Section 4. Employee Plans Voluntary Closing Agreement Requests

7.2.4 Employee Plans Voluntary Closing Agreement Requests

Manual Transmittal

November 24, 2023

Purpose

(1) This transmits revised IRM 7.2.4, TE/GE Closing Agreements, Employee Plans Voluntary Closing Agreement Requests.

Material Changes

(1) Updated IRM 7.2.4.1.1 Acronyms, Terms and Definitions to include references to previously undefined acronyms.

(2) Added IRM 7.2.4.2 to include procedures for Taxpayer Digital Communications Secure Messaging.

(3) Revised IRM 7.2.4.4 , Guidelines for Voluntary Requests for EP Closing Agreements and VCAP Pre-Submission Conference Requests, to add language clarifying that VC has discretion to decline to process any closing agreement request or pre-submission conference request and that VCAP pre-submission conference requests are held at the discretion of VC, and as time permits.

(4) Updated IRM 7.2.4.4 (6) to provide that the VC Manager must approve and obtain the concurrence of the Director of EP R&A to permit any request to allow correction to be completed after the closing agreement is executed.

(5) Revised IRM 7.2.4.4.2 Procedure for Receipt of VCAP Requests and VCAP Pre-Submission Conference Requests, to reflect that applicants may be informed of the receipt of their VCAP request via fax.

(6) Updated IRM 7.2.4.4.3 Processing Closing Agreement Requests under the VCAP, to provide additional instructions for specialists and managers regarding handling closed VCAP pre-submission conference files after the specialist has completed their review and updating RCCMS case records of any anonymous case once they receive disclosure information.

(7) Updated IRM 7.2.4.4.4 (6) to provide that the program coordinator will send the closing letter to the applicant.

(8) Updated IRM 7.2.4.6 to reflect that documents for sanction processing can now be sent to a designated mailbox via email and to note special rules that apply when sanctions are approved to be paid via paper check.

(9) Updated in various places to reflect an RCCMS update that now allows for recording “failure codes” into the RCCMS issue data grid. Previously they were noted in the “Principal Issue Code” field.

(10) Made changes throughout the IRM for plain language, editorial changes, clarity and removal of outdated references.

Effect on Other Documents

This supersedes IRM 7.2.4 dated October 26, 2022, and incorporates the applicable provisions of TEGE 04-0622-0018, Taxpayer Digital Communications Secure Messaging.

Audience

Effective Date

Eric D. Slack
Director, Employee Plans
Tax Exempt and Government Entities

Procedure Scope and Objectives

1. Purpose: This IRM describes the procedures Employee Plans (EP) Voluntary Compliance (VC) follows to process requests for closing agreements under the EP Voluntary Closing Agreement Procedures (VCAP).
2. Audience: EP Employees who process closing agreement requests and any IRS employee who transfers a closing agreement request to VC.
3. Policy Owner: Director, EP.
4. Owner: EP.
5. Objective: To encourage sponsors of qualified plans, and others that service qualified retirement plans, to voluntarily disclose to the IRS discovered violations of qualified plan and federal tax requirements along with a proposed correction.

Acronyms, Terms and Definitions

1. This table lists commonly used acronyms and terms and provides their definitions.

Authority

1. The IRS Commissioner may enter into and approve a written closing agreement with any person for their liability with respect to any internal revenue tax for any taxable period ending before or after the date of such agreement. (IRC 7121 and the regulations thereunder).
2. Treasury Regulation Section 301.7121-1(a) permits the IRS to enter into a closing agreement in any case in which there appears to be an advantage to permanently and conclusively close the case, or if the taxpayer shows good and sufficient reasons for a closing agreement, and the Commissioner determines that the United States will not sustain any disadvantage through consummation of an agreement.
3. The Commissioner delegates to the Commissioner, Tax Exempt and Government Entities Division (TE/GE) in cases under their jurisdiction the authority to enter into and approve a written agreement with any person for internal revenue tax liability of such person, or the person or estates for whom they act as authorized by IRM 1.2.2.9.3 and Delegation Order 8-3. (DO 8-3).
4. Delegation Order 8-3 (DO 8-3) delegates the authority to enter into and approve a written closing agreement with any person relating to their federal tax liability to the EP Director and the Director, EP Rulings and Agreements (R&A).
5. R&A considers voluntary closing agreement requests to resolve certain income and excise tax issues that are ineligible for resolution under EPCRS. (Rev. Proc. 2023-4, Section 4).
6. Voluntary closing agreement requests are resolved by issuing a Director’s closing agreement authorized by IRM 1.2.2.9.3, DO 8-3 signed by the appropriate party (for example, the plan sponsor, plan administrator or plan trustee) and IRS representative, as authorized under the Delegation Order.
7. For approved closing agreement requests processed under this IRM 7.2.4, the EP R&A Director will sign the closing agreement.

