GAO Recommends More IRS and DOL Collaboration on IRA Prohibited Transactions
The U.S. Government Accountability Office (GAO) has issued a report concluding that the IRS and the Department of Labor (DOL) could better monitor and police certain IRA transactions that are prohibited, formally known as prohibited transactions (PTs). An example given by the GAO is the purchase by an individual’s IRA of property that is already owned by that individual.
The DOL has a process for reviewing taxpayer applications that seek an exemption from PT rules. The IRS enforces federal statutes that penalize taxpayers for participation in a PT when no exemption has been granted. The GAO found in examining more than 100 such applications to the DOL that only in about six percent of cases was there evidence of communication between the two agencies. The GAO noted that “no formal mechanism exists to help guide collaboration between the agencies.”
Based on its findings, the GAO recommends that the Secretary of Labor should document internal policies and procedures for managing the IRA PT exemption process.
The GAO also recommends that the Secretary of Labor and the Commissioner of Internal Revenue, in consultation with one another, should establish a formal means—such as by a memorandum of understanding—to support and guide their collaborative efforts to oversee IRA PT exemptions.
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