IRS taxpayer notices often unnecessary and for small-dollar amounts

Posted: Thursday, April 20, 2000

WASHINGTON (AP) - Now that the annual income tax filing deadline has come and gone, millions of Americans will get notices from the Internal Revenue Service for taxes due or because they made a mistake. But an audit says many of these are repetitious and some involve $5 or less.

About 39 percent of the 14.8 million taxpayers who got IRS collection notices between January and November 1999 received multiple notices for the same tax assessment, according to a new audit by the General Accounting Office, the investigative arm of Congress.

Most of these taxpayers got extra notices because they hadn't paid their taxes, penalties and interest in full on time. But 270,000 received them even after they had paid up, often because the IRS failed to record the payment in time to stop another notice from going out.

Last year, the IRS also sent out 31 million notices telling taxpayers about mistakes in returns, such as math errors, and adjustments made to their accounts. According to a second GAO audit, 1.5 million of those involved net amounts due of less than $5 or refunds of less than $1.

Depending on the circumstances, it costs the IRS between 42 cents and $14.32, including staff labor, to prepare and send each of these notices, the GAO estimated.

The IRS says it is working to improve its communications with taxpayers - long a source of complaints - and legislation passed by the House is aimed at exploring ways to use technology, such as e-mail, to speed things up.

In letters to the GAO, IRS Commissioner Charles Rossotti said the report on multiple notices ``mirrors our concerns for minimizing the burdens placed on taxpayers and the costs of sending unnecessary notices to them.''

As part of its long-term modernization effort, Rossotti said the IRS is developing an updated computer system to improve how it deals with receipt of payments.

``We are committed to sending clear and concise notices to taxpayers detailing what is expected of them, while ensuring accuracy,'' Rossotti said.

Regarding the notices for errors involving low-dollar amounts, Rossotti noted that the law requires the IRS to inform taxpayers of any change to their account. In addition, the GAO pointed out that some of these notices initially involve larger amounts, such as a return claiming a refund of $300 that is adjusted because of an error to $4 in taxes owed.

``There would be times when sending a small-dollar notice is appropriate,'' Rossotti said. ``If a taxpayer is expecting a refund but ultimately has a small balance due, we would certainly want to notify him or her of the reason.''

By the end of April, Rossotti said the IRS will make changes in the error notices that could involve:

-Adding clear language pointing out when a notice is not a bill or request for payment.

-Asking Congress to change the law requiring that taxpayers be notified of all adjustments.

-Changing computer programs so that small-dollar payments due are simply recorded as zero balances, with a notice send to taxpayers explaining the change.

House-passed legislation that would enact a number of new taxpayer rights would require that the Treasury Department report within 18 months whether use of e-mail and faxes could improve IRS communication with taxpayers. That bill is pending in the Senate.

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