. “We don’t conduct such a review,” said Bennett, noting that the program is voluntary.
The VCP Application
Bennett observed that there are model VCP application forms available. She said that they are a tool, and that it is not compulsory that a taxpayer use them, “but they do help expedite the process.”
When filling out the form, Bennett said, it is best to not leave spaces blank. If there is no error to be reported in a particular section, she said, it is best to say so and not enter “N/A.” Filling out the form completely, she said, gives the IRS a better perspective on why a plan sponsor is applying. And, Bennett said, one should review the application before submitting it.
Pilot Program
Bennett noted that the IRS announced a pilot program in June 22 through which plan sponsors are notified that they have been selected for an audit and that they have 90 days to prepare and to self-correct errors. Bennett said that it is her understanding that 100 plan sponsors have received such letters. They have “a window of opportunity,” she said, to perform self-examination — an “opportunity to look underneath the stones.”
The Bottom Line
“Ultimately, the goal is to preserve the plan’s qualified status,” said Bennett.
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