Roles and Responsibilities

1. The VC Manager oversees the processing of voluntary requests for closing agreements and requests for pre-submission conferences and assigns them to specialists and also collaborates with VC program coordinators to monitor the overall progress on assigned requests.
2. VC program coordinators review and process assigned closing agreement requests and requests for pre-submission conferences and collaborate with specialists assigned closing agreement requests, requests for pre-submission conferences and VCP submissions that are resolved with a closing agreement.

Taxpayer Digital Communications Secure Messaging (TDC SM)

1. The IRS is implementing Taxpayer Digital Communications Secure Messaging (TDC SM) as a more efficient way for taxpayers and their authorized representatives, if applicable, to exchange information and documents with the IRS. Taxpayers/representatives will use the TDC SM platform by invitation only. The procedures apply to all compliance activity types (cases) that include taxpayer contact with a start date on or after June 22, 2022.
2. You must offer TDC SM to all taxpayers and their representatives with the initial contact letter. TE/GE has revised many initial contact letters to include language that advises taxpayers and their representatives of the availability of TDC SM to communicate securely with you. The revised letters use selectable paragraphs that you must choose. Use the TDC SM paragraph with the initial contact letter and suggest that irs.gov/TEGEConnect be visited to enroll and get started.
3. For cases with start dates before June 22, 2022, where employees have already issued the opening letter initiating contact to the taxpayer/representative, those employees will consult with their manager to determine whether offering TDC SM is appropriate for facilitating efficient and effective issue resolution and/or timely case closure. If you and your manager think TDC SM would be beneficial, invite the taxpayer and their representative to use TDC SM to bring your case to conclusion. Include the following language with the request for information (e.g., Information Document Request):

Employee Plans Voluntary Closing Agreement Requests Overview

1. These procedures apply to closing agreement requests submitted to:

1. VC under the EP VCAP.
2. Any IRS employee, including employees of the Office of Chief Counsel, Wage and Investment, Small Business/Self-Employed, Large Business and International, and TE/GE Operating Divisions, who transfers the request to VC.
3. VC for 457(b) plans. (Rev. Proc. 2021-30, Section 4.09).
4. VC as a result of an EPCRS VCP submission converted to a closing agreement request because the VCP submission includes failures and/or other issues ineligible to be corrected under EPCRS, as authorized under Rev. Proc. 2023-4, Section 4.

Note:

With your group manager’s approval along with the approval of the VC Manager, employees may offer a VCP applicant the option to resolve failures or issues by converting the VCP case to a VCAP request. In such instances, the specialist should review the Form 2848 that was submitted with the VCP case to determine if a new Form 2848 will be needed. In most cases a new Form 2848 will be needed because the description of “Matters” in Line 3 is limited to issues that can be addressed under VCP and the issues that will be resolved in the VCAP are outside the scope of issues that can be addressed under VCP.

Guidelines for Voluntary Requests for EP Closing Agreements and VCAP Pre-Submission Conference Requests

1. Generally, VC will consider closing agreement requests and, beginning on January 1, 2022, requests for pre-submission conferences, for failures or problems that aren’t eligible for resolution under EPCRS.

Example:

Some issues ineligible for EPCRS:
Excise taxes associated with prohibited transactions.
Failure to provide (or accurately provide) Forms 1099-R or W-4P.

Note:

A closing agreement request that includes issues in IRM 7.2.4.4 (1) , may also include failures that are resolvable under EPCRS.

1. Anonymously, if made before January 1, 2022, by a representative of the taxpayer. The taxpayer’s identity is not disclosed until after the IRS and representative have agreed to the closing agreement terms.
2. To reduce or relieve penalties associated with a failure to pay and/or failure to file that are in addition to the taxpayer’s liability for income or excise tax amounts.
3. By an organization involving several plans for an umbrella or mass closing agreement.
4. Anonymously, by a representative of the taxpayer, for a pre-submission conference request made on and after January 1, 2022.

