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MSP #4: TRANSPARENCY AND CLARITY

The IRS Lacks Proactive Transparency and Fails To Provide Timely, Accurate, and Clear Information.

TAS Recommendations and IRS Responses

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1.

TAS RECOMMENDATION #4-1

Create a filing season dashboard and provide weekly information on the filing season, including the total number of returns in inventory, number of returns beyond normal processing times, number of returns in suspense status, and the anticipated timeframes for working through them, while acknowledging that the situation is fluid and timeframes may change along with circumstances.

IRS RESPONSE TO RECOMMENDATION: The IRS is in the process of launching a “Filing Season Processing Times” page on IRS.gov to regularly provide updated information for the most commonly filed individual and business tax return types, letters, notices, and other forms. Viewers will be able to check average processing times for individual and business returns as well as amended return submissions. It will also provide links to tools, such as Online Account Where’s My Refund? and Where’s My Amended Return? that allow taxpayers to check their specific refund status, determine the status of their amended return, and contact information for reaching the IRS directly. Taxpayers will also find links to filing season alerts and COVID-19 processing-related information.

CORRECTIVE ACTION: The IRS is in the process of launching a “Filing Season Processing Times” page on IRS.gov to regularly provide updated information for the most commonly filed individual and business tax return types, letters, notices, and other forms. Viewers will be able to check average processing times for individual and business returns as well as amended return submissions. It will also provide links to tools, such as Online Account Where’s My Refund? and Where’s My Amended Return? that allow taxpayers to check their specific refund status, determine the status of their amended return, and contact information for reaching the IRS directly. Taxpayers will also find links to filing season alerts and COVID-19 processing-related information.

TAS RESPONSE: The National Taxpayer Advocate is pleased that the IRS is developing a “Filing Season Processing Times” page on IRS.gov and looks forward to seeing what information is provided and how it is presented. Providing taxpayers with as much information as possible regarding the IRS’s progress in processing returns and other forms is a critical part of ensuring taxpayers are informed and able to receive information as to when they can expect their refunds, potentially reducing the number of calls made to the IRS.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open):6/30/2022

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2.

TAS RECOMMENDATION #4-2

Improve Where’s My Refund?, IRS2Go, or online accounts by providing taxpayers specific information about the cause of their refund delay and an estimated date when the IRS might issue their refund.

IRS RESPONSE TO RECOMMENDATION: The IRS agrees with the TAS recommendation to improve Where’s My Refund? (WMR), IRS2Go, or online resources by providing taxpayers specific information about the cause of their refund delay and an estimated date when the IRS will issue their refund. The IRS plans to partially implement the recommendation.

On January 3, 2022, the IRS implemented changes to improve WMR messaging for taxpayers whose refunds are held or delayed and provide improved messaging on returns in processing for extended periods. The IRS is currently working to implement WMR multiple tax year functionality, allowing most taxpayers to access refund information for the last two tax years. Pending approval of funding requests, the IRS plans to incorporate more detailed status messaging to meet taxpayer needs and add capabilities in WMR to include: extracting Error Resolution System (ERS) data; providing more specific messages based on the ERS status code; extracting data for certain Taxpayer Protection Program (TPP) delays; and allowing direct deposit recipients or married filing joint taxpayers to self-initiate a refund trace.

The IRS is conducting a research effort in early 2022 to further review specific taxpayer needs and expectations regarding online reporting of refund status. We will use the outcomes of this research to help implement informed updates to WMR and the Where’s My Amended Return? application.

CORRECTIVE ACTION: January 3, 2022, implemented WMR messaging added for refund delays. Additional features will be deployed as funding permits.

TAS RESPONSE: The National Taxpayer Advocate is encouraged that the IRS recognizes the need for Where’s My Refund? tools that provide taxpayers exact and precise information regarding the status of their refund. Further, the National Taxpayer Advocate can appreciate how funding limitations may affect the implementation of this recommendation. However, TAS encourages the IRS to make this a high priority when determining how to best utilize its funds, as more information will help taxpayers better understand when they may receive their refund and may also result in a reduction of phone calls to the IRS, relieving an already strained phone system.

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 #4-3

Revise math error notices to identify the exact adjustment the IRS is correcting and the time period for requesting abatement, all in the first paragraph of the notice, and include the date by which a taxpayer must request an abatement at the very top of the notice.

