Clarifying Form 1099-R would help the Internal Revenue Service identify more taxpayers who are underreporting their retirement income, according to a new report.
The report, from the Treasury Inspector General for Tax Administration, noted that in a tax gap study for tax year 2001, the IRS estimated that as much as $4.2 billion could be attributed to underreported retirement income. Given the magnitude of underreporting, even small improvements in the IRS’s examination of tax returns with retirement income could increase taxpayer compliance and generate substantial revenue to the federal government to reduce the tax gap between taxes owed and money actually collected.
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