On Dec. 1, President Trump signed into law the Internal Revenue Service Math and Taxpayer Help Act (H.R. 988). H.R. 988, commonly known as the IRS Math Act, requires the IRS to provide more detailed information on notices that assess additional tax when a taxpayer has made a mathematical error. The new law is the result of bipartisan support, passing the House by voice vote earlier this year and the Senate on Oct. 20 by unanimous vote.
Currently, the IRS sends filers math error notices when it determines that a return contains basic math or clerical errors. These notices provide the proposed changes by the IRS and the amount of additional taxes owed, but with limited details on the calculations. According to IRS data, during tax year 2023, more than 1 million math error notices were sent, which encompassed over 1.2 million mistakes. This was a significant increase from tax year 2022, when the IRS sent approximately 700,000 notices pertaining to approximately 850,000 math errors.
In general, a taxpayer has 60 days to respond to an IRS math error notice before the tax assessment becomes final. If a taxpayer fails to respond, they are prevented from challenging the IRS position in Tax Court. Therefore, a taxpayer would have to pay the assessment and timely file a claim for refund to challenge the IRS calculation — an expensive and time-consuming process.
The IRS Math Act modifies Code section 6213(b)(1) and requires math error notices to be sent to the taxpayer’s last known address and include:
- A description of the math or clerical error in plain language, including a description of the nature of the error, the error type, applicable Internal Revenue Code section, and specific tax return line of the error.
- An itemized computation of the change proposed by the IRS, including the adjustment to adjusted gross income, taxable income, itemized or standard deduction, nonrefundable credits, other refundable credits, income tax, other taxes, total tax, withholding taxes under Code section 3101 or 3201(a), estimated tax payments, refund or amount owed, NOL carryforwards, or credit carryforwards.
- The phone number for the automated transcription service.
- And clearly indicate the deadline to request abatement, or disagreement with taxes the IRS claims are due.
The effective date is 12 months from the date of enactment. Given the current loss of IRS personnel, including information technology specialists, it is unclear how quickly or completely the Service would be able to comply within the 12-month period and prescribe the methodology to ensure a taxpayer’s rights and the procedures to protest a deficient notice. The IRS Math Act directs the Treasury to provide procedures within 180 days of enactment and undertake a pilot program within 18 months.
For more information on the IRS Math Act, please contact a CBIZ tax professional.
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