With the technology and requirement of e-file in place, the IRS customer service and document processing activities are more automated than ever. It’s easier to file your taxes, we’re not printing tons of paper copies any more, and the turn around time of the average refund has gone from 6 weeks to 2 weeks – 8 days if you’re willing to receive your refund on a debit card. While these are the upsides, there are some real down sides you might want to be aware of. On January 11, 2012, National Taxpayer Advocate Nina E. Olson released her annual report to Congress, identifying just how the inadequacies in the IRS’ automated processes could very likely harm you financially.
You can click here to read the IRS report in its entirety, or just take a breeze through the highlights I have summarize below:
IRS’ Automated Data-Matching Technology Kicking Out Tax Return Errors Erroneously – The computer says it’s wrong so it must be wrong, right? I say wrong. But this is what’s happening with your tax returns. The automated process may say there is an error, kick back your return, and send you a system-generated letter without any human intervention. And once this cycle of tax drama starts only heaven knows when or where it will end.
Check these statistics:
- In 2010 alone the automated processes kicked out 15 million tax returns. In the end, only 1.6 million legitimately needed a tax audit.
- In 2010, the IRS issued notices correcting 10.6 million “math errors,” These math error notices are often vague making it difficult, if not impossible to accept or contest.
- Of the 184,000 corrected math errors, the IRS had internal data to immediately resolve 56 percent of these reversals.
- The IRS used math error authority in 2010 to disallow exemptions for dependent children on about 300,000 returns; it ultimately had to reverse about 55 percent of the adjustments.
Taxpayer Services : Delays and Non-Responses to Taxpayer Inquiries – I don’t need to say much here; just check out the statistics:
- From 2004 to 2011, the percentage of calls that the IRS answered from taxpayers seeking to speak with a telephone assistant dropped from 87 percent to 70 percent.
- From 2004 to 2011 the backlog of correspondence in the tax adjustments inventory jumped by 158 percent (from 357,151 to 920,768).
- From 2004 to 2011 the percentage of correspondence in this inventory classified as “over-age” (i.e., 45 days or older, with issues that have not been resolved) increased by 309 percent (from 11.5 percent to 47.0 percent of correspondence).
In short, the IRS is unable to answer three out of every ten calls and may take up to 6½ weeks to answer a correspondence.
Tax Returns “Auto-Void” Without Taxpayer’s knowledge – In some cases, the IRS’ automated processing system had detected a tax return as being part of a scheme called “Operation Mass Mail”. These returns are automatically voided in the IRS system without providing any notice to the taxpayer.
Check these statistics:
IRS declined to process about 900,000 returns in 2011. Later, in tens of thousands of these cases, the IRS marked the accounts with a code that indicates it had erred and the return had been submitted by a legitimate taxpayer
Tax credits Causing Fraud –There is First-Time Homebuyer Credit, the Making Work Pay credit, the American Opportunity tax credit, the health care premium tax credit, the adoption tax credit, and the Additional Child Tax Credit. People want these credits because they super size their refund. But my goodness; the amount of fraudulent activity going on to get them!
Check these statistics:
- In 2011, the IRS’s Electronic Fraud Detection System flagged 1,054,704 returns on suspicion of fraud, an increase of 72 percent over 2010.
- IRS’s centralized Identity Protection Specialized Unit received more than 226,000 identity theft-related cases, an increase of 20 percent over 2010.
Workload Overload – because the tax codes keep changing and getting more complex, exacerbated by the increasing diversity in the lives and make-up of the American taxpayers, the people who handle your taxes (your tax preparer included) is overloaded with multiple moving pieces that sometimes collide.
Check these statistics:
- There were approximately 4,430 changes to the tax code from 2001 through 2010.
- There were an estimated 579 changes to tax code in 2010 alone.
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I’m sure this does not give you a warm and fuzzy feeling about dealing with your income taxes; I don’t have one either. I’m publishing this information so you can be aware of the challenges. I also want you to know that you do have rights as a taxpayer. If you find yourself in any of these predicaments, respond, respond quickly, and respond being fully armed with knowledge about your rights. Also, don’t go it along; take advantage of the Taxpayer Advocate Services available to you.
Click here to learn about your taxpayer rights.
Blessings,
~ Michelle Walker-Wade, CRTP