When the IRS uses its math error authority to correct an error on a taxpayer’s return, the taxpayer, under IRC § 6213(b)(2)(A), has 60 days from the time the notice was sent to dispute the correction and request an automatic abatement. After the abatement is made, the IRS must follow the deficiency procedures to reassess the tax, and it cannot collect the assessed amount during the 60-day period that the taxpayer has to request abatement.

As mentioned in the Math Error Blog: Part I, the IRS omitted the 60-day time period language for requesting abatement from over five million math error notices where the only adjustment was for the Recovery Rebate Credit (RRC). Ironically, neither the CP 11 nor CP 12 notices include the term “math error” or the authority provided by the Code.  So how are taxpayers even supposed to know what they are looking at?

Good news: The IRS is doing the right thing and will be issuing a supplemental notice providing taxpayers additional time, 60 days from the issuance of the new notice, to request an abatement, which includes providing taxpayers the ability to provide information or documentation to support the RRC.  If you received a prior RRC math error notice omitting the 60-day language, keep an eye on your mailbox for the supplemental letter and consider the options listed below.

This revelation of the missing 60-day abatement language raised many questions, but one thing is clear – this omission would have had serious implications for taxpayers and was a significant compromise of their rights, particularly the right to be informed, the right to a fair and just tax system, the right to challenge the IRS’s position and be heard, and the right to pay no more than the correct amount of tax. Specifically, this omission risked taxpayers losing their right to request an abatement, receive a statutory notice of deficiency, and seek judicial review in the U.S. Tax Court, the only pre-payment judicial forum.

How Does the Math Error Authority Work as Part of the Economic Impact Payment/RRC Reconciliation Process?

We wanted to provide some background to help you understand the issue and its complexities. Congress enacted IRC §§ 6428 and 6428A, which provided for Economic Impact Payment (EIP) 1 and EIP 2. These payments were advance payments of the RRC that may be claimed on an eligible taxpayer’s 2020 individual federal tax return. If the individual received the correct amount of EIPs 1 & 2, there was no need to claim the RRC on his or her 2020 tax return. On a side note, IRC § 6428B provides an RRC to serve the same purpose of reconciliation for EIP 3 on an eligible taxpayer’s forthcoming 2021 tax return. Our goal will be to work with the IRS so we do not have a repeat of this issue in 2022.

In IRC §§ 6428(e)(1) & 6428A(e)(1), Congress provided the IRS with math error authority to correct returns where the RRC was incorrectly claimed. This is similar to the authority Congress has provided the IRS to use math error authority to correct other refundable credits under IRC § 6213(g)(2), for example, the Child Tax Credit (CTC) or Earned Income Tax Credit (EITC). Since math error authority is typically used to correct a computational error that will result in an adjustment to tax causing a deficiency, Congress also amended IRC § 6211(b)(4) to include the RRC in the definition of deficiency. As a result, taxpayers who receive a math error notice adjusting the RRC and request an abatement will likely receive a statutory notice of deficiency providing an opportunity to petition the Tax Court for final determination if the IRS does not consider the taxpayer’s documentation sufficient to substantiate his or her RRC claim. Additionally, in situations where the RRC is adjusted as one of the items in an examination, it may be included in a statutory notice of deficiency along with the other issue(s).

So What Does This Mean and How Does It Affect the RRC?

Let’s look at examples to see how these statutory changes play out with the RRC reconciliation process.

Example 1: Taxpayer whose filing status was “single” correctly received $1,200 for EIP 1 and $600 for EIP 2.

Tax Treatment: Because the EIP amounts were correct, the taxpayer did not need to claim the RRC on his or her 2020 individual tax return.

Example 2: Taxpayer did not receive an EIP for one of her qualifying children, so she claimed the RRC for this qualifying child on her 2020 tax return.

Tax Treatment: Taxpayers who did not receive one of the EIPs or believe they did not receive the entire amount to which they were entitled will claim the RRC on their 2020 return.  The IRS will compare the claim with its records and if consistent will pay the claim.

Now let’s look what happens if the taxpayer makes a mistake when claiming the RRC on his or her 2020 tax return or his or her records are inconsistent with IRS records.

Example 3: Same scenario as Example 2, but the taxpayer here inadvertently transposed two of the digits in the child’s Social Security number (SSN).  The IRS disallowed the RRC for this child because the SSN did not match its records and sent the taxpayer a math error notice informing her that “Information was changed because of the following:

• • We changed the amount claimed as Recovery Rebate Credit on your tax return.  The error was in one or more of the following:
    • The Social Security number of one or more individuals claimed as a qualifying dependent was missing or incomplete.
    • The last name of one or more individuals claimed as a qualifying dependent does not match our records.
    • One or more individuals claimed as a qualifying dependent exceeds the age limit.
    • Your adjusted gross income exceeds $75,000 ($150,000 if married filing jointly, $112,500 if head of household).
    • The amount was computed incorrectly.”

