Treasury
Inspector General for Tax Administration
Office of Audit
A SERVICE-WIDE STRATEGY IS NEEDED TO
ADDRESS GROWING NONCOMPLIANCE WITH INDIVIDUAL RETIREMENT ACCOUNT CONTRIBUTION
AND DISTRIBUTION REQUIREMENTS
Issued on March 29, 2010
Highlights
Highlights of
Report Number: 2010-40-043 to the
Internal Revenue Service Deputy Commissioner for Services and Enforcement.
IMPACT ON TAXPAYERS
Individual
Retirement Accounts (IRA) are a key tax-preferred way for individuals to save for
retirement and are an increasingly important way for individuals to roll over
savings from pension plans. The
Investment Company Institute estimated that assets held in IRAs were $3.6
trillion in 2008 and that IRAs represented more than 26 percent of total
WHY TIGTA DID THE AUDIT
A prior
TIGTA review of Tax Year (TY) 2005 IRA information concluded that Internal
Revenue Service (IRS) processing procedures for IRAs do not ensure that
individuals are complying with IRA rules.
This audit was initiated to assess IRS actions to identify and correct
individual excess contributions to IRAs and nondisbursements of required
minimum distributions from IRAs.
WHAT
TIGTA FOUND
Our review of
TY 2006 and TY 2007 IRA information showed that individual noncompliance with
IRA excess contribution and minimum distribution requirements continues to grow
since our previous review. TIGTA identified
potential revenue losses associated with:
·
295,141
individuals improperly making excess contributions totaling $812,339,722 for TY
2006 and $756,792,044 for TY 2007. TIGTA
estimated tax revenue losses of $94,150,444 in excise tax and $17,574,276 in
income tax for these 2 tax years.
·
255,498
individuals not taking required minimum distributions totaling $348,480,200 for
TYs 2006 and 2007. TIGTA estimated tax
revenue losses of $174,249,074 in excise tax for these 2 tax years.
WHAT TIGTA RECOMMENDED
TIGTA
recommended the Deputy Commissioner for Services and Enforcement ensure a
Service-wide strategy is developed to address retirement provision
noncompliance. This strategy should include
the development of processes to identify individuals who do not comply with
retirement provisions, along with compliance efforts to address the
noncompliance.
In
their response to the report, IRS officials agreed that a Service-wide strategy
is warranted. Executives from the Wage
and Investment and Tax Exempt and Government Entities Divisions agreed to share
the responsibility for development of this long-term strategy. This strategy
will not only address compliance, but will also include plans for outreach and
guidance for individual taxpayers and employee plan organizations.
READ THE
FULL REPORT
To view the report,
including the scope, methodology, and full IRS response, go to:
http://www.treas.gov/tigta/auditreports/2010reports/201040043fr.html.
Email Address: inquiries@tigta.treas.gov
Phone Number: 202-622-6500
Web Site:
http://www.tigta.gov