TaxAlerts Tax Article
September 2011 | Written by: Karen Reed, EA
The IRS has the authority adjust our tax returns to correct math errors without performing an audit. And while we have the right to dispute adjustments the IRS makes to our returns, a recent review by the US Treasury Inspector General for Tax Administration (TIGTA) found that the Agency’s process for responding to disputes is in need of improvement.
According to TIGTA’s July report, the IRS issued approximately 8.6 million math error notices during a period of approximately seven months during 2010. Of these notices, 98.4 percent were agreed to by the taxpayer. Given the IRS’s known history of sending out erroneous notices, this indicates that many taxpayers are paying tax bills that are not necessarily correct. In fact, in our experience at TaxResources, we have seen many instances in which a taxpayer has mistakenly paid the bill without having a professional review the notice first.
TIGTA reviewed 260 of the 133,186 responses from taxpayers who disputed the adjustments, finding that 104 of the cases were not resolved in a timely manner and 43 were not handled accurately. Extrapolating from these numbers, TIGTA estimates that 17,627 taxpayers may not have had their responses resolved accurately during the review period. These inaccuracies could result in approximately $39.5 million in lost revenue to the Federal Government and approximately $29.2 million in tax benefits that taxpayers will not receive over the next five years, the report estimates.
As a result of these findings, TIGTA has recommended that the IRS (1) develop a process to monitor timeliness of working responses to math error adjustments, (2) prioritize the working of written responses relating to Earned Income Tax Credit (EITC) math error adjustments, and (3) reinforce to staff the need to thoroughly and accurately work responses to math error adjustments. Though the IRS agreed to make improvements in training staff about the importance of thoroughly and accurately responding to taxpayer disputes of math error adjustments, the Agency said a process for monitoring timeliness is already in place and disagreed that a new one is needed. The IRS also disagreed that changes are needed in their processes for handling of EITC disputes.
One of our most important rights as taxpayers is our right to representation. Concerns about both the accuracy of IRS notices and the handling of disputes make it clear that representation by an experienced tax professional is important when it comes to any type of IRS contact, even one as simple as mathematical correction letter.