TIGTA: IRS Should Better Educate About RMDs from IRAs

By ASPPA Net Staff • July 16, 2015 • 0 Comments
  1. The IRS should better inform individuals about Internal Revenue Code provisions saying they must take required minimum distributions from their IRAs when they reach a certain age, says a Treasury Inspector General for Tax Administration report.

    Treasury issued the report July 15. TIGTA sought to determine whether IRS processes provide reasonable assurance that taxpayers are complying with these tax code provisions. In another report earlier this year, TIGTA said that the IRS had made progress in this vein, but that it had more work to do.

    In the most recent report, TIGTA says that in response to its earlier recommendations, the IRS has developed a broad-based strategy for educating taxpayers and individuals about IRA rules and notifying those at risk of violating the minimum distribution requirement rules. TIGTA calls this “a significant improvement.”

    Still, TIGTA says the IRS can do more. TIGTA recommends that the IRS should consider:

    1. directly communicating with taxpayers who are required to take a distribution and informing them about the distribution rules, using easily understood language;
    2. if the notice program is expanded, modifying the methodology for the RMD notices to identify more individuals who are not in compliance; and
    3. informing estates of distribution rules associated with IRA inheritances.

    According to the Treasury Department, IRS officials were receptive to at least some of what TIGTA had to say. The officials said that the IRS recently added small business IRAs to those about which it sends sample notices, and agreed that direct communication with those reaching the age of 70½ would be helpful.

    But it is unclear what effect TIGTA’s recommendations will have. The officials said that budget constraints prevent the IRS from expanding its use of notices and increasing communications with individuals reaching that age. And the IRS did not agree to notifying estates.