7.2.4. Employee Plans Voluntary Closing Agreement Requests

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

(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.

(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.

(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).

(2) For anonymous submissions submitted before January 1, 2022, and anonymous pre-submission conference requests made on and after January 1, 2022, the representative making the request should include items H-N, above, and the following:

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."

(3) VCAP requests, including anonymous VCAP pre-submission conference requests, should be faxed to (855) 240-1585.

(4) Other IRS functions (including TEGEDC and EEE) that receive VCAP requests involving tax-favored retirement plans should notify the VC Manager that they received a VCAP request and fax the request to (855) 240-1585. The VC Manager has discretion to determine if the request will be worked by VC and will notify the originating IRS function of that determination.

(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:

TIN (i.e., EIN) or SSN, but only for instances where closing agreement covers an individual. Name. 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. Work unit. Plan type. Plan number. Return received, as the date the request was faxed. Statute, as two years from the date entered in the Return Received field. Name control. Appropriate project code that applies to the plan type submitted to VCAP. Status code should be “08”, but if the assigned employee is a program coordinator input “10”. Activity grade. NAICS Code Note: Use 111100--Oilseed and Grain Farming for cases involving an individual who has never maintained a trade or business.)

3. After the request to establish the RCCMS case is approved the assigned employee prepares all documents for posting as an Adobe Portable Document Format (PDF) file to the Office Documents folder in RCCMS. The RCCMS naming convention, as described in IRM 7.2.2.17.2, Mandatory RCCMS Naming Convention for EP VC Cases, is used.

4. For VCAP requests, conduct or request IDRS search to see if the applicant or plan is under examination.

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.

5. For VCAP Requests, notify the applicant (or the representative, if filed anonymously before January 1, 2022) of receipt of the request and the assigned Work Unit number using Letter 5265.

6. Request establishment of the new VCAP request (including VCAP pre-submission conference requests) on RCCMS. Once the case is established on RCCMS, request a transfer of the case to Group 7550 so the VC Manager can assign the request.

(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.

(2) For program coordinators working cases, unless noted otherwise, they should follow the same procedures as the specialist to process the case.

(3) The VC Manager assigns VCAP requests to VC groups. Group managers, unless noted otherwise, should follow the same procedures that are in IRM 7.2.2.5 when assigning VCAP requests to specialists. The specialist works with the program coordinator and group manager to finalize the closing agreement and sanction payment.

(4) Specialist: Upon receipt, see IRM 7.2.2.6, Actions Upon Receipt of Newly Assigned VCP Cases, and IRM 7.2.2.6.1, Required Use of Form 5464 and WebETS, for additional directions and requirements for initial case processing.

(5) Follow the naming convention guidelines in IRM 7.2.2.17.2 for naming files that are posted in RCCMS when working VCAP requests.

(6) For VCAP requests where there is information indicating that the applicant made a pre-submission conference request:

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

(7) Specialists develop and keep workpapers that document:

1. Analysis and research.

2. Explain conclusions.

3. Conversations that led to a conclusion or recommendation.

(8) Specialists should develop and analyze requests.

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.

(9) The VC Manager designates a program coordinator to follow the steps below for the VCAP request. Once cases are fully developed, the designated program coordinator takes the following actions:

(10) For cases assigned to specialists, the program coordinator assisting the specialist emails an updated version of the case summary with meeting notes to the specialist, so the specialist knows the outcome of the discussion. Specifically, whether the request is accepted or denied and for accepted requests whether the proposed correction is acceptable (or if the group agreed on an alternative) and the agreed sanction.

(11) Denied Requests. If the group agrees that the request should be denied, the specialist should follow the process outlined in IRM 7.2.4.4 (9), as applicable, but using the appropriate letters for VCAP cases posted on SharePoint.

(12) Accepted Requests. If the group reaches a consensus on the correction method and sanction, the individual assigned the case will inform the applicant of the outcome. The specialist should document that the applicant agrees to the correction method and sanction before drafting a closing agreement.

(13) Once all parties are in agreement to move forward and enter into a closing agreement, take the following actions:

(14) Program coordinator: email the closing agreement draft, including attachments, to the EP R&A Tech Advisor for review.

(15) If the EP R&A Director or EP R&A Tech Advisor requests changes to the draft closing agreement, then the program coordinator will make any requested changes and, if the case is assigned to the coordinator, send the revised agreement to the plan sponsor or POA. If the case is assigned to a specialist, the program coordinator will send the revised draft agreement to the specialist and the specialist will send it to the plan sponsor or POA.

