TIGTA and IRS disagree about need to inform elderly about withholding options

The Internal Revenue Service (IRS) should increase its efforts to educate elderly taxpayers about potential exemptions from withholding tax on certain retirement payments in order to reduce unnecessary tax return filings, according to a new report publicly released by the Treasury Inspector General for Tax Administration (TIGTA).

While the IRS's public Web site instructs taxpayers on how to determine whether to file a Federal tax return and if income tax withholding is necessary, printed publications, such as the instructions for filing IRS Form 1040, do not expressly state whether taxpayers should continue to have income tax withheld on Social Security, pension and annuity payments.

"To reduce the burden and cost for elderly taxpayers, the IRS should provide seniors with a consistent message about whether payments should be subject to income tax withholding," commented J. Russell George, the Treasury Inspector General for Tax Administration. "The IRS and the tax professional community share the responsibility for educating taxpayers age 65 and older about discontinuing unnecessary withholding and avoiding the filing of tax returns when appropriate."

In August 2007, TIGTA issued a report examining the characteristics of unnecessarily filed individual income tax returns (Reference Number 2007-40-130, August 17, 2007). That report found that more than 8 million tax returns were unnecessarily filed in 2003, 2004, and 2005. Eighty-five percent of those returns were filed to obtain a refund of taxes withheld.

TIGTA's new report recommends that the IRS ensure consistency between information posted on its Web site and its written products to ensure that taxpayers are accurately advised to discontinue income tax withholding if there is little likelihood that they will be required to file income tax returns in subsequent years. The IRS also should provide outreach programs for tax professionals with respect to the tax responsibilities of elderly taxpayers.

The IRS disagreed with TIGTA's recommendations, stating its belief that revising publications and the instructions to Form 1040 would risk causing confusion for many taxpayers in order to accommodate a select group of filers. TIGTA reaffirmed its recommendations following the IRS's comments to the report.

You can read the full report, including the scope, methodology, and the IRS's complete response.

You may like these other stories...

Savvy tax planning is about more than knowing what to write off. Just as essential is knowing when to take deductions. Choosing to stuff deductions into one tax year as opposed to another bears directly on how much winds up...
Tesco says it overstated profit forecastStanley Reed of the New York Times reported that Tesco, the large British grocery retailer, disclosed on Monday that it had overstated its expected half-year profit by about $400...
The IRS has announced the special per diem rates for 2014-15 that taxpayers can use for substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home. The new per diem rates...

Already a member? log in here.

Upcoming CPE Webinars

Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 21
Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience's communication style.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.