US. IRS To Audit 401(k) Savers Who Contribute Too Much
We’ve written about the danger of overstuffing your Individual Retirement Account. Stiff penalties apply. Now the Treasury Inspector General for Tax Administrator is out with a report that suggests that some 401(k) workplace retirement plan savers are pushing the limits, saving more than what’s allowed, costing the U.S. Treasury.
TIGTA’s recommendation: bring lax employers and errant taxpayers into compliance. The IRS’ response: It will beef up employer education and conduct targeted audits for taxpayers who appear to have excess 401(k) deferrals, especially those with multiple 401(k)s.
The TIGTA report found that the vast majority of taxpayers comply with 401(k) contribution limits. Still, some 401(k) plans don’t have controls in place to prevent employees from exceeding the annual limits. And the bigger problem: Some taxpayers get tripped up when contributing to multiple 401(k) plans. Worse, some folks appear to be repeat offenders, having made excess contributions at least three years in a row.
Based on a sample of 2014 tax returns, TIGTA estimates that 1,400 taxpayers appeared to have gone over the limits when contributing to one 401(k) and would owe additional taxes of about $8 million if found to be noncompliant. And an estimated 13,200 taxpayers who contributed to multiple 401(k)s potentially exceeded the limits and would owe additional taxes of about $33 million.
Read more @Forbes