The Latest IRS Headache for Taxpayers: 11 Million 'Math Error' Notices

Millions of Americans have gotten a scary, confusing letter from the Internal Revenue Service in 2021 saying they owe more taxes. Making matters worse, many of the letters are about stimulus payments meant to lessen the blow of the pandemic. The explosion of IRS bills to taxpayers fall into a category known as “math-error” notices, and the IRS sent out more than 11 million of them from Jan. 1 to mid-August.

That compares with about 765,000 for the same period in pandemic-disrupted 2020 and about 2 million in 2019, according to National Taxpayer Advocate Erin Collins, who heads an independent unit within the IRS charged with safeguarding taxpayer rights. Ms. Collins is trying to help taxpayers who got these notices, and now several million filers will get more time to respond. Despite their name, math-error notices aren’t just about arithmetic. Instead, they are tax adjustments for a variety of issues detected by IRS computers during return processing. They usually result in tax due, a smaller refund or even a higher refund in some cases.

When the letters assess taxes due or reduce refunds, as millions do, they are treacherous for filers because the first notice is also the final notice--unlike with many IRS letters. What’s more, the law assumes recipients have conceded if they don’t respond within 60 days. The case then goes directly to the IRS’s dreaded collections process, so taxpayers often face liens or levies faster than with a conventional audit. Yet the information in math-error notices is often so incomplete that they baffle even tax professionals.

Chastity Wilson, a former IRS lawyer now with professional-services firm CLA, says the firm currently has a client with a math-error assessment of $154,000 for an alternative-minimum-tax issue. But the IRS letter provided no explanation as to why, and the agency moved the case to collections despite timely requests for holds.

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What caught Ms. Collins’s attention when she researched this year’s letters is that the IRS omitted the crucial 60-day deadline on millions of math-error notices it sent involving Rebate Credits. So she pushed back and scored a win for taxpayers: Now about five million recipients of earlier notices will get a new, clearer one restarting the 60-day clock. An IRS spokesperson says the agency hasn’t determined when these letters will be mailed.

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https://www.wsj.com/articles/the-latest-irs-headache-for-taxpayers-11-million-math-error-notices-11630661402 (subscription)