What You Need to Know
- The Treasury Inspector General for Tax Administration works to make the IRS more efficient.
- Clients who make excess IRA contributions or take early withdrawals are supposed to file Form 5329.
- TIGTA wants to see what the IRS is doing to enforce the Form 5329 filing requirements.
The Internal Revenue Service now faces extra pressure to enforce tax reporting rules related to individual retirement arrangements and other types of retirement accounts.
The Treasury Inspector General for Tax Administration has listed IRS retirement account police work second on its list of IRS audit priorities for fiscal year 2023 — the 12-month period that started Oct. 1.
TIGTA officials say they will “determine whether the IRS is effectively ensuring that taxpayers comply with filing requirements for [IRS] Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, when they receive an early distribution from a retirement account or had excess contributions to individual retirement arrangements.”
What It Means
Some clients who have taken early IRA withdrawals or who have added too much to their IRAs may have simply skipped filing their Form 5329 forms.
The IRS may now work harder to identify and punish the clients with Form 5329 problems.
The Treasury Inspector General for Tax Administration is one of four inspectors general offices at the U.S. Treasury Department.
TIGTA is responsible for promoting efficiency and effectiveness in the administration of federal internal revenue laws.
It also fights fraud and abuse at the IRS and related entities.
Form 5329 is a tax form that individuals are supposed to use to report taxable early withdrawals from IRAs, other retirement plans that qualify for special tax treatment and modified endowment contracts.