IRS RESPONSE TO RECOMMENDATION: ​The IRS disagrees with the TAS recommendation to revise math error notices to identify the exact adjustment the IRS is correcting and the time period for requesting abatement, all in the first paragraph of the notice, and include the date by which a taxpayer must request an abatement at the very top of the notice.

The IRS issues millions of math error notices each year for both individual and business taxpayers. The flow of the notice is purposely designed starting with the cause of the math error and the changes made to the taxpayer’s account. To add a different date to each notice is not feasible from a systemic or resource perspective. Math error notices already include a detailed explanation of required taxpayer actions, including the timeframe, details on payment methods, steps to take if the taxpayer disagrees, and contact details. When applicable, notices also explain taxpayer appeal rights.

CORRECTIVE ACTION: N/A

TAS RESPONSE: IRS math error notices contain critical information, and taxpayers must contest the math error assessment within 60 days from the date of the notice being issued, or they forfeit their right to petition the assessment in U.S. Tax Court. It is critical that up front, in the notice, taxpayers understand the exact error being corrected and the timeframe in which they must respond to contest the assessment. Currently, math error notices provide taxpayers with several possible errors that were identified, and it is left to the taxpayer to discern what exact error the IRS corrected. These notices would be more informative and transparent if they provided precise information early on in the notice.

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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4.

TAS RECOMMENDATION #4-4

Send all math error notices to taxpayers by certified or registered mail.

IRS RESPONSE TO RECOMMENDATION: ​IRS does not agree to implement TAS recommendation.

Using certified or registered mail services for issuing math error notices is cost prohibitive and does not guarantee customers will receive them faster. The Internal Revenue Code (IRC) requires certified mailing for certain types of taxpayer correspondence. Math error notices are not included in the correspondence as outlined in the IRC.

Sending mail as certified does not provide faster delivery because it travels the same path as regular first-class mail under the same United States Postal Service delivery standards. Certified mail can be tracked to confirm delivery; however, the IRS is implementing the Taxpayer Correspondence Delivery Tracking initiative later this year that will provide the same service for all mail without any cost.

The IRS issues millions of math error notices each year and using certified mail would automatically add a $3.75 fee per notice and reduce the pre-sort postage savings because any newly certified mail pieces must be processed separately from the rest of the first-class mail. Registered mail, which is only used for foreign addressees, is even more cost prohibitive with a $17.15 fee per notice.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate understands that there is no statutory requirement for sending math error notices via certified or registered mail, and giving these notices this mailing status would result in additional expenses.

However, these notices contain critical information, such as the assessment having to be contested within 60 days from the date the notice was issued. Thus, using certified mail would give these notices the same level of importance as other time-sensitive notices and would be another way for the IRS to emphasize their importance.

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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5.

TAS RECOMMENDATION #4-5

Revise Letter 4464C to include more details about the items the IRS is reviewing and when the IRS will release the refund.

IRS RESPONSE TO RECOMMENDATION: ​The IRS review process associated with the 4464C letter is primarily automated and refunds are systemically released as soon as the Form W2 is received by the IRS and return has been verified. The 4464C letter is provided for informational purposes to advise the taxpayer of the refund delay and expected timeframes. There is no action required of the taxpayer if they receive a 4464C letter. If the IRS is unable to verify the income or withholding and there is a discrepancy confirmed by an IRS employee, additional correspondence is issued to request specific documentation required as part of the applicable compliance treatment stream. Most of these cases are resolved systemically with no action required by the taxpayer and/or manual action by the IRS.

The letter is currently in process of a language update informing the taxpayer to allow the applicable review timeframes before contacting the IRS. We do not want to encourage the taxpayer to contact their employer unnecessarily. In addition, we do not want to alert thieves to IRS intentions, increasing the chance for refund fraud by arming unscrupulous entities with internal data.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate appreciates that the IRS is making modifications to the letter and will provide taxpayers more information about timeframes for verifying certain information on their returns. Further, TAS understands the balance between providing taxpayers useful information while not providing too much information that could be misused by bad actors. However, TAS still believes that more information could be provided to taxpayers, such as informing them that the data on one or more W-2s are currently being verified and that there is no need to contact their employer as the IRS can typically resolve these discrepancies without taxpayer involvement.

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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6.