1. Any applicable income or excise tax amounts, including applicable interest owed to the IRS.

Exception:

A request may be made to waive the 100% excise tax imposed by IRC 4971(b) and 4975(b) and such waiver may be provided in appropriate circumstances.

• Reduce a plan’s existing minimum funding deficiency.
• Settle for less than 100% of the tax imposed by IRC 4971(a) and 4975(a).
• Accept a reduction of a minimum funding deficiency.
• Not require correction of prohibited transactions.

Note:

For plans subject to Title I of ERISA, a plan sponsor should correct a prohibited transaction using the Department of Labor’s Voluntary Fiduciary Correction Program before making a request for a closing agreement.

1. Provide administrative convenience allowing taxpayers to address tax consequences other than plan disqualification (such as excise tax or additional income tax) by paying their full tax liability, interest, and, if applicable, penalties.
2. Won’t be open-ended, prospective or relate to future periods.

Exception:

Don’t refund VCP user fees for VCP submissions that are converted into a VCAP due to the situations described in IRM 7.2.2.10(2)(b), (c) and (f).

Information Required in Voluntary Closing Agreement Requests and VCAP Pre-Submission Conference Requests

1. The plan, plan sponsor (or entity making the request) or the "eligible party" (collectively referred to as the applicant) must include the following items in a VCAP request. (See IRM 7.2.4.4.1(2) for anonymous VCAP requests submitted before January 1, 2022).

Note:

In rare situations, you may need authorization from the taxpayer before disclosing information to the person identified as the person to contact. Remember that a Taxpayer needs to provide authorization if the individual identified is a third party.

Note:

Find the NAICS code on the filed Form 5500 series return for the retirement plan or choose the appropriate code from the Form 5500 instructions for making the request.

1. A unique identifying number the representative has assigned to the closing agreement request. The identifying number should not be used for any other closing agreement request.
2. The EIN of the representative’s employer.
3. A penalty of perjury statement signed by the representative stating: "Under penalties of perjury, I declare that I am an authorized representative of the taxpayer who would be party to any closing agreement. I comply with the power of attorney requirements described in 26 C.F.R. § § 601.501-601.509. I will submit an executed Form 2848 upon the disclosure of the identity of the taxpayer to the IRS. I also declare that the issues and information included with this request are true, correct, and complete to the best of my knowledge and belief."

Procedure for Receipt of VCAP Requests and VCAP Pre-Submission Conference Requests

1. The VC Manager assigns an employee to convert any faxed VCAP requests or VCAP pre-submission conference requests into electronic records and establish those requests as a Compliance Activity on the Reporting Compliance Case Management System (RCCMS).
2. When a VCAP request or pre-submission conference request is sent to the VCAP fax number (either from a plan sponsor, POA or other business unit), the assigned employee:

1. Establishes the request on the Headquarters Employee Plans System of TE/GE Rulings and Agreements Control (HQEP -TRAC) to obtain a unique identifying number that will be entered as the "Work Unit" number in a newly established RCCMS Activity.
2. Completes the identifying information and all required fields in the General (1 of 2) and Codes/Checksheets tab for establishing cases in RCCMS:

1. TIN (i.e., EIN) or SSN, but only for instances where closing agreement covers an individual.
2. Name.
3. Enter as the appropriate type of case Voluntary request for Closing Agreement,Voluntary Closing Agr-Gp Submission,Closing Agreement Pre-Submission Conference, for pre-submission conference requests received on and after January 1, 2022, or for anonymous requests made before January 1, 2022, Voluntary Closing Agr-Anonymous.
4. Work unit.
5. Plan type.
6. Plan number.
7. Return received, as the date the request was faxed.
8. Statute, as two years from the date entered in the Return Received field.
9. Name control.
10. Appropriate project code that applies to the plan type submitted to VCAP.
11. Status code should be “08”, but if the assigned employee is a program coordinator input “10”.
12. Activity grade.
13. NAICS Code

Note:

Use 111100--Oilseed and Grain Farming for cases involving an individual who has never maintained a trade or business.)

