Each year, the IRS sends out over 200 million correspondence letters to taxpayers and receives about 20 million correspondences from taxpayers. The correspondence quantity has greatly increased in the recent past due to significant changes in the tax code that result in many taxpayers’ inquires. Most taxpayer inquiries are related to tax returns and follow ups on tax refunds.
When the IRS receives a letter or telephone call from a taxpayer, the inquiry goes through a well-defined internal process. This internal process is set to ensure that all correspondences from taxpayers are resolved in a timely and effective manner. The IRS has also provided internal rules that guide the handling of taxpayer inquiries.
Correspondence Received by the IRS
The IRS receives correspondences from the public in the form of telephone calls, letters, and forms submitted (apart from tax return forms). The correspondences are queued into a correspondence inventory system and are initially reviewed by the Wage and Investment Division Accounts Management function department with the assistance of the IRS Field Assistance Office. Correspondences are received in the 10 IRS campuses and after the initial review, they are placed into 100 categories so as to be forwarded to the respective departments to handle. The categorization also assists in the allocation of resources and time to the different correspondences. Some of the inquiries are shipped while others are scanned and sent to the respective departments.
Internal Rules on Handling of Taxpayer Correspondences
According to the IRS internal rules, any inquiry received from taxpayers should take 30 days to resolve and the taxpayer should be provided with a final response. If the IRS is unable to provide the response within 30 days, they send an interim letter to the inquirer to update him or her of the progress of the inquiry. The IRS also requires that their employees provide an accurate answer to taxpayers for every inquiry sent. An accurate answer entails responding clearly to all issues raised in the inquiry.
Automated Underreporter Program Correspondence
Besides correspondence received directly from taxpayers, the IRS also initiates correspondences to the taxpayers. Most of these correspondences are sent from the Automated Underreporter Program. The Automated Underreporter Program is a program that computes taxpayers’ incomes and deductions from information received from third parties. It then compares these figures with those provided by the taxpayers in their tax returns. If there is a discrepancy, the IRS will send a letter to the taxpayer asking them to explain these differences. These mails from the Automated Underreporter Program account for the majority of the 200 million letters sent by the IRS every year.
IRS Challenged in Managing Correspondences
However, in spite of the fact that the IRS has a vigorous system of handling taxpayers’ inquiries and the fact that there are well-laid rules on handling these correspondences, the IRS is still majorly challenged in handling these cases. According to reports by The Government Accountability Office (GAO), the Treasury Inspector General for Tax administration (TIGTA), and the National Taxpayer Advocate (NTA), the IRS is not quite following the rules set in handling inquiries and many of the inquires are either resolved inaccurately or they are resolved past the deadline appointed in the internal rules. The three watchdog organizations have also provided their recommendations to the IRS on how to handle the challenges of the taxpayer correspondences.
