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MSP #12: Math Error Notices

Although the IRS Has Made Some Improvements, Math Error Notices Continue to Be Unclear and Confusing, Thereby Undermining Taxpayer Rights

TAS Recommendations and IRS Responses

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1.

TAS RECOMMENDATION #12-1

Measure the abatement rates of its math errors and use the data to assess which math errors are most problematic and which notices need to be revised for clarity.

IRS RESPONSE TO RECOMMENDATION: The IRS can measure abatement rates and the associated dollar amounts but cannot systemically determine that those abatements occurred because of a math error. Measuring the abatement rates would involve identifying every math error related adjustment in our systems.  There are two major transaction codes to identify an additional assessment or abatement, respectively. IRS employees input additional reason codes and source codes as applicable. There is no singular code (transaction, reason, or source code) that identifies assessment or abatement specific to math  errors.

The Internal Revenue Manual specifies the transaction codes and source codes for employees to use in resolving a math error.  Thus, the IRS can identify if a taxpayer had a math error on the return and if there was a negative adjustment (abatement of tax) but, due to the subjective nature of reason and source codes, we cannot say with certainty that the abatement was related to a particular math error.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate remains concerned that some math errors unnecessarily place burdens on taxpayers whose returns did not actually contain errors or who were entitled to tax benefits that the IRS summarily denied.  As mentioned in the Most Serious Problem, a 2011 TAS study measured math error authority and dependent Taxpayer Identification Numbers (TINs).  The study found that 55 percent of these types of errors were abated, and 56 percent of the abatements could have been identified by the IRS with internal data. In a sample of cases where taxpayers had a missing or incorrect dependent TIN math error and received no refund, 41 percent of the cases that received no adjustment could have been corrected, and all the refunds allowed, by the IRS examining its own records. Another 11 percent of these cases could have been at least partially corrected by historical data. This translates to more than 40,000 taxpayers who may have not received refunds that they were entitled to.  These taxpayers lost an average of $1,274.49.

TAS understands there may be certain technical constraints, but measuring abatement rates of math errors could allow the IRS to proactively prevent issues like the one TAS found in its 2011 study from occurring. Thus, the National Taxpayer Advocate continues to recommend that the IRS do so.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

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2.

TAS RECOMMENDATION #12-2

On all math error notices, cite to the actual line on the return that the IRS is changing, and the reason why the IRS is making the change (e.g., “you claimed 6 dependents on line x, but multiplied the dependency exemption by 7 on line y”).

IRS RESPONSE TO RECOMMENDATION: ​Math error notices currently cite the recommended detail with tax return line number references in the “changes to your 20XX tax return” section.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate appreciates the improvements to math error notices, which do include the line number on the return. The National Taxpayer Advocate’s recommendation was intended to advocate for including the line numbers at issue in the Taxpayer Notice Code (TPNC) explanation of the math error, such as the example given in her recommendation (“you claimed 6 dependents on line x, but multiplied the dependency exemption by 7 on line y”). The National Taxpayer Advocate believes that including the line numbers in the explanation will further benefit taxpayer understanding of the math error issue with their return.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

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

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3.

TAS RECOMMENDATION #12-3

Emphasize the Taxpayer Bill of Rights, and specific taxpayer rights on math error notices by including the taxpayer’s right to challenge the IRS and be heard, and the right to appeal, the specific deadline date the taxpayer must respond by, and the loss of their right to make a prepayment petition of the IRS’s change to their return to the Tax Court, if the taxpayer does not respond by the date in the notice.

IRS RESPONSE TO RECOMMENDATION: The IRS agrees it is important for taxpayers to understand their rights.  Publication 1, Your Rights  as a Taxpayer, is included with math error notices.  We continually look for opportunities to   improve the clarity of our letters and notices in order to improve the customer experience, and we are working with the Taxpayer Advocate to revise the language in our math error notices on the Taxpayer Bill of Rights (TBOR), Taxpayer Advocate Service (TAS), and Low Income Taxpayer Clinics (LITCs).  We will take steps to emphasize the taxpayer’s right to challenge the IRS and be heard   and the right to appeal. We will also provide greater emphasis on response times and the right to make a prepayment petition with the U.S. Tax  Court.

Update: The IRS worked with TAS to make the following revisions to math error notices (CP10, CP11, CP12, CP13 and CP16) to include:
– Page one will contain the last date to respond to the notices
-On subsequent page(s) updates to the Appeals Rights language will include the specific date the taxpayer must contact the IRS to preserve their rights to appeal the change.
These updates are scheduled to be implemented January 2021.

