Don't panic. The IRS audits a small percentage of plans each year. Just because your plan was selected for audit does not mean there is a problem with it. The IRS wants to be sure that you are operating the plan correctly. Most plans they audit get a clean bill of health. Your plan was probably selected because it fits the profile of a target plan(ie: plans holding real property, participant loans, certain industries). They also randomly select plans for audit. .

Here's the Recommended Procedure:

Barbara Klein, President and Founder.

The first thing you should do is call us and/or your legal counsel. Don't try to go it alone. We know what the IRS is looking for and can make the audit go smoothly. The easier that we make the agents job, the sooner the audit will be over.

You will first learn that your plan is being audited through a letter from the examiner who is assigned to your case. The letter tells you that they are examining your plan return for a stated year. The letter also says that they will be at your office on a given date and time.

What should you do if you will be on vacation the day the examiner is coming? Should you cancel your vacation plans? Of course not. If you are not able to meet with the examiner on the date they selected call them to arrange a new date. The letter notifying you of the audit will include a phone number to contact the examiner. Most of the examiners are reasonable people who are willing to work with you.

Included with the letter will be a list of documents the agent will want to review. Start collecting this information as soon as possible. If you have trouble finding something you will want as much time as you can get to track it down. Do you know where to find your 1992 1099R forms? Below is a sample of the information the examiner may request:

Memberships:

• Copies of the Plan Filings (Form 5500, Attachments & 1099Rs)
• Copies of the Corporate Tax Returns
• Western Pension & Benefits Conference
• Payroll Records
• Canceled Checks for Participant Payments and Contributions
• Plan Documents: Trust, Amendments, Determination Letters, SAR, SPD, SMM and Fidelity Bonds
• Plan Work Sheets: Allocations, Vesting, Discrimination Tests, Distribution Calculations
• Asset Documentation: Broker Statements, Notes, Financial Reports
• Trustees Notes
• Actuarial and Funding Reports (Defined Benefit Plans)
  

An IRS audit is not the end of the world. With competent, professional assistance your appointment with an employee plan examiner will be brief and almost painless.

Just remember to keep smiling