The Internal Revenue Service needs to update its IRA publications to better explain “unconventional” IRA investments and the related tax consequences and potential schemes associated with them, the Government Accountability Office said.
In its 40-page report, released Wednesday, the GAO states that unconventional IRA investments — such as real estate, certain precious metals, private equity and virtual currency — “can introduce risks to account owners who assume greater responsibility for navigating the complex rules that govern tax-favored retirement savings.”
IRS enforces tax rules relating to IRAs and can assess additional taxes, GAO states.
GAO said that the IRS needs to:
- Assess options for updating its IRA publications to provide more information for taxpayers with unconventional assets;
- Evaluate the feasibility of requiring disclosure for high-risk IRA asset types associated with abusive tax schemes; and
- Develop auditor resources (such as training materials or job aids) that explain how IRAs with unconventional assets can generate unrelated business income tax.
IRS generally agreed with GAO’s recommendations.
IRS Publications 590-A and 590-B serve as a general handbook for millions of taxpayers with IRAs.