Correcting SAR failures

[Guest JMN]

How much relief is available under the operational failure guidance for non-exempt SARs? I can study the Rev Proc but maybe someone can advise on how, in very general terms, generous the relief is.

[XTitan]

Depends on what the error is and how soon it can be corrected. Generally, operational errors (Notice 2008-113 as amended by Notice 2010-06) can be corrected within 1 year without penalty or within 2 years with the 20% additional income tax due only on the amount in error, in exchange for the employer and employee(s) involved filing an attachment to their tax returns explaining the situation. The errors in the Notice are limited to over/under deferring and paying too soon/too late. Compared to exposing the entire balance to 20% additional income tax plus premium interest tax dating back to the date of deferral, I'd say the relief is pretty generous. Hope that helps.