TIGTA: Resolution of Math Error Disputes Often Late, Sometimes Wrong

November 1, 2011

In taxpayer disputes over its correction of math errors on returns, the IRS was wrong 17% of the time and late in resolving disputes 40% of the time, the Treasury Inspector General for Tax Administration (TIGTA) found.

IRC § 6213(b)(1) allows the IRS to adjust items on tax returns without an audit for math or clerical mistakes including computational errors, tax credit claims that exceed allowable limits, and incomplete or incorrect supporting information including missing or incorrect Social Security numbers and missing documentation. The Service has been using this authority increasingly in recent years, with much of the higher level of errors stemming from the making work pay credit and its interaction with stimulus payments and credits

When it makes math error adjustments to a taxpayer’s tax return, the IRS sends a notice to the taxpayer. The taxpayer then has an opportunity to dispute the IRS’ adjustment. Under IRS guidelines the taxpayer should receive a final response from the IRS within 30 calendar days from the taxpayer’s initial telephone call or written correspondence.

During the period in 2010 that TIGTA studied, the IRS issued approximately 8.6 million math error notices. A total of 133,186 taxpayers disputed the adjustments made to their tax returns. In an audit, TIGTA studied a sample of 260 of the taxpayer responses contesting math error adjustments. It found that 104 of the 260 responses (40%) were not resolved in a timely manner by the IRS and that 43 of the responses (17%) were not resolved accurately.

TIGTA also found that the IRS had no processes in place to monitor the timeliness of math error notice responses. It noted in its report that almost every failure to timely respond in its sample occurred when taxpayers had written to the IRS. IRS management indicated to TIGTA that taxpayer telephone responses are given priority during the filing season because telephone responses are addressed when received.

TIGTA recommended that the IRS develop processes to ensure that math error disputes with taxpayers are resolved more quickly and accurately.

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