• Use AMDIS, EMFOLT, INOLE and BMFOLT IDRS commands, as appropriate.
• Place results in the “Office Documents” folder in RCCMS or note findings in workpapers.
• Discuss indications of examination activity with the VC Manager.

Processing Closing Agreement Requests under the VCAP

1. The VC Manager, group manager, program coordinator or specialist may consult a local IRS Field Actuary, and EP Examinations, including area managers, for technical assistance.

Example:

Some issues/failures that may require additional coordination:
IRC 412(i) plan issues.
IRC 409(p) failures.
Rollovers as Business Startups failures.

Note:

The VC Manager will assign all closing agreement pre-submission conference requests to program coordinators.

1. Contact your manager and request that the closed pre-submission conference case be transferred to you so you can review the workpapers.
2. When reviewing the workpapers remember that any discussion during a pre-submission conference request is advisory only and not binding on the IRS. The facts, the proposal, the supporting documents, and the disclosed issues or resolution may have changed from what was included in the pre-submission conference request.
3. Transfer the pre-submission conference RCCMS case file back to your manager once you have completed your review.
4. The specialist’s manager transfers the pre-submission conference RCCMS case file to Group 7550 and the program assistant returns the file to the RCCMS closed case library

1. Analysis and research.
2. Explain conclusions.
3. Conversations that led to a conclusion or recommendation.

1. Coordinate with your group manager before contacting a program coordinator, as the group manager should be consulted to assist you with developing the case and may designate what program coordinator you should work with on the VCAP case.
2. If additional information is needed, use Letter 5345 (and, if applicable, Letter 5346) to request that information.
3. Offer TDC SM to the Applicant/POA by following IRM 7.2.4.2, Taxpayer Digital Communications Secure Messaging (TDC SM).
4. Consult with the assigned program coordinator for assistance, if needed, in developing the case.
5. After development of the case, prepare a summary of the case (using the template posted on SharePoint) and email the summary, along with the narrative in the original request, to the program coordinator who is assisting you with the case.
6. The program coordinator will communicate with the specialist to finalize the summary of the case. In some instances, the program coordinator may have questions that require the specialist to do additional research or contact the applicant in order to further develop the case.

1. Circulate summaries of requests (using template) for discussion.

1. The specialist assigned the case is expected to develop the case issues and provide the program coordinator with a summary of the request. The specialist should coordinate with their group manager before contacting a program coordinator.
2. The specialist should consult with a program coordinator for assistance.

• VC Manager.
• EP R&A Director.
• EP R&A Tech Advisor.
• Other program coordinators.

1. The program coordinator assigned the case (or assisting the specialist assigned the case) should present the case to the group.
2. Discussion should address whether the IRS should:

1. Proceed with addressing the issue disclosed in the closing agreement request.
2. Accept the proposed correction or consider an alternative.
3. Accept the proposed sanction or propose an alternative.

1. Use sample agreement on the VC SharePoint, if applicable to your case.
2. If the case is assigned to a specialist, the specialist will:

1. Ask a program coordinator if there is a relevant sample closing agreement, in instances where the samples posted on SharePoint do not cover the issues in your case.
2. Email a draft of the closing agreement to a program coordinator for review with a reference to the work unit in the body of the email.
3. If the program coordinator returns the agreement with comments and/or changes, review and discuss any questions about those changes or comments the program coordinator made to the draft closing agreement.
4. Revise the agreement according to suggested revisions and comments and return the revised draft to the program coordinator via email.
5. Wait for an email from the program coordinator notifying you that the draft agreement has been approved by the VC Manager.

1. If the case is assigned to a specialist, the program coordinator will:

1. Email the draft agreement to the VC Manager.
2. Make any suggested revisions.
3. If changes are made, email an updated version to the specialist. If no changes are needed, email the specialist to let the specialist know that the VC manager has approved the draft.

Note:

For cases assigned to a program coordinator, the program coordinator will email the draft agreement to the VC Manager and make any suggested revisions.

1. Inform the plan sponsor or POA that:

1. The draft closing agreement isn’t necessarily the final version.
2. The existence of the draft doesn’t mean that the IRS has agreed to enter into a closing agreement.
3. The EP R&A Director has the final decision on the closing agreement terms and acceptance, so there may be additional changes to the agreement.

