PILLA TALKS TAXES

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CAN 200 MILLION NOTICES BE WRONG?

Well, Maybe Not ALL of Them 

According to the IRS, the agency sends out about 200 million notices each year to individuals and business regarding their accounts. Correspondence is the primary way the IRS communicates with people about their accounts. The agency does not make phone calls. It sends letters. In all, there are approximately one thousand different varieties of notices and letters. 

And that’s all well and good but the problem is that too many of the IRS’s notices are either incomprehensible or simply dead wrong. I’ve been dealing with this issue for nearly three decades now. My first book, released in 1986, discussed the problem with bogus and confusing IRS notices. And my latest book, The IRS Problem Solver, continues to address a problem that the IRS simply has not solved in the thirty years that I’ve been in the business of helping people with tax problems.

Among the problems with IRS notices is that they tend to be written in jargon that people do not understand. In the first place, people are generally intimidated by the process. When you add the fact that the letters are convoluted or just plain wrong, people often fail to respond or respond incorrectly. We see a perfect example of this in the case of the so-call “soft notices” the IRS has been using of late. I discussed these notices in several past issues of PTT, including the October/November 2009 issue, where I addressed the new Strategic Plan.

 A soft notice is a letter that generally does not require the citizen to take any action. It’s merely a way for the IRS to inform certain people about how they should be doing things in the future. In one recent case, the IRS sent a notice to citizens telling them of an action that needed to be taken the following year. However, the IRS got an immediate 30 percent response rate from people calling in and sending letters trying to respond. But people weren’t supposed to do anything. Clearly, the IRS didn’t communicate that very well in its letter.

IRS to Redesign its Notices

To finally begin addressing the problem, the IRS recently announced that it will “redesign” some of its key notices. According to Commissioner Douglas Shulman, “The differences between the old and new notices are like night and day.” He claims that one of his priorities is to make sure that IRS has clear and simple communications with citizens. I have yet to see any of the new notices so I’ll reserve judgment as to how effective they will be in terms of clear and simple communication. 

But it’s about time the IRS begins the process. As I document in chapter two of The IRS Problem Solver, people have been dealing with the hassle and confusion caused by bogus and incomprehensible IRS notices forever. Even worse, the Government Accountability Office (GAO) has been telling the IRS for decades that it has major problems with its notices. Only now is the IRS accepting the fact that it must do something meaningful about the problem. 

To begin the process, the agency will redesign nine key notices. These notices account for approximately 2 million annual pieces of correspondence with individuals, businesses and exempt organizations. The newly designed notices are in use effective right away in 2010. The first batch of notices includes those relative to: 

• Additional child tax credit availability,
• Insufficient funds on direct debit installment agreement,
• Confirmation of tax-exempt status required,
• Potential exemption from AMT,
• Undelivered refund notice,
• Credit elect change,
• Unable to direct deposit,
• Forms 940/941 may not be required, and
• Taxpayer not liable to file Form 720.

The Office of Taxpayer Correspondence

In addition to redesigning the above notices and others, the agency is creating a new office to oversee the process. The office will be called the Office of Taxpayer Correspondence. It will assume the responsibility for all correspondence that goes out. It’s job is to ensure that IRS notices are easier to understand and written for the average person. 

This process grew out of the Taxpayer Communications Task group, formed in July 2008, by Shulman. He appointed several IRS officials to undertake a comprehensive review of all IRS correspondence. The task group found that IRS notices have different looks and messages and often do not use consistent language. As a result, many notices create unnecessary confusion. 

In addition, the notices are generated from different IRS functions. For example, the collections, audit and submissions processing functions all use different notices, all of which have a different look and feel. It is hoped that the new approach will create more consistent, understandable notices for use going forward. 

Over the next eighteen months, the IRS will simplify and put into plain language notices that comprise 60 to 75 percent of its volume of notices. The new format includes a “plain language” explanation of the notice, a clear statement what action the citizen is supposed to take and consistent design from notice to notice. The new format will also direct the reader to pages on the IRS’s web site where they can find information relative to the notice. 

Only time will tell whether the redesigned notices will achieve the goal of simplifying and clarifying the communication process.