IRS Launches New IRA Correction System for Custodians to Resolve Account Mistakes

The Treasury Department and the Internal Revenue Service have issued Revenue Procedure 2026-33, creating the IRA Compliance Resolution System (ICRS), the first IRS program specifically designed to correct errors in Individual Retirement Accounts (IRAs).

Until now, IRA custodians, including trustees of IRA trusts, have had no formal IRS process for fixing many common administrative mistakes in the accounts they oversee. In many cases, those problems were handled through a private letter ruling or were left unresolved. ICRS is intended to close that gap and provide a formal remedy. The new framework is modeled on the IRS’s long-running correction system for employer retirement plans. It becomes effective May 1, 2027, giving custodians time to prepare.

At present, ICRS has one component: the IRA Voluntary Correction Program (IVCP). This is a paid submission process reviewed by the IRS. The agency has said that self-correction of IRA failures is not currently available, though it has asked for comments on whether the program should be expanded later. An IRA custodian may submit an IVCP filing for an IRA owner, a term that also includes beneficiaries of inherited IRAs, whether the issue involves one account or a group of accounts affected by the same error. An individual owner may also submit on their own behalf.

IVCP currently covers four types of mistakes:

• Required minimum distribution shortfalls caused by a service-provider error. The correction requires paying out the missed amount plus earnings.
• IRA establishment failures, such as when a custodian opens the wrong kind of account, like a Roth IRA instead of the requested traditional IRA. Fixing this generally requires moving the money into the properly established account, and the request usually must be made no later than December 31 of the year after the account was created.
• Errors in which custodians or their service providers cause non-spouse beneficiaries to receive a taxable distribution rather than a trustee-to-trustee transfer into an inherited IRA. The correction requires the non-spouse beneficiary to contribute the amount that was distributed, improperly transferred, or improperly rolled over from the original inherited IRA into a new inherited IRA established in the same beneficiary’s name, subject to certain limits.
• Failed 60-day rollovers, regardless of whether the fault lies with the IRA owner or the custodian. The IRS may waive the deadline when equity and good conscience support relief, including in cases involving death, disability, hospitalization, incarceration, or custodian error. This category is especially important because it is meant to largely replace the private letter ruling process now used to seek such waivers. The IRA owner must be the applicant for this type of filing; a custodian cannot apply in its own name, though it may still help clients prepare the submission as a service.

For 2027, IRA owners may choose either the traditional private letter ruling process or ICRS. Starting in 2028, ICRS will become the only path for this type of relief. Existing no-cost automatic waiver and self-certification procedures are unchanged and remain available. When relief is granted, the IRS may also agree within an IVCP filing not to assess related excise taxes on excess contributions or missed required minimum distributions, or the 10% additional tax on early distributions.

All IVCP filings must be submitted electronically, may not be anonymous, and require a fee: $3,500 for a standard filing submitted before January 1, 2028, or, for a group filing involving at least 10 IRA owners, an initial $10,000 fee for the first 10 owners plus $250 for each additional affected owner, up to a maximum of $50,000 for 170 or more IRA owners. The program generally is not available once an IRA owner’s tax return is under examination, and a correction cannot produce a refund for a tax year that is already closed under the applicable statute of limitations.