1. Consider any requested changes by the POA or submitter and coordinate with the VC Manager, if needed.
2. If the case is assigned to a specialist, the specialist will:

1. Discuss any requested changes with the program coordinator.
2. Inform the program coordinator that the draft agreement was accepted.
3. Discuss if the applicant has requested additional time to complete corrective actions.

1. Send the representative the revised agreement along with a letter requesting the identifying information, noted in the table below. Use the sample cover letter located on the VC SharePoint website for requesting the identity for anonymous closing agreement requests.

Note:

Should be the NAICS code on the filed Form 5500 series return for the retirement plan. For other entities the filer should choose the appropriate code from the Form 5500 Instructions.

Note:

1. The key data fields in RCCMS by working with your group manager to transfer the case to Group 7558. Refer to IRM 7.2.2.3.2 for detailed processing procedures for handling requests to revise data fields in RCCMS. After the updated RCCMS case is returned to you, proceed with the next step
2. The approved anonymous closing agreement draft with the identifying information and fax or mail it to the POA for review

1. Sends the closing agreement to the plan sponsor/applicant requesting an authorized employee of the entity sign the agreement and use Letter 5359 as the cover letter.
2. Requests the sanction payment, if applicable, by direct debit of a bank account or for sanctions less than $25,000 via credit card through the Pay.gov website.

Exception:

Coordinate with your group manager if the applicant cannot pay via the Pay.gov website. If your manager approves payment of the sanction via a paper check, document the approval in your CCR and request the sanction payment in the form of a cashier’s check or certified check payable to the “United States Treasury.” Follow IRM 7.2.4.4.3(18) for processing of paper checks.

1. Check to see if the closing agreement was signed by an authorized employee of the entity.
2. Verify that the Pay.gov payment is the correct amount. Specialists should contact a VC program coordinator, typically the VC program coordinator that assisted the Specialist with the case, to ask them to get a Pay.gov deposit ticket to confirm receipt of the payment.

Note:

Program Coordinators will wait 7 to 10 days from the payment date to take action in order to ensure that the sanction payment was successfully received and posted.

1. Verify that "Transaction Amount" is the amount of the sanction.
2. For ACH payments, make sure the payment was processed, by verifying that "Collection Status" is "Settled." If it shows "Retired" or anything else the payment could not be processed. Look to the Pay.gov "Transaction Detail " report for additional information. A new payment will need to be requested.
3. For credit/debit card payments, make sure the payment was processed by verifying that the Collection Status is "Successful."
4. Request a new or additional payment for any payment that was not the correct amount or was unsuccessfully processed.

1. Verify that the sanction check is for the correct amount.
2. Verify that the check is: (i) a certified check or cashier’s check and (ii) made payable to U.S. Treasury or United States Treasury.
3. Scan a copy of the sanction check and keep the original check in a secure location in accordance with the guidelines in IRM 5.1.2.3.1 until the paper check can be mailed for internal processing.

1. Email the program coordinator you worked with and include the RCCMS work unit in the body of the message and attach the following:

1. A scanned version of the taxpayer signed closing agreement.
2. Deposit receipt for sanction paid via Pay.gov (if payment was secured via a paper check, include a scanned version of the paper check).

Note:

Wait for the program coordinator to send you the closing agreement that is signed by the EP R&A Director.

1. For cases worked by specialists, the program coordinator who assisted the specialist with the case will email the EP R&A Director to request signature on the closing agreement.
2. The email will include the following documents as attachments:

• A scanned version of the taxpayer signed closing agreement.
• Deposit receipt for sanction paid via Pay.gov (if payment was secured via a paper check, include a scanned version of the paper check).
• Correspondence verifying that the agreement was reviewed by the EP R&A Tech Advisor.

Note:

If you don’t receive a response from the EP R&A Director within seven days of your email, send a follow-up email.

Note:

If the sanction was paid via paper check, the sanction payment package must be mailed to Kansas City using UPS/Fed Ex overnight service.

1. Record “l” issue codes in RCCMS using the issue data grid, see IRM 7.2.2.23(12) for instructions on using the data grid. Remember there are issue codes specific to VCAP inventory.
2. Specialists: contact the program coordinator to discuss specific issue codes to record in RCCMS.

1. Upload the signed closing agreement into RCCMS.
2. Generally follow the procedures in IRM 7.2.2.23.
3. Upload all documents and complete required fields for case closure in RCCMS.