Update: Math error notices CP10, CP11 and CP13 have been redesigned to improve clarity. Taxpayer Bill of Rights (TBOR), Taxpayer Advocate Service (TAS), and Low Income Taxpayer Clinic (LITC) language has been revised and added to these notices. Emphasis has been placed on formal appeal rights, including the right to appeal to the U.S. Tax Court. Implementation for these updates is mid-year 2021. CP12 and CP 16 have also been revised to improve clarity and add TBOR, TAS, and LITC language, as well as emphasis on appeal rights.

Due to limited IT resources paired with unexpected legislative COVID-19 demand. Updates to these two notices has been pushed to FY2022.

CORRECTIVE ACTION: We continually look for opportunities to   improve the clarity of our letters and notices in order to improve the customer experience, and we are working with the Taxpayer Advocate to revise the language in our math error notices on the Taxpayer Bill of Rights (TBOR), Taxpayer Advocate Service (TAS), and Low Income Taxpayer Clinics (LITCs).  We will take steps to emphasize the taxpayer’s right to challenge the IRS and be heard   and the right to appeal. We will also provide greater emphasis on response times and the right to make a prepayment petition with the U.S. Tax  Court.

The IRS worked with TAS to make the following revisions to math error notices (CP10, CP11, CP12, CP13 and CP16) to include:
– Page one will contain the last date to respond to the notices
-On subsequent page(s) updates to the Appeals Rights language will include the specific date the taxpayer must contact the IRS to preserve their rights to appeal the change.

These updates are scheduled to be implemented January 2021.

CP12 and CP 16 have also been revised to improve clarity and add TBOR, TAS, and LITC language, as well as emphasis on appeal rights. Due to limited IT resources paired with unexpected legislative COVID-19 demand, updates to these two notices has been pushed to FY2022.

TAS RESPONSE: The National Taxpayer Advocate appreciates the IRS’s agreement to implement the recommendation in full. TAS looks forward to working with the IRS to revise its language to help improve taxpayer understanding of their rights, necessary actions, options, and deadlines.

Update: TAS review shows that notices were revised as requested in February of 2022.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open):

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4.

TAS RECOMMENDATION #12-4

Further emphasize the steps that taxpayers may take (pay or file to petition) on the first page of its math error notices, so that taxpayers are clear on what their options are in response to notices. The section heading that discusses appeal options should be similarly as big and bold as the section heading discussing payment.

IRS RESPONSE TO RECOMMENDATION: ​The IRS agrees that taxpayers need clear information regarding their options.  The IRS has designed math error notices to ensure the taxpayer has all information needed to take appropriate actions. With the current notice design there is insufficient space to display appeals process information on Page 1; however, the IRS will take steps to emphasize taxpayers’ appeals options.

Update: The IRS worked with TAS to add bold print to the appeal rights section of the math error notices (CP10, CP11, CP12, CP13 and CP16) and included options for contact and last date contact should be made. Due to space constraints and the adoption of the request to move the explanation of the math error, this language could not be included on the first page.

Update: Notices have been redesigned to improve clarity and ensure the taxpayer has all information needed to take appropriate actions. Although there is insufficient space to display the appeals process on the first page of these notices, appeals options have been placed earlier in the notice. The section discussing appeals rights will also include bolded text.  CP 10, CP11 and CP 13 implementation is mid-year 2021.

Due to limited IT resources paired with unexpected legislative COVID-19 demand, the updates to CP 12 and CP 16 were pushed to FY2022.

CORRECTIVE ACTION: The IRS has designed math error notices to ensure the taxpayer has all information needed to take appropriate actions. With the current notice design there is insufficient space to display appeals process information on Page 1; however, the IRS will take steps to emphasize taxpayers’ appeals options.

The IRS worked with TAS to add bold print to the appeal rights section of the math error notices (CP10, CP11, CP12, CP13 and CP16) and included options for contact and last date contact should be made. Due to space constraints and the adoption of the request to move the explanation of the math error, this language could not be included on the first page. These updates are scheduled to be implemented in January 2021.

Notices have been redesigned to improve clarity and ensure the taxpayer has all information needed to take appropriate actions. Although there is insufficient space to display the appeals process on the first page of these notices, appeals options have been placed earlier in the notice. The section discussing appeals rights will also include bolded text.  CP 10, CP11 and CP 13 implementation is mid-year 2021.

Due to limited IT resources paired with unexpected legislative COVID-19 demand, the updates to CP 12 and CP 16 were pushed to FY2022.

