Watchdog Urges DOL and IRS to Work Together on Prohibited IRA Transactions
The Government Accountability Office wants the Labor Department and the Internal Revenue Service to establish a formal collaborative process when it comes to oversight of prohibited IRA transaction exemptions, according to news reports.
The DOL and the IRS both have oversight responsibilities over IRAs, but it’s the DOL that reviews applications for exemptions from investors who want to invest IRA funds in nontraditional assets such real estate or virtual currencies, the GAO says in a recent report, according to ThinkAdvisor.
And investing in such assets could land IRA holders in trouble as far as tax laws, according to the GAO, the publication writes.
At the same time, the IRS could benefit from having access to the information the DOL has about requested exemptions to prohibited IRA transaction rules, according to ThinkAdvisor.
The IRS and DOL share some information related to prohibited IRA transactions, but there’s no formal mechanism, according to the GAO, the publication writes.
The Labor Department doesn’t share information on denials, for example, which could be useful for IRS examiner training as well as education of IRA owners, the GAO says, according to ThinkAdvisor.
Only eight of the 124 IRA applications the GAO reviewed from Jan. 1, 2006 through May 16, 2017, showed that the DOL and IRS had been in touch, the publication writes. The GAO therefore recommends that the agencies set up a formal collaboration on the oversight of prohibited IRA transaction exemptions, such as a memorandum of understanding, according to ThinkAdvisor.