The post is by Ashlea Ebeling of Forbes.com.

The downside of all the saving for retirement we do is that when it comes to taking the money out, there’s usually a tax bill to face. The taxpayer must determine if this income is totally taxable, partially taxable or not taxable at all.

Lots of folks are getting it wrong. The Internal Revenue Service is ferreting them out, and more could be done to make sure everyone is paying up, according to a new report, "Opportunities Exist to Identify More Taxpayers Who Underreport Retirement Income," by the treasury inspector general for tax administration.

"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," the report says.

How much is at stake? In a tax gap study for 2001, the IRS estimated that as much as $4.2 billion could be attributed to underreported retirement income. For tax years 2008 and 2009, the IRS reported that taxpayers filed 21 million returns with IRA income totaling $293 billion and 52.2 million returns with pension income totaling $1 trillion. (Post continues below video.)

The way the IRS determines if you’re correctly reporting taxable retirement income is by matching what you put on your 1040 with forms that your employer or financial institution send to you and the IRS (Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans). The IRS’s "automated underreporter program" made tax assessments of $607.5 million on 217,811 tax returns in tax year 2007, based on reviewing 1099-Rs.

But the IRS could have picked up more taxable retirement income if the 1099-Rs were made clearer, the report says. The inspector general found that taxpayers receive Form 1099-Rs with "contradictory or confusing information regarding the amount of taxable retirement income to put on their tax returns."

The inspector general found forms listing $107.5 billion in taxable amounts in total that all had a box checked that said taxable amount not determined." It also found forms with distributions totaling $67 billion where the taxable amount was left blank. "This contradictory or absent information can confuse taxpayers, resulting in them reporting the incorrect amounts of retirement income on their tax returns," the report says.

The report's top recommendation is to revise the Form 1099-R to clarify the meaning of "taxable amount not determined": The box should clearly communicate that the taxpayer is responsible for determining the taxable amount.

The IRS conceded in its response to the report that the rules around reporting taxable retirement income represent one of the more complex areas of the tax law, and agreed that it would revise the instructions for Form 1099-R to make it clear that taxpayers are responsible for determining the taxable amount of their retirement income. And the IRS plans to study the feasibility of capturing additional information on a form to be filed with the tax return.

The IRS dismissed a  recommendation to include dates of retirement income distributions on the 1099-R as largely unworkable. (This would catch folks who, instead of doing direct institution-to-insti​tution transfers, cash out their retirement money and miss the 60-day rollover period for moving it back into a qualified plan.)

The national taxpayer advocate has written about the complexity of the retirement savings provisions in the tax code, noting that there are more than 12 alternative vehicles with different and sometimes seemingly conflicting rules.

It behooves you to study the rules and keep track of your contributions to retirement accounts -- whether they are made on a pretax or after-tax basis -- to make sure that you don’t run into the opposite problem of overpaying  tax on retirement income. And you’ll have your records at the ready if you hear from the IRS.

More from Forbes and MSN Money:

• Can boomer women afford to retire?
• Eight reasons retirees don’t buy annuities
• Four ways to take control of your retirement
• Big tax cheats: Small businesses
• Yikes! I owe taxes on canceled debt?
• Don't qualify for Roth? Use 'back door'