TAS RESPONSE: The National Taxpayer Advocate appreciates that the IRS will take steps to further emphasize taxpayers’ appeals options.  The National Taxpayer Advocate recognizes that there is limited space on the first page of the notice. In FY 2020, TAS will be designing sample notices, including a math error notice, that will be designed to include the recommended information on page one of the notices, including information on the taxpayer’s right to appeal and deadline to exercise that right. This may act as a guide for possible future IRS redesign of its notices and for how to implement TAS’s notice recommendations.

Update: TAS review shows that notices were revised as requested in February of 2022.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED:  Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open):

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5.

TAS RECOMMENDATION #12-5

Place the explanation of the math error on the first page of the notice, not the third or fourth, so that taxpayers see and read the explanation before they read about the numerous payment options, which nudges them to pay and not question the purported error or if they should appeal. Page one should also include the deadline date to appeal, and what taxpayers lose if they do not appeal, as well as information about the TBOR, TAS, and LITCs.

IRS RESPONSE TO RECOMMENDATION: ​The IRS agrees the taxpayer should receive a detailed explanation of the math error earlier in the notice. With the current notice design there is insufficient space to display the detailed explanation on Page 1; however, the explanation can be moved to an earlier position in the notice. The IRS will ensure taxpayers have access to information on the appeal due date, Taxpayer Bill of Rights (TBOR), Taxpayer Advocate Service (TAS), and Low Income Taxpayer Clinics  (LITCs).

Update: The IRS worked with TAS to make the following revisions to math error notices (CP10, CP11, CP12, CP13 and CP16) to include:
– Explanation of the math error will begin on the first page.
– Updated notices headers includes the last date the taxpayer can respond to the notice.
NOTE:  This date has also been added to the appeals language section which appears on a subsequent page.

The IRS continues to collaborate with TAS to revise language and identify notices needing Taxpayer Bill of Rights (TBOR), Taxpayer Advocate Service (TAS), and  Low Income Taxpayer Clinics (LITCs) language.

Update: Math error notices have been redesigned for clarity. Formal appeal rights have been moved to appear earlier in the notice and TBOR, TAS and LITC language has been added. CP 10, CP11 and CP 13 implementation is mid-year 2021 and the implementation for the CP12 and CP 16 is FY2022.

CORRECTIVE ACTION: With the current notice design there is insufficient space to display the detailed explanation on Page 1; however, the explanation can be moved to an earlier position in the notice. The IRS will ensure taxpayers have access to information on the appeal due date, Taxpayer Bill of Rights (TBOR), Taxpayer Advocate Service (TAS), and Low Income Taxpayer Clinics  (LITCs).

The IRS worked with TAS to make the following revisions to math error notices (CP10, CP11, CP12, CP13 and CP16) to include:
– Explanation of the math error will begin on the first page.
– Updated notices headers includes the last date the taxpayer can respond to the notice.
NOTE:  This date has also been added to the appeals language section which appears  on a subsequent page.

The IRS continues to collaborate with TAS to revise language and identify notices needing Taxpayer Bill of Rights (TBOR), Taxpayer Advocate Service (TAS), and  Low Income Taxpayer Clinics (LITCs) language. These updates are scheduled to be implemented by January 2021.

Math error notices have been redesigned for clarity. Formal appeal rights have been moved to appear earlier in the notice and TBOR, TAS and LITC language has been added. CP 10, CP11 and CP 13 implementation is mid-year 2021 and the implementation for the CP12 and CP 16 is FY2022.

TAS RESPONSE: The National Taxpayer Advocate appreciates that the IRS will consider moving the explanation of the math error(s) to an earlier position in the notice. The National Taxpayer Advocate recognizes that there is limited space on the first page of the notice.  In FY 2020, TAS will be designing sample notices, including a math error notice, that will be designed to include the recommended information on page one of the notice, including the explanation of the error and information on TBOR, TAS, and LITCs.  This may act as a guide for possible future IRS redesign of its notices and for how to implement TAS’s notice recommendations.

Update: TAS review shows that notices were revised as requested in February of 2022.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): 

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6.

TAS RECOMMENDATION #12-6

Work directly with TAS on notice redesign to ensure notice clarity and adequate inclusion of taxpayer rights on math error notices.

IRS RESPONSE TO RECOMMENDATION: The IRS agrees with the importance of the clarity and inclusion of taxpayer rights on all notices and letters. TAS currently participates in the review and feedback of all new and revised correspondence. IRS employees participate on the Taxpayer Advocacy Panel (TAP) to support recommendations for notice improvement. We are also working with TAP to revise math error notices and we are currently collaborating with the Taxpayer Advocate to revise the language in these notices on the Taxpayer Bill of Rights (TBOR), Taxpayer Advocate Service (TAS), and Low-Income Taxpayer Clinics (LITCs). In addition, Publication 1, Your Rights as a Taxpayer, is included with math error notices to ensure the taxpayer is aware of appeal rights.

