A report issued by the Treasury Inspector General for Tax Administration (TIGTA) suggests that the IRS is permitting large deductions to be incorrectly claimed each year in relation to retirement plans for the self-employed. These retirement plans are popular with self employed persons who wish to make adequate provision for their retirement by making contributions that carry tax relief.
The TIGTA report reviewed the IRS controls including its use of third-party data to assess their ability to spot incorrect deductions in respect of Simplified Employee Pension’s (SEP) Individual Retirement Arrangement (IRA) accounts. These SEP IRAs are administered by financial firms in their capacity as third party trustees. The financial firms then notify the relevant parties each year of the contributions to the plans during the year. TIGTA’s analysis revealed that by tightening up its controls to identify and follow up incorrect deductions more than USD 71 million in revenue could be protected over five years.
