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MSP #9: COMBINATION LETTERS

Combination Letters May Confuse Taxpayers and Undermine Taxpayer Rights

TAS Recommendations and IRS Responses

1
1.

TAS RECOMMENDATION #9-1

Discontinue the use of Combination Letters and provide all taxpayers undergoing an examination with a separate Initial Contact Letter and 30-Day Letter, providing taxpayers with sufficient time to submit documentation and explanations before issuing the 30-Day Letter.

IRS RESPONSE TO RECOMMENDATION: The IRS has previously acted to reduce the use of the Combination Letters. We use Combination Letters on a small percentage of cases in correspondence examinations, and only when the IRS already has internal information that supports the issues or evidence of prior IRS contact on the same issue. The taxpayer has the opportunity to dispute the facts and provide supporting or correcting documentation.

CORRECTIVE ACTION: N/A

TAS RESPONSE: TAS welcomes the IRS’s upcoming Combination Letter study and our joint participation toward improving taxpayer communication.

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 #9-2

If the IRS chooses not to discontinue use of Combination Letters, it should work with the Taxpayer Advocate Service (TAS) on a joint study to track and compare Combination Letter data with Initial Contact Letter data to identify the causes of significant discrepancies between the two populations, as well as analyze potential issues and areas for improvement.

IRS RESPONSE TO RECOMMENDATION: The IRS agrees on the importance of better understanding the customer experience. We will work with the Wage & Investment (W&I) Division Lean Six Sigma staff to identify potential areas for improvement. The Taxpayer Advocate Service (TAS) will be included on the team conducting the study.

CORRECTIVE ACTION: We will work with the Wage & Investment (W&I) Division Lean Six Sigma staff to identify potential areas for improvement. The Taxpayer Advocate Service (TAS) will be included on the team conducting the study.

TAS RESPONSE: TAS looks forward to working with the W&I Division Lean Six Sigma staff to identify potential areas for improvement. A key element of the study should include data measuring the actual impact Combination Letters have on taxpayer rights, IRS resources, taxpayer responsiveness, and the exercise of appeal rights.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 2/15/2023

3
3.

TAS RECOMMENDATION #9-3

Refrain from expanding the use of Combination Letters until research is conducted on the impact to taxpayers and the IRS.

IRS RESPONSE TO RECOMMENDATION: We will refrain from expanding the use of Combination Letters to any new workstreams until the completion of the Lean Six Sigma Study noted in the IRS Response to Recommendation #9-2 is complete

CORRECTIVE ACTION: We will refrain from expanding the use of Combination Letters to any new workstreams until the completion of the Lean Six Sigma Study noted in the IRS Response to Recommendation #9-2 is complete.

TAS RESPONSE: TAS appreciates IRS’s commitment to refrain from expanding the use of the Combination Letter to new workstreams until the Lean Six Sigma Study has been completed.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 2/15/2023

4
4.

TAS RECOMMENDATION #9-4

If the IRS continues to use Combination Letters, work with TAS to redesign them to clearly communicate to taxpayers:
a. Their tax return is under examination;
b. The possible outcomes of the audit, including what happens if the taxpayer provides documentation the IRS deems inadequate;
c. The timeframe in which they have to request an appeal and the factors that impact this timeframe; and
d. The steps they must take to request an appeal.

IRS RESPONSE TO RECOMMENDATION: We continuously look for opportunities to simplify and improve the clarity of notices and other communications to taxpayers. We will use the information from the study noted above in response to Recommendation #9-2 to determine if changes are necessary to the Combination Letters. The specifics of those changes are yet to be determined.

CORRECTIVE ACTION: We continuously look for opportunities to simplify and improve the clarity of notices and other communications to taxpayers. We will use the information from the study noted above in response to Recommendation #9-2 to determine if changes are necessary to the Combination Letters.  The specifics  of those changes are yet to be determined.

TAS RESPONSE: TAS welcomes IRS’s decision to utilize the Lean Six Sigma study findings as a basis for determining necessary Combination Letter revisions.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 2/15/2023

5
5.

TAS RECOMMENDATION #9-5

Revise IRS Publication 3498-A, The Examination Process (Audits by Mail), to include guidance specific to the Combination Letter.

IRS RESPONSE TO RECOMMENDATION: Publication 3498-A generally guides taxpayers through the audit process and explains their responsibilities and rights during and after an audit. The Publication does not list or provide information on specific letters, as there are numerous letters that are issued by the various examination functions in the IRS. Rather, each letter speaks to what actions need to be taken regarding the letter sent. Repeating information specific to a single letter in a publication for all letters issued by examination functions may be more confusing to taxpayers. However, we will evaluate the results of the study noted above in the IRS Response to Recommendation #9-2 to determine ways to improve our communications with taxpayers.

CORRECTIVE ACTION: N/A

TAS RESPONSE: We acknowledge that it may not be possible or necessary for Publication 3498-A to specifically address the numerous letters issued by the various examination functions in the IRS. We are optimistic that the IRS and TAS will come to an agreement on revised Combination Letter language.

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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