Update: IRS worked with TAS and the business owner to redesign the math error notices  (CP10, CP11, CP12, CP13 and CP16) to ensure clarity. The section providing information on return changes has been moved to earlier in the notices and taxpayer appeal rights, including a specific date the taxpayer must make contact, and are adequately included under the “what you need to do” section of these notices.

Update: IRS employees participate on the Taxpayer Advocacy Panel (TAP) to support recommendations for notice improvement. We also collaborated with the Taxpayer Advocate to revise language regarding the Taxpayer Bill of Rights (TBOR), Taxpayer Advocate Service (TAS), and Low-Income Taxpayer Clinics (LITCs). This language will be added to the CP 10, CP11 and CP 13 mid-year 2021 and the CP12 and CP 16 is FY2022.

CORRECTIVE ACTION: IRS employees participate on the Taxpayer Advocacy Panel (TAP) to support recommendations for notice improvement. We are also working with TAP to revise math error notices and we are currently collaborating with the Taxpayer Advocate to revise the language in these notices on the Taxpayer Bill of Rights (TBOR), Taxpayer Advocate Service (TAS), and Low-Income Taxpayer Clinics (LITCs). In addition, Publication 1, Your Rights as a Taxpayer, is included with math error notices to ensure the taxpayer is aware of appeal rights.

Update: IRS worked with TAS and the business owner to redesign the math error notices  (CP10, CP11, CP12, CP13 and CP16) to ensure clarity. The section providing information on return changes has been moved to earlier in the notices and taxpayer appeal rights, including a specific date the taxpayer must make contact, and are adequately included under the “what you need to do” section of these notices. These changes will be implemented in the January 2021 revision.

IRS employees participate on the Taxpayer Advocacy Panel (TAP) to support recommendations for notice improvement. We also collaborated with the Taxpayer Advocate to revise language regarding the Taxpayer Bill of Rights (TBOR), Taxpayer Advocate Service (TAS), and Low-Income Taxpayer Clinics (LITCs). This language will be added to the CP 10, CP11 and CP 13 mid-year 2021 and the CP12 and CP 16 is FY2022.

TAS RESPONSE:  The National Taxpayer Advocate appreciates that the IRS participates on the TAP and collaborating with the National Taxpayer Advocate to revise the language of notices regarding TBOR, TAS, and LITCs.  However, the National Taxpayer Advocate recommends that TAS be more involved in the initial notice design and redesign process, to advocate in the initial stages for what TAS believes will be the best ways to promote taxpayer rights and understanding. This would be an improvement over the current system where the IRS produces notices and the National Taxpayer Advocate then recommends changes, when it is more difficult to do than in the initial design and redesign process.

Update: TAS review shows that notices were revised as requested in February of 2022.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): 3/31/2022

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7.

TAS RECOMMENDATION #12-7

Use internal data to make corrections to returns that benefit taxpayers, instead of burdening taxpayers with unnecessary math error assessments that are later abated.

IRS RESPONSE TO RECOMMENDATION: The IRS agrees with the importance of identifying opportunities to relieve taxpayer burden and does so within our statutory limits. The IRS currently has legislative authority to correct some clerical errors, commonly made by taxpayers, during the processing of the return. For example, we use the taxpayer’s current year return to “fix” clerical errors, such as a document missing a Social Security number (SSN) by verifying the taxpayer’s SSN from elsewhere on the return.  We may also correct an invalid child’s taxpayer identification number (TIN) on a Form 2441, Child and Dependent Care Expenses, by verifying the valid TIN from elsewhere on the return, such as from the Schedule EIC, Earned Income Credit. When these types of errors are corrected, taxpayers are notified of the change.  However, if the IRS is unable to correct the error, the taxpayer is issued a math error notice that explains the identified error(s) and includes the amount of any resulting  adjustment(s).

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate appreciates that the IRS fixes taxpayer returns in some cases where it may do so by looking elsewhere on the return. However, to further improve its ability to correct such errors before resorting to sending taxpayers math error notices, the National Taxpayer Advocate recommends the IRS look to prior-year historical return data (such as past dependent TINs) to attempt to fix taxpayer errors (such as an incorrect dependent TIN). The National Taxpayer Advocate believes that this will allow the IRS to correct some taxpayer returns that are currently sent through math error procedures, which will reduce burdens for both the IRS and taxpayers.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

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

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