Ugly IRA problem- any VCP like option?

[Flyboyjohn]

Ugly IRA excess contribution situation over 18 years and potential $400K excise taxes.

Is there a person or department at IRS we could approach to make an anonymous VCP-type application proposing corrective action?

Thanks

 

[spiritrider]

There is no EPCRS-like system for traditional and Roth IRA excess contributions. They are subject to 26 code 408, 26 code 4973, reported on Form 5329 and covered in Publication 590-A. While the IRS has statutory authority to grant a waiver of the 50% excise tax penalty for failure to take RMDs and I have seen them do so for extended periods although not eighteen (18) years. The IRS has no such statutory authority to grant a waiver of the 6% excise tax penalty for excess contributions. I have never heard of them granting any such relief.

One thing to keep in mind. Just like for Form 5330, there is no statute of limitations (SOL) for unfiled Form 5329s. This is best dealt with before 12/31 or another year's excise tax will be due.

[jpod]

Ugly is an understatement.  More like fugly.  I am not aware of any path to a good either.  Just out of curiosity, what was the source of the excesses?  Was it money already taxed or was it pre-tax money that came from some sort of non-qualified deferred compensation plan?  If it is money that hasn't been taxed yet, some might suggest to withdraw it (plus the accumulated earnings on it), pay the income tax (including the 10% penalty if applicable), call it a day and hope for the best.  If it was money already taxed, I have no bright ideas.

[Luke Bailey]

Flyboyjohn, under IRC sec. 7121 the IRS has the ability to enter into a closing agreement for any tax liability. Even though 408 (other than 408(k) and (p)) do not appear to be in the non-EPCRS Employee Plans Voluntary Closing Agreement group's wheelhouse, it wouldn't hurt to start with them and see whether they can give you some guidance or steer you in right direction. Of course, the EPVCA corrections usually require complete payment of tax liability, but practicalities may be taken into account, and you can submit anonymously:

"Call Paul Hogan at 206-946-3472 or Thelma Diaz at 626-927-1415 with questions about submitting a voluntary closing agreement request."

[Appleby]

If this is still unresolved- contact Gary Lesser https://benefitslink.com/GSL/