IRS Seeking Out Under-Reporting Taxpayers

According to a report released by the Treasury Inspector General For Tax Administration, the IRS is taking active steps to find taxpayers who under-report their retirement income. The report explains how the IRS can achieve taxpayer compliance and create substantial revenue by implementing small improvements in tax return examinations.

Currently, the IRS ensures taxpayers properly report retirement income by matching 1040s with forms sent to the IRS by employers and financial institutions. The report claims that clearer 1099-R forms could help the IRS bring in more taxable retirement income. During its evaluation, TIGTA discovered that forms totaling $107.5 billion in taxable amounts stated that the “taxable amount [was] not determined.” Another $67 billion in forms had empty spaces where the taxable amount should be reported. As I previously reported, TIGTA has made various recommendations to help clarify Form 1099-R.

See Ashlea Ebeling, How the IRS is Catching Taxpayers Who Underreport Retirement Income, Forbes, Feb. 7, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.