Popular search terms:

MSP #16: Math Error Notices

The IRS Does Not Clearly Explain Math Error Adjustments, Making it Difficult for Taxpayers to Understand and Exercise Their Rights

TAS Recommendations and IRS Responses

1
1.

TAS RECOMMENDATION #16-1

Organize a team, which would include TAS, to review all current explanations of math error adjustments, and rewrite where necessary, to ensure the congressional directive is being met.

IRS RESPONSE TO RECOMMENDATION: The IRS disagrees with this recommendation. There is already a process in place to create and revise taxpayer correspondence. When a business notice owner identifies a need for a new or revised correspondence product,  a request is submitted to the Office of Taxpayer Correspondence (OTC) for services through the “Green Button” application. OTC will work all aspects of correspondence development, including compliance with the Plain Language Writing Act of 2010 and Chief Counsel review for legal sufficiency and submission of programming requirements. Prior to correspondence implementation, TAS and other stakeholders are given an opportunity for review and provide feedback on the product.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The IRS’s established process for reviewing math error notices has failed to ensure these notices reflect Congress’s desire for clear, simple math error correspondence.  When enacting math error authority, Congress required the IRS to provide taxpayers with a clear explanation of the math error adjustment. However, as discussed in the Most Serious Problem, the more than two million math error notices issued annually by the IRS are often vague and unclear and do not comply with Congress’ directives on how the IRS should explain a math error adjustment to the taxpayer. This leaves taxpayers confused as to what adjustments the IRS has made to his or her return. To address the inadequate math error notices, it is essential IRS establishes a team, including TAS, to create standard and non-standard templates for math error notices that meet Congress’ desire for clarity and simplicity.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

2
2.

TAS RECOMMENDATION #16-2

Set forth an IRM template for non-standard math error adjustment explanations that provides an outline of the elements to be included in the explanation, with examples. The IRM should also require that these explanations be developed and approved by the OTC, Chief Counsel, and the National Taxpayer Advocate or delegate.

IRS RESPONSE TO RECOMMENDATION: IRS will add IRM guidelines for crafting math error explanations that do not have a taxpayer notice code (TPNC) or language specified in the current IRM guidance. During calendar year 2014 non-standard (TPNC 100) explanations represented 0.66% of all ME error explanations 2,266,658 explanations issued, only 14,878 used a non-standard explanation. The non-standard notices have unique circumstances the guidelines will include the elements that all explanations should include. It is impractical to develop a template for all possible circumstances however, IRS currently provides specific guidance and text for several non-standard error codes situations, including: Multiple filers in the same return IRM 3.12.3.3.21,Unemployment Compensation IRM 3.12.3.77.3.13, State Income Tax Refund IRM 3.12.3.77.3.8, Schedule H, Correction Procedures IRM 3.12.3.72.2.3, IRA Distributions IRM 3.12.3.77.3.11. In the rare occasion, a non-standard ME explanation is required, IRM 3.12.3.2.6.9 provides instructions and procedures for employees to follow for TPNC 100, and IRM 3.14.1.6.17.12.7, states that “A 100 percent review of Key 100s is required each cycle. This will ensure they are mailed with the appropriate explanation(s).” Adding the required elements of an explanation will aid in the creation and review of the non-standard explanations.

Update: The Internal Revenue Manuals (IRMs) 3.12.2 and 3.12.3 were revised in February 2016, (IPUs 16U0393 (3.12.2.2.6.10) and 16U0406 (3.12.3-2). The changes clarify using only approved IRM text for Taxpayer Notice Code, (TPNC) 100 management approval is required when the approved text does not address the issue. The changes also incorporate procedures for completing Form 12126, TPNC 100 Worksheet, (or equivalent) and routing to Notice Review for entry of TPNC 100.

CORRECTIVE ACTION: IRS will add general IRM guidelines to the January 2016 IRM 3.12.3 update for employees who compose non-standard ME explanations.

The IRM update process includes reviews by TAS and other stakeholders.

TAS RESPONSE: TAS is pleased the IRS will provide guidance on the particular elements non-standard math error notices should include.  Although TAS understands such notices will vary according to a taxpayer’s particular circumstances, we believe it is essential for the IRS to include a non-standard template which will illustrate how information about a math error adjustment in these non-standard situations can be incorporated in a clear and simple manner. Further, TAS reiterates its desire to be included in this IRM revision process.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

3
3.

TAS RECOMMENDATION #16-3

Update math error notices to clearly disclose that the taxpayer may request abatement without providing an explanation or substantiating documentation.

IRS RESPONSE TO RECOMMENDATION: When resources will allow, the IRS will develop language to include on math error notices to  disclose that taxpayers may request abatement without providing an explanation or substantiating documentation.

Update: On 5/16/17, Submission Processing submitted a Revised Correspondence Request (Green Button) to OTC, with a projected timeframe of FY19 if resources are available.  The request included the notice language requested by TAS.

Update: 8/22/2019 –  CP 11, Math Error: Balance Due of $5 or More, was changed to include language specific to the recommendation.

Excerpt:

  • If you contact us in writing within 60 days of the date of this notice, we’ll reverse the change we made to your account. You don’t need to provide an explanation or additional documents when you request the reversal, but we’ll consider any information you provide us. However, if you don’t provide us additional information that justifies the reversal and we believe the reversal is in error, we may forward your case for audit. After we forward your case, the audit staff will contact you within 5 to 6 weeks to fully explain the audit process and your rights, and you may need to provide an explanation or additional documents. After the audit, you’ll have formal appeal rights, including the right to appeal our decision to the United States Tax Court before you have to pay the additional tax.
  • If you don’t contact us within 60 days, the change will not be reversed and you must pay any additional tax. You’ll have no right to appeal our decision before payment of any additional tax. Following payment of the tax, however, you may file a claim for refund to dispute the change. Generally, you must submit the claim within 3 years of the date you filed the tax return, or within 2 years of the date of your last payment for this tax, whichever is later. W&I considers this corrective action closed.

CORRECTIVE ACTION: When resources will allow, the IRS will develop language to include on math error notices to  disclose that taxpayers may request abatement without providing an explanation or substantiating documentation.

TAS RESPONSE: TAS is pleased the IRS has agreed to revise its math error notices to clearly disclose the taxpayer may request abatement without providing an explanation or substantiating documentation. However, the IRS should make this change immediate and not contingent on the availability of resources. Informing taxpayers of their rights goes to the heart of due process and the fundamental fairness of the summary assessment procedure. Procedural due process is at the core of the U.S. tax and legal system and cannot be arbitrarily denied based on a “lack of resources” argument. A taxpayer’s right to appeal an IRS decision in an independent forum is critical to the tax administration system. Therefore, it is essential the IRS revises math error notices to disclose taxpayers may request abatement without providing an explanation or substantiating documentation promptly.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

en English
X