The IRS fails to provide taxpayers with necessary information, leading to confusion and complexity according to the National Taxpayer Advocate’s 2022 Annual Report to Congress.
NTA’s report details numerous cases how the IRS does not provide clear, timely, nor accurate information to taxpayers, violating a taxpayer’s right to be informed, as outlined in the Taxpayer Bill of Rights. While the pandemic added more complexity to U.S. tax laws and procedures, this lack of transparency and clarity was a problem long before the pandemic.
As the report notes, the IRS frequently fails to provide basic information and instead provides confusing and inaccurate information to taxpayers:
“The IRS is not consistently open and transparent and does not provide clear and timely information about what taxpayers need to know…. Frequently, taxpayers and tax professionals receive confusing and inaccurate information from the IRS or cannot reach an IRS assistor. Frustrations within the tax and accounting professional community are at an all-time high…”
The IRS frequently issues notices to taxpayers which contain confusing and incomplete information. For example, when the IRS issues notices because of potential math errors or refund fraud, they do not explain why the refund is being reviewed but instead list several reasons that they might be reviewing your tax return.
The report provides the following example of a math error notice’s language, which lists five possible reasons that a taxpayer received the notice:
As NTA notes, this does not tell the taxpayer what the IRS is reviewing, over what timeframe the IRS is reviewing the return, or whether the taxpayer can expedite the process. This is not a unique situation – the IRS often provides taxpayers with is deliberately complex and confusing information in order to make it more difficult for taxpayers to follow up. As NTA’s 2018 Annual Report to Congress noted, the “IRS has attempted to design letters that artificially suppress the number of follow-up calls, even when the outcome is bad for the IRS and worse for taxpayers.”
This complexity is a key contributor to the massive backlog of paperwork and tax returns the IRS is currently dealing with. As of mid-December 2021, the IRS had 6.2 million unprocessed individual returns, 2.8 million unprocessed business returns, 2.4 million unprocessed amended individual returns, 427,000 unprocessed amended business returns, and about 4.75 million pieces of general taxpayer correspondence.
At one point, it got so bad that the IRS was storing unopened paper tax returns in trailers.
In response to taxpayers’ frustrations, the IRS said to simply “plan for delays.” As the NTA explains, this advice would be more palatable if taxpayers received a realistic timeframe from the IRS, and, for many taxpayers, this standard is unreasonable.
The agency’s conduct has real world effects, as NTA notes. For instance, one taxpayer interviewed is fighting cancer and needed her tax refund to pay her mortgage. Months later, she was still waiting for any communication from the agency:
“Many taxpayers desperately need the money and cannot afford to wait. One taxpayer, who is fighting cancer, noted that with her health deteriorating; she desperately needs her tax refund to pay her mortgage. As of November, she was also still waiting…”
As it stands, taxpayers receive a comically low level of information – they do not know when they can expect their tax return to be processed, what stage of processing it is in, and if investigated for errors, are not told what the problem is or how they can fix the problem.