The Internal Revenue Service has not always followed the proper procedures when resolving discrepancies in the money owed by taxpayers for the alternative minimum tax, according to a new report.
The IRS provides taxpayers with various online tools to determine whether they will have to prepare a Form 6251 to determine their AMT liabilities. While the tools generally seem to work, the complexity of the AMT causes errors in determining and computing the tax, noted a report by the Treasury Inspector General for Tax Administration. In 2006, computer checks identified about 226,000 discrepancies between the AMT figures reported, or not reported, by taxpayers and the amounts computed by the IRS.
When a discrepancy occurs, the tax return is sent to an IRS tax examiner, who looks for obvious input errors or misplaced entries. If the examiner cannot resolve the issue, a notice is sent to the taxpayer asking for additional information or saying the AMT calculation was incorrect.
TIGTA reviewed a random sample of 52 tax returns filed in 2006 on which IRS computers identified a discrepancy. In all 52 cases, computer checks correctly identified a discrepancy, and the cases were correctly sent to tax examiners for further review. However, the examiners did not follow procedures when resolving 11 of the 52 cases. Of the 11 cases, three resulted in the examiners incorrectly computing the amount of tax owed.
TIGTA recommended that the IRS provide information to tax examiners on the importance of correctly resolving AMT discrepancies and highlighting specific issues that could lead to incorrect resolution. IRS officials agreed with the recommendation. The IRS plans to emphasize the issue in its annual training for its submission-processing division and to issue a reminder on the division's "Hot Topics" Web site during the filing season.
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