IRS: "Can you guess what you did wrong on your tax return?"
Filed under: Tax
The Internal Revenue Service has announced a new warning letter it will be sending to taxpayers. It's replacing a letter than used to go out which suggested changes to income, deductions and credits. The new letter will simply tell taxpayers to check their tax returns, and if they think they've made a mistake, they should file an amended tax return.With the old letters, the IRS calculated an amount due and included that with the notice. Now, no such estimate of taxes due will be calculated. The IRS computers are still doing the same thing they did before, which was to match tax return information against documentation received from outside sources, such as W-2s, 1099s, and K-1s. The difference is that the IRS will no longer be telling taxpayers what differences have been identified.
It seems a little counterproductive to just send taxpayers letters that hint that they've done something wrong. The old letters seem much more useful in that they identified the actual reason for sending the letter -- we think you've made a mistake and here is what it is. Now, taxpayers are instead told the IRS thinks they may have made a mistake, but the taxpayer is left to guess at what the error might be.
How does this new letter enhance the tax collection process? I have no idea. I can't imagine that it helps at all. The tax code in the United States is incredibly complicated, and playing an additional guessing game with taxpayers seems to be a waste of time. The IRS has said that they are going to test the new letters and see if they result in additional collection of taxes. If they work, their use will be expanded.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
Reader Comments (Page 1 of 1)
9-03-2008 @ 10:47AM
Josh Smith said...
I'm thinking either Tax preparation businesses will see a boost in business or the IRS will see more taxes from people who feel they did something wrong and would rather pay up now that chance getting in trouble later.
Reminds me of being called to the principal's office and made to believe they "knew" I did something wrong. So long as i didn't fess up most of the time I'd get off scot-free.
Seems like the IRS is stretching for cash as well as angering angry "customers" anyway.
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9-03-2008 @ 1:30PM
J said...
Sounds like a shake-down to me. IRS: "Let's kick the tree and see how many apples fall." Screw that.
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9-04-2008 @ 8:14PM
Ray Florow said...
A sorry, complicated, chaotic tax code just got worse. Where and when did we get so far from '...government for the people...' and the "service" ethic of our government?
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9-29-2008 @ 10:46PM
Barbara said...
Americans are taxed to death. Taxes.taxes.taxes and more taxes every bill I get its all about taxes so we can send it over seas. If we bail out every company that gets in trouble we'll be bailing every company from here until and never come out on top. I don't see any coming to my rescue to bail me out. It's dog eat dog thats this American sees it.
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2-12-2009 @ 11:37AM
Cheryl said...
Sounds like the IRS has found yet another way to tack on interest and penalites. "guess your error?" what taxpayers will choose to ignore such letters so another 2- 3 years go by - and yes, according to the IRS it will still be an open year because they sent you a letter three years after your mistake so now they will be able to tack on 6 years of interest and penalities instead of three. And remember they are the only organization that is allowed to compute interest on interest. This practice needs to be stopped before it starts. How about sending letters to The Senate and congress, apparently they have LARGER IRS issues than middle class America
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