A proposed change to the tax code would make the IRS provide more specific information when fixing simple accounting mistakes on Americans’ tax returns. This could impact how millions of Americans claim the child tax credit (CTC).
Right now, the IRS can correct math errors on taxpayers’ behalf as long as they give a general notice of the adjustment and 60 days to respond.
However, a new bipartisan bill, introduced by Sens. Elizabeth Warren (D-Mass.) and Bill Cassidy (R-La.) in the Senate, and by Reps. Andy Feenstra (R-Iowa) and Brad Schneider (D-Ill.) in the House, would require the IRS to clearly explain the error on the tax return and provide a calculation of the correct amount of tax owed.
The legislation, known as the IRS Math and Taxpayer Help Act of 2024, would stop the IRS from reporting multiple possible errors instead of accurately describing the specific error.
In 2022, the IRS sent out at least 9.4 million math error notices, with the majority related to pandemic-related recovery rebate credit and the child tax credit.
Most of these, about 8.3 million, were related to the pandemic-related recovery rebate credit and the child tax credit. About 24% of all math error notices in 2022 were linked to the CTC.
In fiscal year 2023, the IRS logged 2.7 million math errors and sent out 2.2 million notices about them, according to the most recent IRS databook.
The NTA noted in 2022 that math error adjustments can have significant consequences for taxpayers if they don't act quickly.
The law would also start a pilot program to study the effectiveness of sending out math error notices by registered mail, which needs the taxpayer's signature upon receipt.
The pilot would provide insights about the effectiveness of certified mail and recommendations for improving taxpayer response rates.
The new law is in response to recent suggestions from the National Taxpayer Advocate regarding math error notices.
In 2022, NTA Erin Collins suggested that the IRS revise its math error notices to give taxpayers precise reasons for the adjustment instead of listing numerous possibilities.
Erin Collins wrote that it's important for taxpayers to know that if they don't request a reversal within 60 days, they lose the opportunity to have the matter reviewed by the U.S. Tax Court.
The current math error notices can include different error codes from the IRS integrated data retrieval system. The new law will require more detailed information from the IRS when communicating with taxpayers. The IRS is currently undergoing a major operational overhaul, technology update, and hiring spree due to the 2022 Inflation Reduction Act (IRA).
New procedures for dealing with mistakes in math are being created as part of the reorganization, as mentioned in the organization’s
strategic operating plan The IRS includes identifying problems at the time of filing such as math errors, missing forms, or missing income reported by third parties as one of its main projects..
The agency has utilized 21 percent of the IRA’s funds for IRS systems modernization and 7 percent of operational support funds, according to a recent report from the Treasury Inspector General for Tax Administration.
A newly proposed adjustment to the tax code would demand more specific information from the IRS for identifying and correcting simple accounting errors on Americans’ tax returns, a change that could impact how millions of Americans apply for the popular child tax credit (CTC). At present, the IRS is authorized to correct…
