The IRS has implemented new procedures—effective April 1, 2017—for information document requests for audits of Tax Exempt and Government Entities (TE/GE), including audits of qualified plans and 403(b) plans. According to the IRS, the new procedures are intended to reduce the burden on the taxpayer, provide consistent treatment of taxpayers, allow the IRS to secure more complete and timely responses to information document requests (IDRs), and promote timely issue resolution. 

The new process will involve more direct communication between the taxpayer and the IRS and, hopefully, more targeted document production requests. The new enforcement procedures, however, will require taxpayers to fully respond to an IDR within the stated timeframe or face specific follow-up actions—including proposed adjustments (i.e., taxes), issuance of a summons, or proposed revocation of tax-exempt status.

New Document Request Procedures

Under the new procedures, IRS examiners are to interact with the taxpayer—discussing the issue being examined and the documents needed—before issuing an IDR. Prior to the examiner mailing the IDR to the taxpayer, the examiner and taxpayer are expected to agree on a response date. However, if the taxpayer and examiner cannot agree on a date, then the examiner is to propose a reasonable response date. Previously, the initial notification of a plan audit sent to a plan sponsor typically included an IDR with a long list of documents to be produced prior to an initial meeting with the examiner (e.g., plan and trust documents, Forms 5500, summary plan description documents, and other specific documentation demonstrating satisfaction of compliance with the qualified plan requirements).

Enforcement Procedures

The new procedures also provide for a more formalized follow-up process and enforcement procedure. Upon review of the information produced by the taxpayer in response to an IDR, the IRS examiner is to review the response for completeness. If the taxpayer does not respond or the response is incomplete, the examiner must determine within 5 days if an extension (of up to 15 days) will be granted. Only two extensions may be granted. If the examiner determines that the response is not complete, the IRS will call the taxpayer to discuss delinquency, determine an appropriate response date, and issue a delinquency notice. If the taxpayer does not satisfactorily respond, the IRS will move to the next level of enforcement—proposal of adjustment, summons, or proposal of revocation.