Treasury Inspector General for Tax Administration
August 24, 2011
TIGTA - 2011-50
Contact: Karen Kraushaar
WASHINGTON -- The Internal Revenue Service (IRS) needs to improve the timeliness and accuracy of its response to taxpayer complaints about math error adjustments, concludes a new report from the Treasury Inspector General for Tax Administration (TIGTA).
The IRS has the authority to adjust tax returns to correct math errors without performing an audit. Math errors include errors of arithmetic and, in certain instance defined by law, missing or incorrect Social Security Numbers (SSN), missing documentation, and claims for tax credits above the allowable amounts. When it makes math error adjustments to a taxpayer’s tax return, the IRS notifies the taxpayer, who may accept or contest the adjustment.
TIGTA reviewed a sample of math error adjustment notices issued between January and July of 2010 to determine whether the IRS is accurately and timely resolving individual taxpayer responses to math error adjustments. There were more than 400 math error conditions that could result in the IRS making an adjustment to a taxpayer’s tax return in 2010.
The IRS issued approximately 8.6 million math error notices during the period reviewed by TIGTA. While more than 98 percent of the individuals receiving a math error notice agreed with the adjustments to their tax returns, 133,186 (1.6 percent) taxpayers disputed the adjustments.
“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, the Treasury Inspector General for Tax Administration.
TIGTA estimated that 12,232 taxpayer responses may not have been timely resolved during the period reviewed. Further, TIGTA estimates 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.
TIGTA recommended that the IRS: develop a process to monitor the timeliness of working responses to math error adjustments; prioritize the working of written responses related to to Earned Income Tax Credit math error adjustments; and reinforce 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 TIGTA’s other recommendations.
A special plugin is required to view PDF documents. To obtain the free PDF reader, please visit the Adobe web site.