New bill would force IRS to explain tax return errors

Newly proposed tax law changes would require more specific action from the IRS when it comes to recording and correcting simple accounting errors on Americans’ tax returns, but the plan would make millions of Americans more specific about recording and correcting simple accounting errors on their tax returns. (CTC) could affect how Americans claim the popular Child Tax Credit (CTC).

Currently, the IRS has the authority to correct calculation errors on behalf of taxpayers as long as the taxpayer is given general notice of the adjustment and a 60-day response period.

However, the new bipartisan bill is being proposed in the Senate by Sens. Elizabeth Warren (D-Mass.), Bill Cassidy (R-L.V.), and Andy Feenstra (R-Iowa). It is being filed by Congressman Brad Schneider (D). If passed by the House of Representatives (Illinois), it would force the IRS to explain exactly what the errors are on tax returns and provide what it believes is the correct calculation of tax owed.

The bill, which lawmakers are calling the IRS Mathematics and Taxpayer Assistance Act of 2024, would require “the act of reporting multiple alternative errors instead of adequately accounting for the error underlying the adjustment,” according to a one-page article. “is prohibited.”

The IRS issued at least 9.4 million mathematical error notices during the 2022 filing season, according to the National Taxpayer Advocate (NTA), an IRS office that advocates for reform on behalf of ordinary taxpayers, not businesses. .

Most of those 8.3 million were for pandemic-related recovery rebate credits and child tax credits. According to IRS data, 24% of all math error notices for the 2022 tax year were related to his CTC.

According to the latest IRS databook, in fiscal year 2023, the IRS recorded 2.7 million calculation errors and sent out 2.2 million notifications about them.

In 2022, the IRS noted that “if taxpayers do not act quickly, adjustments for mathematical errors have significant consequences, whether they result in an assessment of an underpayment or a reduction in the amount claimed.” did.

The legislation would also create a pilot program to study the effectiveness of sending mathematical error notifications by registered mail. Registered mail requires the taxpayer’s signature upon receipt.

According to the law, the test will draw conclusions “about the effectiveness of certified mail, with or without a return receipt, and other recommendations to improve taxpayer response rates.”

The new law is in response to recent recommendations by the Internal Revenue Service regarding notification of miscalculations.

In 2022, current IRS Commissioner Erin Collins “recommended that the IRS revise its miscalculation notices to provide taxpayers with the exact reason for the adjustment, rather than listing numerous possibilities.”

“It is important that taxpayers understand that if the 60-day period expires and the taxpayer does not request cancellation, they will lose the opportunity to have their matter considered by the U.S. Tax Court,” she wrote.

Currently, math error notifications include: several different error codes From the IRS Integrated Data Retrieval System.

While the new law will require the IRS to be more detailed in its communications with taxpayers, the IRS is currently undergoing major operational reviews, technology updates made possible by the Inflation Control Act of 2022 (IRA). , is in the midst of employment expansion.

New protocols related to mathematical errors are being developed as part of the overhaul, as described in the agency’s report. strategic operating plan.

The I.R.S.[identifying] It lists “problems at the point of filing such as calculation errors, missing forms, and missing income reported by third parties” as one of its “major projects.”

As noted in a recent report from the Treasury Inspector General for Tax Administration, 21% of IRA funds have been spent by the agency to date on modernizing IRS systems, along with 7% of operational support funds.