New Bipartisan Bill Aims to Improve IRS Math Error Notices
Tax season can be a confusing and stressful time for many Americans, and the Internal Revenue Service (IRS) has come under fire for its math error notices that often leave taxpayers scratching their heads. However, a new bipartisan bill, the Internal Revenue Service Math and Taxpayer Health (IRS MATH) Act, seeks to address this issue by requiring the IRS to provide clearer and more understandable error corrections.
Introduced by Senators Elizabeth Warren and Bill Cassidy, the IRS MATH Act aims to make it easier for taxpayers to understand the corrections made by the IRS and potentially avoid refund reductions. Currently, when the IRS finds simple errors in a tax return, it has the authority to correct them and sends out error notices. However, these notices are often vague and confusing, failing to explain what error has been corrected or that taxpayers only have 60 days to challenge the IRS’s position.
The IRS MATH Act proposes three key improvements to error notices. First, it requires the IRS to mention the specific line item that has been changed, providing clarity to taxpayers. Second, it mandates that the reason for the correction be stated clearly in the notice. Finally, it insists that the taxpayer’s required response date be clearly listed, ensuring that individuals are aware of the deadline for challenging the correction.
In addition to these improvements, the bill also calls for coordination between the IRS and the National Taxpayer Advocate to determine the benefits of sending error notices by certified or registered mail. The National Taxpayer Advocate, a leadership position within the IRS’s Taxpayer Advocate Service (TAS), will play a crucial role in ensuring that taxpayers receive timely and accurate information regarding any errors in their tax returns.
Both Senators Warren and Cassidy emphasize the importance of clear communication and transparency from the IRS. Senator Warren states, “Taxpayers shouldn’t be forced to decipher confusing, intimidating, and financially impactful letters from the IRS,” while Senator Cassidy adds, “Taxpayers should have every opportunity to keep their hard-earned income.”
The IRS itself acknowledges the need for improvement in this area. In fiscal year 2021, the agency sent nearly 13 million notices of math errors to taxpayers, and for tax year 2022, 2.65 million such notices were sent out. The most common errors identified during this period were related to the child tax credit, recovery rebate credit, tax calculation, adjusted gross/taxable income, standard/itemized deduction, withholding or excess Social Security payments, and earned income tax credit.
To address these issues, the IRS has outlined a strategic operating plan for fiscal years 2023–2031, in which it aims to identify and resolve math errors at the point of filing, reducing the need for post-filing corrections. By implementing real-time checks and leveraging third-party and internal data, the IRS hopes to evaluate taxpayers’ eligibility for credits and deductions more accurately.
The Taxpayer Advocate Service has also urged taxpayers to contest any math errors made by the IRS within the 60-day limit set by the agency. Failure to do so can result in the IRS assessing the liability immediately or retaining the refund due to the math error adjustment. After the 60-day period expires, taxpayers can no longer challenge the adjustment in U.S. Tax Court and must pursue alternative legal avenues.
The introduction of the IRS MATH Act is a step in the right direction towards improving taxpayer rights and reducing confusion during tax season. By requiring clearer and more informative error notices, taxpayers will have a better understanding of any corrections made by the IRS and will be able to take appropriate action within the given timeframe. With bipartisan support and an emphasis on transparency, this bill has the potential to benefit millions of Americans and ensure a fairer tax system for all.
