IRS Urged to Crack Down on Multimillion Dollar IRAs
The Internal Revenue Service is being urged to bolster its enforcement efforts on multimillion-dollar Individual Retirement Accounts in a new government report that also encourages Congress to provide more direction.
The report, from the Government Accountability Office, found that for tax year 2011, an estimated 43 million taxpayers had IRAs with a total reported fair market value of $5.2 trillion.
Relatively few taxpayers had aggregated balances exceeding $5 million as of 2011 (the most recent year available), the GAO noted. Generally, taxpayers with IRA balances greater than $5 million tend to have adjusted gross incomes greater than $200,000, be joint filers, and are age 65 or older. Large individual and employer contributions sustained over decades and rolled over from an employer plan would be necessary to accumulate an IRA balance of more than $5 million. There is no total statutory limit on IRA accumulations or rollovers from employer defined contribution plans.
In 2014, the federal government will forgo an estimated $17.45 billion in tax revenue from IRAs, which Congress created to ensure equitable tax treatment for those not covered by employer-sponsored retirement plans. Congress limited annual contributions to IRAs to prevent the tax-favored accumulation of unduly large balances, the GAO noted. But concerns have been raised about whether the tax incentives encourage new or additional saving. Congress is re-examining retirement tax incentives as part of tax reform. The GAO was asked to measure IRA balances and assess IRS enforcement of IRA laws. Read more on Accounting Today.