Tax Treatment: The IRS disallows the child as not qualifying for the RRC and issues a CP 11 or CP 12 Notice eliminating or reducing the amount of the credit utilizing its math error authority.

In addition to the lack of specificity or clarity regarding what exactly has been changed on the return and why, the notice also fails to inform the taxpayer that she must contact the IRS within 60 days from when the notice was sent to request that the assessment be abated.  The 60-day period is key to a math error notice and abatements.

Does the Omission of the 60-Day Time Period to Request Abatement Invalidate Math Error Notices?

This filing season, over five million math error notices were issued erroneously omitting the 60-day time period language entirely where the only item adjusted or denied was the RRC.  Taxpayers were not informed of their rights and the ability to request an abatement.  IRC § 6213(b)(2)(A) provides, “Notwithstanding section 6404(b), a taxpayer may file with the Secretary within 60 days after notice is sent under paragraph (1) a request for an abatement of any assessment specified in such notice, and upon receipt of such request, the Secretary shall abate the assessment.”  Although the statute requires the taxpayer to request abatement within 60 days from the date the notice was sent, it appears it does not require the notice itself to include the 60-day time period language.  Thus, based upon the wording in the statute, the omission of the 60-day abatement time period from the notices does not appear to invalidate the notice or the math error assessment.

However, omission of this critical piece of information was beyond just bad customer service; it was a clear infringement of a taxpayer’s right to be informed and right to a fair and just tax system.  The good news is the IRS is correcting the notices going forward and issuing supplemental notices to protect taxpayer’s rights.  The challenge is the process could take some time but sending supplemental letters protects taxpayer rights by providing them with additional time to request an abatement and an opportunity to contest the proposed adjustment as provided by the Internal Revenue Code.  However, taxpayers do not need to wait to receive the supplemental notice if they have support for the claim.

Taxpayers Have Options If They Receive a “Math Error” Notice Omitting the 60-Day Period Language

Taxpayers who receive a notice where the 60-day abatement language has been omitted but do not agree with the RRC adjustment have the following options:

1. Contact the IRS at 800-829-0922 and request that the assessment be abated.

1. 1. If the request is made within 60 days of the first notice being sent, the assessment must be abated even if the taxpayer doesn’t provide supporting documentation.
   2. If the request is made beyond 60 days from when the first notice was sent and the taxpayer does not provide supporting documentation, abatement may be denied. If the abatement request is denied, the taxpayer should explain that the 60-day abatement period language was wrongly omitted from the notice he or she received and ask for reconsideration of the adjustment.  The IRS does not have to reconsider the request for abatement, but it should, and it should provide guidance to its employees to consider the taxpayer’s request to abate the adjustment.

If the taxpayer can support the abatement request with documentation and show the RRC claimed was correct, the IRS should allow an abatement, even if the 60-day period has elapsed.  That is the correct thing to do.  (See IRM 21.5.4.5.3.)  The taxpayer can call the customer service number listed on his or her CP (math error) notice and provide the missing information or correct information (e.g., an SSN that matches the dependent claimed on the return), and the customer service representative should make the adjustment.  These situations are referred to as substantiated cases.  See IRM 21.5.4.5.4, Math Error Substantiated Protest Processing.

For instance, in Example 2 above, the taxpayer could provide a copy of the qualifying child’s Social Security card, thus verifying the correct Social Security number.  However, if the IRS rejects the abatement request either because it finds the documentation unsatisfactory or because no documentation was provided and the abatement request was made after the 60-day abatement period, the assessment will remain, and no statutory notice of deficiency will be issued, preventing the taxpayer from disputing the matter in the U.S. Tax Court.  However, the IRS will be issuing supplemental notices that restart the 60-day clock for requesting an abatement, exam consideration, issuance of a statutory notice of deficiency and will provide taxpayers the ability to file a petition in the U.S. Tax Court if the parties do not agree.  Unfortunately, it is our understanding that the supplemental letters are not providing an explanation as to why the IRS originally reduced or eliminated the claimed RRC in the first notice.  The letters are only providing information on the additional 60-day abatement period and taxpayers’ rights.

