A newly introduced bipartisan bill seeks to force the Internal Revenue Service (IRS) to make its clerical and math error notices sent to taxpayers easier to understand so that filers can potentially avoid refund reductions.
When a tax return is found to have some simple errors, the IRS has the authority to correct them. Once corrections are made, the agency sends error notices. If a taxpayer feels the error correction done by the IRS has to be reversed, they must contact the agency. If the taxpayer fails to respond within 60 days, they forfeit their right to challenge the IRS’s correction and the agency moves forward with the return. The IRS error correction can result in refunds getting reduced, thus harming taxpayers.
Senators Elizabeth Warren (D-Mass.) and Bill Cassidy (R-La.) introduced the Internal Revenue Service Math and Taxpayer Health (IRS MATH) Act on Thursday with the aim of improving such error notices sent by the IRS, according to a press release on April 18.
“Each year, millions of Americans receive math error notices reducing their tax refunds, but find the notices ‘vague and confusing’ because they do not explain what error the IRS has corrected or that taxpayers have only 60 days to challenge the IRS’s position,” the release said.
“The notices often list several potential errors that may have been made rather than specifying the exact issue, and they do not properly notify taxpayers of ways to contest the IRS adjustment, resulting in compounding errors on future tax returns and further risks to taxpayers.”
IRS MATH Act requires the tax agency to improve error notices in three ways—mention the line item the IRS is changing, state the reason, and “clearly list the taxpayer’s required response date.”
The act also requires the IRS to coordinate with the National Taxpayer Advocate to determine the benefit of sending error notices by certified or registered mail. The National Taxpayer Advocate is a leadership position within the IRS’s Taxpayer Advocate Service (TAS).
“Filing your taxes can get confusing—and sometimes, mistakes happen,” said Sen. Warren. “And when they do, taxpayers shouldn’t be forced to decipher confusing, intimidating, and financially impactful letters from the IRS. It’s time to improve procedures and notices that correct these errors so that hardworking Americans can get the money they’re entitled to and get back to their daily lives.”
Sen. Cassidy pointed out that “if there’s a mistake on a tax return, the IRS needs to explain it in plain English and there must be clear lines of communication. Taxpayers should have every opportunity to keep their hard-earned income.”
Math Errors
According to the IRS, the agency sent nearly 13 million notices of math errors to taxpayers in fiscal year 2021.For tax year 2022, the agency sent 2.65 million such notices. The top errors during this tax year were related to the child tax credit, followed by recovery rebate credit, tax calculation, adjusted gross/taxable income, standard/itemized deduction, withholding or excess Social Security payments, and earned income tax credit.
After the IRS received $80 billion in funds from the Inflation Reduction Act (IRA), it published a strategic operating plan for fiscal years 2023–2031 in which the agency listed identifying issues like math errors as a key problem it intends to focus on.
“The IRS will notify taxpayers and tax professionals about potential issues and allow them to make corrections at the point of filing, reducing the need to resolve errors after filing,” it said.
“We will advance our ability to systematically check each electronically filed return for errors in real-time, match it against available third-party and internal data, and evaluate the taxpayer’s eligibility for credits and deductions.”
In a post on April 2022, the Taxpayer Advocate Service asked taxpayers to ensure they contest any math error made by the IRS within the 60-day limit set by the agency.
If a taxpayer fails to do so, “the IRS can immediately assess the liability, and move toward its normal collection procedures if the assessment is not paid, or retain the refund not paid due to the math error adjustment. After the 60-day time period has expired, the taxpayer can no longer challenge the adjustment in U.S. Tax Court.”
“Instead, the taxpayer must challenge the adjustment in the U.S. District Court or the U.S. Court of Federal Claims. If the taxpayer has a balance due, the taxpayer must first pay the tax and file a claim for refund to challenge the adjustment in one of these courts.”
The due date for contacting IRS to contest the agency’s math error correction is provided in the top right-hand corner of the first page of the notice.
The IRS issues multiple variations of its math error notices. One of the most common has a notice number of CP11 and refers to errors corrected because the agency believed there was a miscalculation.
CP12 notice number is used when the IRS corrects one or more mistakes on the taxpayer’s returns. As a result, the taxpayer shall either be due a refund or their original refund amount can be changed.
