One Plus One Equals…Three?

Math Error Notices from the IRS 

Nancy Muench is a CPA with over thirty years of tax experience, and we are fortunate to be able to rely on her expertise as the Head of our Tax Department.  She has some good advice to share regarding math error notices from the IRS.  

In our tech savvy society, we’ve come to trust that our computers and software programs are correctly calculating the numbers we plug into the system. However, even with sophisticated software to ensure the highest accuracy when completing tax returns, it is still possible to have “math errors” (as classified by the IRS) and receive a notice from the IRS.  Although Congress first authorized the IRS to use the math error program in 1926, it has since been expanded to include errors that extend beyond simple addition or subtraction.  In addition to basic arithmetic errors, some of the errors that fall under the math error classification include: 

• An omission of information required on the return to substantiate an entry. 
• Any document provided to the IRS needs to be reported on the return.  Most commonly omitted are sales of stock options.  Even if there is no gain or loss reported, these transactions still belong on a filed return. 
• Tax documents, such as 1099R forms, which are not mailed and are accessible only online sometimes are overlooked and not provided to the tax preparer. 
• Missing or incorrect amounts for quarterly estimated payments. 
• Missing or incorrect TINs (Taxpayer Identification Numbers) for the primary, secondary, and/or dependents. 

The IRS uses computers to screen all tax returns for math errors and mail notices to affected taxpayers with very little human input from IRS agents.  A math error notice is not the same as an audit notice.  If the error is one that requires subjective judgment, the taxpayer will likely receive an audit notice instead of a math error notice.

If you receive a notice from the IRS about a math error or any other issue, your first step is to contact us, if we prepared your tax returns.  Don’t ignore any notices from the IRS, as these are time sensitive and require a response within 60 days.  Remember that the IRS will never call you about a math error or audit.  All initial correspondence from the IRS will be in writing.  Calls claiming to be from the IRS are scams.  Never provide identifying information over the phone.

A math error notice doesn’t necessarily mean you will owe more in taxes.  In our experience, these math error notices often result in a refund for the taxpayer.  We are happy to help our clients navigate the process should one of these notices appear in your mailbox. 

*Nancy Muench is not affiliated with LPL Financial.