Audit CAP sanction for nonamender

[Guest Laura Goalen-Anderson]

Our office has been asked to assist in the representation of a plan that is under audit by the IRS for a plan year. During the audit, the agent discovered that the plan has not been updated since 1985. Yep..1985. I am looking at the fee chart for sanctions and under Section 14 of Rev. Proc. 2008-50 and trying to determine the possible sanctions. The chart provides a separate sanction amount for each type of nonamender failure (e.g., EGTRRA, GUST, OBRA, TRA 86) and it goes up due to the "age" of the failure. Is our client on the hook for each sanction or just the sanction for TRA'86 since that was when the first failure occurred ? I am of course assuming the latter but just wanted to see if anyone else has been in this situation. Thanks.

[Guest Sieve]

Those penalties are not cumulative. The only applicable sanction amount is the one for the earliest amendment missed--in your case, TRA '86.