How to Prepare for the IRS’s “New 90-Day Pre-Examination Compliance Pilot” Audit Process

Carlton Fields tax attorney Lowell Walters provides an overview of the IRS’s “New 90-Day Pre-Examination Compliance Pilot” audit process and explains what you can do to prepare for it.

Introduction

Hello, ladies and gentlemen. My name is Lowell Walters and I am going to speak with you today about a new IRS audit program, and what you should be doing now to prepare.

I am an attorney with Carlton Fields and the focus of my practice is employee benefits. I spend most of my time helping my clients with their retirement and group health plans, but anytime an employer provides employees something other than direct, taxable cash compensation, you may have additional Internal Revenue Code requirements, ERISA requirements, Affordable Care Act requirements, and I can help.

Overview of the 90-Day Pre-Examination Process and What to Do Now to Prepare

IRS June 3, 2022, newsletter: ’90-day pre-examination compliance pilot’
- Comparing this pilot to standard audit procedures

STANDARD AUDIT PROCESS	90-DAY PRE-EXAMINATION PROCESS
The letter notifies you that your plan is under audit	The letter notifies you that your plan will or may be under audit in 90-days
Asks you to gather a list of items for its review Distribution/contribution details Plan document copies Can be a list several pages long Can be a more focused audit asking for several items only May alert you of the IRS’ intent to visit the premises and interview employees in charge of daily plan activities	Recommends you review your plan to look for and correct errors SCP option VCP remains an option because of the wording of the letter
	You notify the IRS of the errors you found and how you corrected them
	“The IRS will review your documentation and determine if we agree with your conclusions and that you appropriately self-corrected any mistakes. We’ll then issue a closing letter or conduct either a limited or full-scope examination.”

Recommendations
- Assess compliance now
  - ‘Compensation’
  - Prior CPA audit results
  - Was the plan updated within the last year or two for ‘Cycle 3’?
  - If under 100 participants, consider getting an unofficial CPA audit
- 90-days may be enough time to find problems if you start looking right away
  - May be enough time to fix some problems
  - Can probably get an extension (but not sure!)