(16) For anonymous requests submitted before January 1, 2022:

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.

A	Employer Identification Number (EIN).
B	Name and address of the entity who will sign the closing agreement.
C	Name of retirement plan, if applicable.
D	Three-digit plan number, if applicable.
E	Type of retirement plan, if not previously provided.
F	Six-digit North American Industry Classification System (NAICS) code 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.
G	Statement as to whether the plan sponsor, plan, or entity making the request, is under any IRS examination.
H	Statement to certify neither the plan, the plan sponsor, or entity making the request, has not been involved with an abusive tax avoidance transaction.
I	If not previously provided, the number of plan participants and the total amount of plan assets. If not readily available, or for a request covering multiple plans, provide estimates if possible.
J	Plan documents, corrective amendments, exhibits and/or spreadsheets that are not redacted.
K	Any other identifying information needed to properly draft a closing agreement.
L	Penalty of perjury statement signed by the plan sponsor or eligible party that indicates the submitted information is accurate and complete to the best of their knowledge.
M	A signed and fully completed Form 2848, Power of Attorney and Declaration of Representative.

2. Once you receive the identifying information check IDRS (or request an IDRS check) to see if the plan, plan sponsor, or entity making the request, is under IRS examination. If there are indications of examination activity, discuss with the VC Manager (or the program coordinator, if the case is assigned to a specialist).

   Note: If the plan sponsor or plan is under examination, a voluntary closing agreement may not be issued.
   

3. If there is no examination activity, update:

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

(17) If the POA (or plan sponsor for cases without a representative) approves the revised draft, the specialist/program coordinator:

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.

3. Request evidence that the plan sponsor made all corrective actions under the closing agreement before signing it.

(18) Review the documents you receive from the POA/taxpayer:

(19) Program Coordinator: Email the signed closing agreement (include supporting documents) to the EP R&A Director for signature.

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.

(20) Specialist: When you receive the closing agreement signed by the EP R&A Director, prepare the forms for the sanction payment package by following the instructions in IRM 7.2.4.6 Processing Closing Agreement Sanction Payments, and process timely per IRM 5.1.2.4.

(21) Once Kansas City receives and processes the sanction payment (as indicated by your receipt of their signed acknowledgment copy of Form 3210) close the VCAP request:

(22) Group manager/designated employee: issue closing letters, signed closing agreements and close the case on RCCMS by following the procedures in IRM 7.2.2.24, Closing Procedures for Group Managers, as applicable to closing agreement cases.

(1) The VC Manager currently assigns all VCAP pre-submission conference requests exclusively to program coordinators.

(2) Upon receipt, program coordinators should follow the procedures for working cases in VC, as applicable. See IRM 7.2.2.6, Specialist’s Actions Upon Receipt of Newly Assigned VCP Cases, and IRM 7.2.2.6.1, Required Use of Form 5464 and WebETS, for additional directions and requirements.

(3) The assigned program coordinator will develop the request and prepare workpapers that document:

1. Analysis and any research.

2. Conclusions reached.

3. Any discussions that explain the conclusion reached or feedback provided to the representative.

(4) Program coordinators should follow the naming convention guidelines in IRM 7.2.2.17.2 for the purpose of naming files that are posted in RCCMS when working VCAP pre-submission conference requests.

(5) The program coordinator will contact the representative to schedule the pre-submission conference.

(6) After the conference, the program coordinator will update workpapers to reflect the discussion and prepare a closing letter using Letter 5341, Closing Letter for EP Voluntary Compliance Pre-submission Conference Request. The program coordinator will send the closing letter to the applicant.

(7) The program coordinator will prepare the case for closure in RCCMS by:

1. Posting all workpapers, closing letters, internal correspondence and any relevant documentation related to the pre-submission conference request.

2. Preparing the case for closure in RCCMS by completing all required fields.

3. Enter the appropriate "Disposal Code" in the General tab of the Closing Record in RCCMS, by entering one of the following:

806-Favorable based on information submitted

807-Not favorable based on submitted information

808-Withdrawn-Not due to disagreement

809-Failed to respond

4. Enter the time charged, consistent with your CCR, in "Examiner’s Time" and your name in "Examiner’s Name" in the Details tab of the Closing Record. Also, if provided, add asset information to "Total trust assets" and the number of participants to "Number of participants affected."

5. Enter the appropriate failure code(s) in 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.

6. Requesting closure in RCCMS.