(b)lines Ask the Experts – IRS Audits of Prior Plan Years

“Included with the letter is a list of documents that the IRS wants my client to provide to the IRS agent.  Even though the audit is for the 2008 year, many of these requests relate to requirements that only went into effect in 2009.  What should my client do?”   

David Levine, Groom Law Group, answers:    

Your client should not be alarmed by these questions.  As the number of 403(b) audits continues to increase, we have seen a number of audits for the 2008 year that refer to items (such as information sharing agreements) that few plans had in place during the 2008 year.    

A key part of the audit process is communicating with the IRS agent (either via the client contacting the IRS agent on its own or via individual, such as an attorney, who can practice before the IRS) about your clients belief that certain audit questions are not applicable to the year under audit.  If your client contacts the agent, it is very likely this mismatch can be easily addressed, and, hopefully, your client’s audit closed quickly with a minimum burden on your client.  

Of course, the IRS will generally still examine things that were already effective prior to the final 403(b) regulations, such as universal availability and nondiscrimination requirements, distribution restrictions, contribution limits, loans and hardships, required minimum distributions and the like. 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.