Last week, Senator Elizabeth Warren (D-MA) and Senator Bill Cassidy (R-LA) introduced the Internal Revenue Service Math and Taxpayer Health (IRS MATH) Act which would provide clarity for millions of taxpayers receiving math error notices from the IRS. This legislation was also introduced in the House by Representatives Randy Feenstra (R-IA-04) and Brad Schneider (D-IL-10).
The IRS is currently allowed to resolve what it believes are math errors and adjust a taxpayer’s amount of tax owed after providing written notice of the proposed change with 60 days for the taxpayer to respond. Instead of providing specific information about the calculation in question, math error notices are often vague and may list multiple potential reasons for the change. In many cases, the “math error” is not a simple matter of a taxpayer subtracting where they should have added; substantive questions about major items on the return could be at issue.
In addition to being unclear about the math error itself, these notices fail to inform taxpayers of their rights and the consequences of not responding. In contrast to normal deficiency procedures, math error notices only allow a limited time frame to take action. Taxpayers are given 60 days to challenge the change by providing the IRS with documentation supporting their calculation. If they do not respond within 60 days, the taxpayer loses their right to petition the Tax Court in the event the IRS made an erroneous calculation.
The IRS MATH Act would bring welcome changes to a practice that can risk violations of taxpayers’ rights. Section 6213(b) of the Internal Revenue Code which grants the IRS math error authority would be changed to require notices to identify the line item in question and describe the error in plain language. The bill would also require notices to include the respond-by date in bold text and the telephone number taxpayers can use to contact the IRS. Additionally, it would require the IRS to notify taxpayers of abatement determinations and require the Secretary of the Treasury to provide additional procedures for requesting an abatement of a math error adjustment.
While the process to resolve math errors should be simple and efficient, convoluted notices confuse taxpayers and can cost them important protections. Math error notices are the most common IRS compliance activity. In Tax Year 2022 over 2.2 million math error notices were sent to taxpayers, with errors calculating the Child Tax Credit accounting for almost a quarter of all errors. The National Taxpayer Advocate has made several recommendations to improve this process, including recently recommending that Congress limit the IRS’s math error authority.
NTU applauds this bipartisan and bicameral effort to reform math error notices. We hope to see this legislation gain broad support and timely passage into law.