The Internal Revenue Service and Congress should work together to make the individual retirement account program less confusing for taxpayers, a congressional watchdog agency says.

Officials from the Government Accountability Office come to that conclusion in a new report that covers topics such as the complexity of the rules that govern IRAs and IRS data on IRA reporting problems.

To gather information for the report, GAO officials reviewed IRS documents and compliance data, and they interviewed representatives from financial services companies and advisor groups.

The GAO investigators found “taxpayers face challenges in figuring how much they can contribute, navigating the various distribution rules, and rolling over their IRAs between custodians,” Michael Brostek a GAO director, writes in a letter discussing the GAO’s findings.

“For example, eligibility to deduct (from taxable income) contributions to a traditional IRA and to contribute to a Roth IRA depends on taxpayer income and filing status, while coverage by an employer-sponsored retirement plan only affects eligibility for deductible contributions to a traditional IRA,” Brostek writes.

“Tax rules for distributions diverge for traditional and Roth IRAs, but both types are generally subject to a 10% early withdrawal penalty, with some exceptions,” Brostek writes.

Similarly, Brostek writes, the rules governing when IRA owners can take and must take distributions are complicated, as are the rules governing rollovers of funds from one account to another.

IRS figures show that about 15% of taxpayers who took traditional IRA contribution deductions in 2001 and 15% of those who took taxable distributions in 2001 misreported on them on their tax returns, Brostek writes.

The GAO is recommending that the IRS respond by clarifying guidance and outreach materials, to help taxpayers better understand that the combined IRA contribution limit applies across all traditional and Roth IRAs.

The IRS also should identify administrative options for improving compliance with the minimum required distribution rule, such as providing more taxpayer guidance or expanding information reporting programs, Brostek writes.

The IRS should work with the U.S. Treasury Department to come up with changes in laws and regulations that could ease compliance, Brostek writes.