While I trust that you know what you’re talking about, I got a couple of letters like that while I worked through college. They called them reviews. Of course, if I hadn’t responded, it probably would have turned into the ugly kind of audit which I’ve only experienced once (damnable macadamia farms).
2 Likes
From the IRS : " An IRS audit is a review/examination of an organization’s or individual’s accounts …".
I think they are trying to land the blow softly in their letters with nicer and softer words like ‘review’
Yeah clearly they have to find out somehow. Its not safe to assume they will never find out. IRS audits the company 401k plan. Company HR finds their own error then reports it. etc. IRS audits them for some other random reason then fidns it. etc. Dumb shit luck through some other reason.
Some you aren’t sufficiently paranoid about the IRS iMHO. 
2 Likes
If the employes they had doing these audits were competent enough to put those things together, they are also competent enough to know that the amount of money the IRS would get from rob wouldn’t be worth the time it would take them to calculate the amount and send the letter. But I don’t think there are enough people working there in the first place, and anyone competent enough to even pass step 1 is probably making twice as much working at an accounting firm trying to outsmart the IRS.
I definitely don’t have the level of paranoia about the IRS as you do.
From what I’ve been able to tell, that’s the least of their concerns. I suspect that, much like police officers, they deal with a lot of people who are, uh, less than forthright. You deal with enough of them, you get jaded and expect everyone is trying to cheat the government and it’s their duty to get as much as possible from the auditee.
Have you ever been through a personal audit?
1 Like
I think we’re both assuming a lot and I doubt either of us know exactly how it works. So hard to tell whos’ guessing correct.
I think taht its more likely that there would be a letter examinartion (audit) that is triggered based on simple number filters ran by computer. Somehow somewhere the IRS gets information that someones 401k contibution is > than the limit. This triggers a compuerized automated red flag. Possibly then a human reviews that information and hits a ‘submit’ button. This is no signficant time or cost by the computer and very minimal work by a human to push a button to cause the system to spit out a letter.
But as I said I’m assuming much here. If someone knows more exact first hand information on exatly how the IRS operates and how much exact time and money is spent to do such a function that isn’t also just assumption/speculation then let us know.
Guilty until proven innocent.
More than it should.
Oops!
never mind
1 Like
For what it’s worth, I’m pretty sure there are both correspondence audits - where a person reveiws your information for accuracy, and automatic adjustments - where any discrepencies between your report and what was reported by others is reconciled. The audit asks for supporting documentation, while the adjustment simply tells you the new numbers (that you then have to dispute if you disagree).
I’d think that the 401k reporting excess contributions would result in an adjustment, and subsequent bill being sent. Not an audit.
2 Likes
My vague recollection, having not been directly involved, is that someone from the third party 401k admin company does an EOY audit a few months into the following year. This is so they can know everyone’s final salaries, who is a HCE, etc. and that’s when they tend to find mistakes like excess contributions or disallowed HCE contributions and the like, and then tell those people they have to withdraw the extra money before the tax deadline and report the extra income accordingly.
I think it would most likely be caught in this process for a normally functioning 401k plan rather than going to the IRS somehow.
4 Likes
I think xerty’s right on this.
1 Like