The Internal Revenue Service (IRS) has several new initiatives — audit initiatives and compliance checks — that might affect retirement plans.
So, what do you need to know about the new IRS info? Here are some of the initiatives that were released on the IRS website in recent weeks. There are two things to be aware of: Audit initiatives and compliance checks.
Audit Initiatives
The IRS Tax Exempt and Government Entities Division has said it will be checking to see if employers have improperly classified some workers as independent contractors instead of permanent employees. What this means is, if someone on a company’s payroll is listed as an independent contractor, it can mean that person is underpaying Social Security, Medicare and some federal income taxes. If they find a misclassified employee, there could be an audit.
The IRS Tax Exempt and Government Entities Division will also be auditing large defined benefit plans to make sure they are starting payments when required – generally, this is at age 70 ½ for those no longer working or 72 for those actively participating. If you don’t get your benefits on time, you might face a 50% tax on undistributed amounts or plan disqualification.
Compliance checks
While the IRS Tax Exempt and Government Entities Division does audits, it will also do some compliance checks to make sure organizations are following the correct recordkeeping and information reporting procedures and requirements. They’ll also be looking to see if the organization’s activities are consistent with its stated tax-exempt purpose.
There are three new compliance checks:
- Unrelated business income
- Inflated assets
- Partial plan termination
As with anything, it’s a good idea to review things on the IRS website.https://www.irs.gov/government-entities/tax-exempt-government-entities-compliance-program-and-priorities
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