A new report from the Treasury Inspector General for Tax Administration concludes that the IRS needs to improve the timeliness and accuracy of its response to taxpayer complaints about math error adjustments.
The IRS has the authority to adjust tax returns to correct math errors without performing an audit. These include errors of arithmetic and, in certain instance defined by law, missing or incorrect social security numbers, missing documentation, and claims for tax credits above the allowable amounts. The IRS notifies the taxpayer of math error adjustments so they may accept or contest the adjustment.
Based on the more than 400 math error conditions that could result in an IRS adjustment to taxpayers’ returns in 2010, TIGTA reviewed a sample of math error adjustment notices issued between January and July of 2010 to determine IRS timeliness and accuracy in resolving them.
The IRS issued approximately 8.6 million math error notices during that period; 98 percent of recipients agreed with the adjustments to their returns, while 133,186 (1.6 percent) taxpayers disputed the adjustments.
TIGTA estimated that 12,232 taxpayer responses may not have been resolved during that reviewed period and that 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.
“Delays in addressing taxpayers’ disputes of math error adjustments could result in taxpayers not timely receiving tax benefits to which they are entitled or in a loss of revenue to the federal government,” said J. Russell George, treasury inspector general for tax administration, in a statement.
TIGTA’s recommendations to the IRS include: developing a process to monitor the timeliness of working responses to math error adjustments, prioritizing the working of written responses related to earned income tax credit math error adjustments, and reinforcing to accounts management function assistors the need to thoroughly and accurately work responses to math error adjustments.
The IRS agreed to reinforce the need to thoroughly and accurately work responses to math error adjustments but disagreed with the other recommendations.
The full TIGTA report is available here.
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