What is a John Doe Submission

When filing a voluntary correction program submission (“VCP”), or for an Employee Plans Voluntary Closing Agreement (a “Walk-In CAP”), one of the options is to file the submission anonymously, or as it is also known, on a “John Doe” basis.

How does a John Doe submission work?

The submission is completed as it would be for a standard VCP or Walk-In CAP submission. However, prior to filing the submission with the IRS, all information identifying the plan sponsor and the plan is anonymized. Information such as name of plan sponsor, plan name, employer identification number, contact information, etc. is not included in the submission forms; all identifying information in plan documents and other exhibits to the submission is redacted. A unique identifier designated by the attorney or other authorized representative submitting the filing on behalf of the plan sponsor is displayed on the filing in order for the IRS and the authorized representative to track the submission in a de-identified manner. Later, once an appropriate correction has been agreed upon with the IRS, the identifying information is revealed prior to finalization of the compliance statement or closing agreement.

What are the benefits of a John Doe submission?

John Doe submissions preserve the option to withdraw the submission without prejudice up until the point that identification of the plan sponsor and plan are made. This is particularly important where, for example, the plan sponsor wishes to propose a “creative” correction which the IRS may not agree with. The ability to withdraw the submission while still maintaining anonymity gives the plan sponsor the option to attempt correction under more aggressive methods, rather than not correcting at all.

What are the drawbacks of filing on a John Doe basis?

The main drawback of filing a correction submission on a John Doe basis is that there will be no audit protection on the correction issues until the point where identities are revealed. Under a standard, non-anonymous submission process, protection from audit on the correction issues being submitted is provided as soon as the request for voluntary correction is filed. If an IRS audit is initiated between the time the submission is filed and the time the final compliance statement or closing agreement is issued, those issues described in the submission cannot be included as a subject of the IRS audit, and penalties cannot be assessed on those issues. Where a submission is filed anonymously, the correction issues are “fair game” if an IRS audit were to be initiated at any point prior to the identity reveal. When considering the filing of a VCP or Walk-In CAP submission, the plan sponsor, in consultation with their benefits counsel, should assess all of the correction options and related costs against the plan sponsor’s risk tolerance.