TAS RECOMMENDATION #4-6

Include a roadmap feature on taxpayers’ online accounts that will show where a taxpayer’s return is in the tax administration process (i.e., Collection or Exam).

IRS RESPONSE TO RECOMMENDATION: IRS agrees with TAS recommendation but cannot implement it currently due to funding limitations.

The IRS is developing requirements for a ‘View My Audit Status’ tool that will provide taxpayers the ability to view the status of their audit case within their Online Account. Once funded and launched, this will allow transparency into important information related to their audit case and any specific deadlines for action. The implementation date is to be determined and is dependent on funding, resources, and Service-wide prioritization of digitalization efforts.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate is pleased that the IRS is taking steps to provide taxpayers with more information as to where their case is at in the maze of tax administration. TAS understands funding limitations don’t allow for the immediate implementation of this recommendation but urges the IRS to give this recommendation a high priority as giving taxpayers more information about the status of their case will likely reduce the need for taxpayers to call the IRS.

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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7.

TAS RECOMMENDATION #4-7

When extending filing deadlines, ensure taxpayers have the option to e-file their returns.

IRS RESPONSE TO RECOMMENDATION: ​The recommendation benefits the IRS, taxpayers, and tax preparers. It potentially reduces the number of paper tax returns the IRS receives, easing the burden on IRS systems, processes, and employees. In addition, the recommendation ensures taxpayers have the option to e-file and potentially helps reduce unnecessary processing delays that can accompany paper filed returns.

The Disaster Policy Office will update their desk guide with policy and procedures to avoid extending deadlines when the e-file program is unavailable. In addition, the Disaster Program Office will update Internal Revenue Manual 25.16.1, “Program Guidelines,” to formalize the policy for external/internal audiences.

The Desk Guide will be updated by 05/31/2022. The IRM will be updated by 05/31/2023.

Action Completed 04/25/2022.  The Disaster Program Office (DPO) updated their IRS Disaster Guideline Desk Guide on 04/25/2022 and added the following guidance to avoid extending deadlines when the e-file program is unavailable:

“In addition, the DPO should consider that taxpayers cannot e-file from mid/late November through mid/late January; therefore, the DPO should ensure that disaster relief ends either before mid/late November or extend to mid-February.”

The update to IRM 25.16.1 is on track to be published before 05/31/2023.

CORRECTIVE ACTION: The Disaster Program Office will update Internal Revenue Manual 25.16.1, “Program Guidelines,” to formalize the policy for external/internal audiences. The IRM will be updated by 05/31/2023.

TAS RESPONSE: The National Taxpayer Advocate is pleased that the IRS agreed to TAS’s recommendation.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 5/31/2023

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8.

TAS RECOMMENDATION #4-8

Develop internal procedures for how the IRS will store, use, and safeguard data collected by AI-run programs and publicly provide this information on its website.

IRS RESPONSE TO RECOMMENDATION: ​The IRS stores and safeguards data collected by Artificial Intelligence (AI)-run programs in the same manner it stores and safeguards all other IRS data. The IRS does not differentiate our responsibilities to safeguard data based on the manner in which the data is collected. In addition, the IRS must comply with the E-Government Act of 2002, Section 208, which established the requirement for agencies to conduct privacy impact assessments for electronic information systems and collections. All IRS systems, including those that utilize data collected by AI-run programs, are subject to a Privacy and Civil Liberties Impact Assessment (PCLIA). This assessment evaluates privacy controls in information systems and documents assurance that privacy issues have been identified and adequately addressed. To promote transparency, the IRS posts the PCLIAs to the IRS.gov IRS Privacy Policy page (https://www.irs.gov/privacy-disclosure/irs-privacy-policy). The PCLIAs explain in plain language how and why data, including a taxpayer’s personally identifiable information (PII), may be obtained, used, and securely stored in a system – and for how long. Furthermore, the Privacy Act requires IRS to publish a System of Records Notice (SORN) in the Federal Register that describes the categories of PII collected, maintained, and used in an automated system. Each PCLIA cross-references any applicable SORN, and the SORNs are also available on the IRS.gov IRS Privacy Policy page (https://www.irs.gov/privacy-disclosure/irs-privacy-policy).

This recommendation has already been implemented.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate is pleased that the IRS agreed to TAS’s recommendation.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

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

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