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.

Labor has a process to grant administrative exemptions for IRA transactions that would otherwise be prohibited by law, such as an IRA buying investment property from the IRA owner.

Although Labor and the IRS “share some information as part of their oversight responsibility for prohibited IRA transactions, no formal mechanism exists to help guide collaboration between the agencies,” GAO’s report said.

Of the 124 IRA applications GAO reviewed from Jan. 1, 2006 through May 16, 2017, only eight reflected Labor Department contact with IRS. GAO found that the department has information about requested exemptions to prohibited IRA transaction rules that could be useful to IRS in carrying out its oversight responsibilities.

For example, “DOL does not share information on denials — information that could be useful as prohibited transaction examples for IRS examiner training and educational outreach to IRA owners,” GAO said. In prior work on interagency collaboration, GAO has found that formal agreements, such as a memorandum of understanding, can help agencies monitor, evaluate and update interagency collaboration.”