The Labor Department and Internal Revenue Service should collaborate on oversight of prohibited IRA transactions, the Government Accountability Office advised Monday.
In its just-released report, Individual Retirement Accounts: Formalizing Labor’s and IRS’ Collaborative Efforts Could Strengthen Oversight of Prohibited Transactions, GAO recommends that DOL and IRS establish a formal means — such as a memorandum of understanding or other mechanism — to collaborate on oversight of prohibited IRA transaction exemptions.
Labor should also document policies and procedures for managing the exemptions process, GAO suggests.
As GAO explains, IRAs’ tax breaks can make it easier to save for retirement. While most IRAs hold investments in stocks and mutual funds, IRA holders wishing to invest in nontraditional assets like real estate or virtual currency might put the IRA at risk of running afoul of tax laws.
IRA owners can, however, apply for an exemption from Labor. While the IRS and Labor each have IRA oversight duties, Labor reviews exemption applications.