Fixes to Form 1099-R Could Boost Compliance, Inspector General Says

By AccountingWEB Staff

 
Changes to IRS tax form 1099-R could eliminate taxpayer confusion, improve compliance, and generate "substantial" revenue for the federal government, according to a report released Tuesday by the Treasury Inspector General for Tax Administration (TIGTA) - "Opportunities Exist to Identify More Taxpayers Who Underreport Retirement Income."
 
In its audit, TIGTA determined that taxpayers are faced with contradictory information, which may be responsible for underreporting the taxable portion of retirement income to the tune of $4.2 billion overall, the IRS estimates.
 
The report said that the IRS Automated Underreporter (AUR) Program matches the Form 1099-R received from the payer who issued the distribution to the amount of retirement income reported on the recipient's tax return. Through this process, it can be determined if the taxpayer reported the correct amount of retirement income. Additional tax form information could improve compliance even more, the report said.
 
The report states: 
 
"We determined taxpayers receive Forms 1099-R from payers with the following contradictory or confusing information regarding the amount of taxable retirement income to put on their tax returns:   
 
  • "A Form 1099-R with a taxable amount but also having the box checked indicating the taxable amount could not be determined. For some retirement income plans, the Form 1099-R instructions require the payer to complete the form in this manner. Our analysis of 14.9 million Forms 1099-R with a distribution identified 11.5 million (77.2 percent) that had taxable amounts totaling $107.5 billion, but the 'Taxable amount not determined' box was checked.
  • "A Form 1099-R with a gross distribution amount but the taxable amount was left blank. TIGTA analysis found that 3.4 million (22.8 percent) had gross distributions totaling $67 billion, but the taxable amount was left blank."
TIGTA recommended that the IRS clarify the meaning of the "taxable amount not determined" box to lessen confusion and "include the dates needed to identify retirement savings program distributions and transfers not rolled over within sixty days as required." In addition, TIGTA recommended the IRS establish procedures to transcribe additional lines from various tax forms.
 
TIGTA said the IRS "substantially agreed" with its recommendations and plans to revise the instructions to Form 1099-R to clarify taxpayer responsibilities and the amounts to report. The IRS plans study the benefit of transcribing additional lines from tax forms. TIGTA, however, believes the cost to transcribe the forms would be nominal.
 
Related article:
 

 

You may like these other stories...

IRS must take oath on Lerner emails: judgeMackenzie Weinger of Politico reported on Thursday that a federal judge ordered the IRS to explain under oath how it lost emails connected to Lois Lerner, the ex-IRS official at the...
Credit Suisse says pension assets at risk unless court delays sentencingJohn Letzing of the Wall Street Journal reported on Wednesday that Credit Suisse Group AG says its management of billions of dollars in assets for...
The prospect of International Financial Reporting Standards (IFRS) being fully adopted in the United States in the near future are growing less likely, as the Financial Accounting Standards Board (FASB) and the International...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.