Tax Insights

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Fuzzy math gives IRS Math Error Authority

Unknown to many, including yours truly until recently, the IRS has a special power called Math Error Authority. Congress provided the IRS this authority to bypass normal audit and deficiency procedures in favor of this abbreviated process.

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Its purpose is to allow the IRS to assess a tax liability quickly by resolving mathematical or clerical mistakes that are specified in the code. Under the rules, taxpayers have only 60 days to request abatement if they don’t agree with the adjustment(s) made under this provision. This power has expanded over time to include among other things, omissions of certain required information such as taxpayer identification numbers and Social Security Numbers that don’t match up to the Social Security Administration’s database. It now includes adjustments to the Recovery Rebate Credit (RRC), the credit related to the stimulus payments received in 2020 and 2021.

The IRS is currently correcting more errors on returns and issuing more math error notices than in previous years. How much more? In calendar year 2020 through July 15, 2020, there were 628,997 math error corrections made on returns filed by taxpayers. For the same period in 2021, the IRS made about nine million math error corrections of which approximately 7.4 million were related to the RRC.

What you should know is the IRS erroneously omitted informing taxpayers of the 60-day window requirement to request abatement of the assessment in many of their notices. IRS is correcting that going forward and issuing supplemental letters extending the 60-day period to those affected by the omission. In addition, IRS will provide additional information to clearly identify the error made on the return that caused the reduction of the RRC that was not provided in notices previously.

If you have any questions regarding the Math Error Authority or your Recovery Rebate Credit, contact your Henry+Horne advisor.

Dale F. Jensen, CPA