If you’re in the retirement plan business, you’ve heard the term “audit roulette”. It refers to the belief by some employers that the odds of their retirement plan getting audited by the IRS are in their favor. Well, those odds are getting worse. The IRS is taking technology to the next level using “data driven decisions”.
With limited resources, the IRS is focusing on data-driven decision making. That is, using data to focus on issues where they believe there is a greater risk of noncompliance and therefore, a greater return on their investment of time.
TE/GE (Tax Exempt and Government Entities) which is the IRS Operating Division responsible for enforcing retirement plan rules reaffirmed this approach in its recently published 2019 Fiscal Year Compliance Letter. Here’s what they said:.
TE/GE continually seeks to advance data and analytics to drive decisions about identifying and addressing existing and emerging high-risk areas of noncompliance to which it applies optimal resources. TE/GE has partnered with Research, Applied Analytics, and Statistics (RAAS) to design and test data-driven approaches to identify noncompliance in both EO and EP. We also took some initial steps to introduce new tools to visualize data to make it easier to identify opportunities to enhance our operations throughout TE/GE. In FY 2019, our partnership with RAAS will expand to include testing new approaches to identify noncompliance in TEB. We also anticipate broadening access for our managers and analysts to new visualization tools, which are becoming an industry standard.
The takeaway is very simple. Voluntary compliance can be cheaper than playing audit roulette.
Photo Credit: © Can Stock Photo / Irochka