You’ll want to take note of the IRS’s latest move regarding its Voluntary Correction Program (VCP).
The IRS just updated Form 8950 — and its instructions — for employer submissions under the VCP, which is a part of its larger Employee Plans Compliance Resolution System (EPCRS).
The VCP is one of three programs under the feds’ EPCRS and, like the name suggests, it allows employers to voluntarily correct plan errors to avoid costly fees and penalties.
In addition to the VCP, the IRS offers the following programs to correct errors:
- The Self-Correction Program (SCP) – plans can correct the issues themselves without involving IRS, and
- The Audit Closing Agreement Program (Audit CAP) – initiated by the IRS and allows plans under investigation to take certain IRS-approved steps, pay a penalty and enter a closing agreement.
Reflects changes made last year
The updated form was created to reflect changes the agency made to EPCRS that took effect on January 1, 2017, and the new Form 8950 and corresponding instructions has a revision date of November 2017.
Despite the revision , neither the new form nor the instructions specifically states when employers should start using the updated 8950. However, experts like the folks at the Employee Benefits Institute of America (EBIA) suggest employers begin using the updated form immediately.
Highlights of the changes
Some of the main changes in the updated form include:
- Determination letter gets eliminated. The updated Form 8950 incorporates the changes made to EPCRS regarding determination letters. Prior to 2017, some VCP submissions required a determination letter submission. Now that requirement has been dropped.
- Clarification on the signature line. The update offers more detail on who must sign Form 8950. Specifically, the signature line now says the form should be signed “by the owner of a sole proprietor or by an officer with legal authority to bind a corporation, partnerships, or organization.” The instructions also state the signature can be either electronic or handwritten.
- “Compliance” fee becomes “User” fee. A subtle but important change for employers to take note of: The fee for the VCP is listed as a “user fee,” as opposed to the previous listing as a “compliance fee.”