Tax Code Change Would Force IRS to Explain Errors

(Dreamstime)

A new bipartisan bill to change the tax code would require the IRS to be specific about accounting errors on Americans’ tax returns and provide a computation of what the agency believes is the correct amount of tax owed.

According to The Hill, the IRS currently has the authority to fix math errors as long as it notifies taxpayers of the adjustment and gives them 60 days to respond.

The IRS Math and Taxpayer Help Act of 2024 would “forbid the practice of reporting multiple alternative errors instead of adequately describing the error underlying the adjustment.”

Currently, math error notices can include several possible error codes, which can make understanding the actual mistake confusing for the taxpayer.

The IRS issued at least 9.4 million math error notices during the 2022 tax-filing season, according to the Taxpayer Advocate Service, the internal IRS organization that advocates for reforms for individual taxpayers.

In tax year 2022, 24% of math error notices issued by the IRS stemmed from the child tax credit, according to IRS data.

“Math error adjustments, whether resulting in assessments of underpayments or reductions of claimed credits, bring with them … significant consequences if taxpayers do not act quickly,” the Taxpayer Advocate Service said in 2022.

Sponsors of the bill are Sen. Elizabeth Warren, D-Mass., Sen. Bill Cassidy, R-La., Rep. Randy Feenstra, R-Iowa, and Rep. Brad Schneider, D-Ill.

The proposed legislation would also establish a pilot program to study the efficiency of notifying taxpayers about math errors by certified mail and comes two years after current National Taxpayer Advocate Erin Collins recommended that “the IRS revise its math error notices to provide taxpayers with precise reasons for the adjustment.”

“It is key for taxpayers to understand that once the 60-day time period has elapsed and the taxpayer has not requested a reversal, they lose their opportunity to have the matter reviewed by the U.S. Tax Court,” Collins wrote.

Funded by the 2022 Inflation Reduction Act, the IRS is currently in the midst of an operational overhaul, which includes the creation of new protocols related to math errors, according to the agency’s strategic operating plan.

According to the IRS, one of its “key projects” is “[identifying] issues at the point of filing such as math errors, missing forms, or missing income reported by third parties.”