2. Taxpayers can wait until the receipt of the supplemental notice that restarts the 60-day clock for requesting an abatement, providing an opportunity to offer information or documentation supporting the taxpayer’s RRC claim. If the IRS does not agree that the taxpayer’s documentation substantiates the RRC claim, it will abate the adjustment, consider sending the matter for audit, and issue a statutory notice of deficiency providing taxpayers the ability to file a petition in the U.S. Tax Court.
3. If the math error adjustment triggered an increase in tax and an assessment of an unpaid tax, the taxpayer may contest the adjustment in a Collection Due Process (CDP) hearing and subsequently petition the U.S. Tax Court for review of Appeals CDP determination.  The receipt of a math error notice is not a prior opportunity under IRC § 6330(c)(2)(B) that would prevent the taxpayer from obtaining review of the adjustment in CDP.  See IRM 8.22.8.3(9)(f), When Liability is Raised.
4. Another option taxpayers have is the ability to file a refund suit in U.S. District Court or the Court of Federal Claims; however, this recourse requires the taxpayer to pay the liability up front and potentially incur additional expenses for legal representation. Because the original return acts as a claim for refund, the taxpayer can file a refund suit after receiving a notice of claim disallowance or six months after the return was filed.  If the IRS does issue a notice of claim disallowance, the taxpayer will have two years to file a refund suit in the U.S. District Court or the Court of Federal Claims.  (IRC § 6532(a)(1))  Disputing the assessment in this forum would normally mean that the taxpayer would have to pay the liability before seeking judicial recourse.  But in cases where the adjustment to the refundable credit has only reduced the credit, no such payment is necessary to file in the U.S. District Court or the Court of Federal Claims.  However, this option is not realistic for the small dollars at issue versus the cost of litigation unless the taxpayer is represented by a Low Income Taxpayer Clinic (LITC) or a representative who is willing to work pro bono – for free.

Example 4: Taxpayer claims the RRC in the amount of $1,000, which makes up the entire amount of the taxpayer’s expected refund.  The IRS, through its math error authority, reduces the RRC to $500, thereby reducing the taxpayer’s refund to $500.  The IRS sends the taxpayer a CP 11 or CP 12 notice informing him or her of this change.  If the taxpayer decides later that he or she disagrees with the assessment, he or she can file a refund suit in U.S. District Court or the Court of Federal Claims six months after the filing of the return. Again, this is a legal right afforded by the statute, but not an efficient resolution.

Bottom Line: Taxpayers Have Options to Contest the RRC Adjustment and the IRS Is Fixing the Procedural Problem

Good news – since this issue has been raised by TAS, the IRS has agreed as of July 22, 2021, that all future math error notices where an RRC adjustment is being made will include the 60-day abatement period language.  For those notices that were already sent to taxpayers without the 60-day abatement period language, the IRS will be sending a supplemental letter explaining their rights, providing the 60-day abatement period from the date the new notices are sent.  We would also recommend that these notices, similar to other IRS notices, include the date by which the abatement request must be submitted to the IRS.  In addition, the notice should clearly identify the error made on the return that caused the reduction in the RRC rather than requiring the taxpayer to determine which of the five bullets apply to his or her circumstances.  The IRS should also revise its FAQs on the RRC webpage informing taxpayers that an error was made on the notices previously sent out regarding changes made to the RRC, and that new notices will be reissued correcting this error and providing taxpayers additional time to contest the adjustment.  The FAQs should clearly inform taxpayers that if they disagree with the supplemental letter regarding reducing or eliminating their RRC, there are remedies available to contest the IRS’s determination.  Taxpayers should contact the IRS by calling 800-829-0922 to review their account with a representative, discuss the disallowed credit, and provide the necessary documentation supporting the credit.  My recommendation would be to reach out to the IRS as soon as possible and provide the supporting information or documentation.  And if needed, the IRS will be providing additional relief by sending a supplemental letter, providing an explanation to taxpayers of the right to request an abatement of the adjustment, and resetting the 60-day window to request that abatement.

If you believe the IRS’s RRC adjustment is incorrect, make sure you reach out to the IRS as soon as possible.

Conclusion

No surprise, taxpayers are often confused by IRS notices, and math error notices are no exception.  Taxpayers may not understand the nuances of tax lingo, but the notice should at least use the term “math error” and provide a simplistic explanation of what that means.  Taxpayers may not understand the use of the term “math error,” but practitioners should understand the procedural significance of CP 11 or CP 12 notices.  These notices are often unclear and confusing.  But the omission of a critical statutory time period to request abatement goes far beyond just confusing: it has significant implications and repercussions for taxpayers, is a serious compromise of their rights, and is unacceptable.  We are appreciative of the IRS doing the right thing to remedy this omission, correcting future notices, and issuing supplemental letters providing the 60-day window to request an abatement.  We urge the IRS to move swiftly to undo this harm and update the RRC FAQs and all pertinent information and guidance.

Additionally, TAS will be proposing a legislative change to IRC § 6213(b)(2)(A) that if adopted would require that the 60-day abatement period language be included in all math error notices and would include clear notification of taxpayer rights.

Eligible taxpayers can reach out to Low Income Taxpayer Clinics (LITCs) for assistance with this issue.  LITCs are independent from the IRS and TAS.  LITCs represent individuals whose income is below a certain level and who need to resolve tax problems with the IRS.  LITCs can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court.  In addition, LITCs can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language.  Services are offered for free or a small fee.

For more information or to find an LITC near you, visit www.taxpayeradvocate.irs.gov/litc or IRS Publication 4134, Low Income Taxpayer Clinic List.  This publication is also available online at www.irs.gov/forms-pubs or by calling the IRS toll-free at 800-TAX-FORM (800-829-3676).