IRS wait times

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Have a slight problem with your self directed IRA?  Self directed 401k?  Think you can call the IRS and get a quick answer to your problem?  Think again. 

Recently I read an article that was summarized a speech by Robert Choi, the director of the IRS’s tax exempt division, gave to gave to a bunch of CPAs.

During his speech, Choi said that it takes on average 3 hours for IRS personnel to review retirement plan documents to see if they are valid.  

Ok, that seems pretty quick.  

However Mr. Choi went on to say that the average time between when a taxpayer submits the documents to the IRS and the taxpayer receives a determination letter is 321 days.

Why the delay?  Choi said “A lot of that time is actually spent in the queue waiting for the case to be assigned because of our staffing constraints and challenges,”

Stop and think about this for a moment.  3 hours to actually do the work, 321 days to get out the results of the work.

By the way, if you have a self directed 401k you’ve probably seen that the Basic Plan Document for your 401k is going to run 80 pages or so of small text boiler plate.  Then the adoption agreement is probably going to be another 30 pages.  How extensive of a review do you think they are actually going to give those documents in the 3 hour time frame?

If you have an issue with IRS don’t expect an immediate resolution.  Its going to take some time. Not only that, but the answer may not be based upon an in depth review.  They might need to take a second look.