Tax & Accounting Blog

IRS Study Points to Errors in Form 1099-R Reporting of Retirement Distributions to Individuals Living Outside the United States

1099, International Reporting & Compliance, ONESOURCE, ONESOURCE Nonresident Alien Taxation, Tax Information Reporting, Trust Tax March 27, 2013

The IRS Employee Plans Compliance Unit, in a review labeled the International Foreign Distribution Project, found many errors on Forms 1099-R for individuals living outside the United States.

The project focused on individuals living outside the U.S. or U.S territories who received retirement plan or IRA distributions before reaching age 59 ½. Responses to the project inquiries showed that Form 1099-R filers (payers, trustees or plan administrators) are not fully furnishing the recipient’s information on Forms 1099-R. The required information includes the recipient’s taxpayer identification number, name, street address (including apartment number if applicable), city, state and zip code (or postal index numbers). The complete furnishing of this information is critical in locating U.S. citizens and resident aliens who now live outside the U.S.

The U.S. Treasury Inspector General for Tax Administration (TIGTA) reported in 2012 that 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” of tax due but not paid. And in a tax gap study conducted by the IRS, it was estimated that as much as $4.2 billion can be attributed to underreported retirement income.