Last week, President Trump signed a new law, the Internal Revenue Service Math and Taxpayer Help (IRS MATH) Act, designed to simplify at least this one part of our complicated tax code.
The legislation was bipartisan: sponsored by Sens. Bill Cassidy (R-LA) and Elizabeth Warren (D-MA) in the Senate and Reps. Randy Feenstra (R-IA) and Brad Schneider (D-IL) in the House, and approved unanimously by both chambers.
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In the modern era, the IRS feeds all of the tax returns it receives through a computer program, which automatically flags if someone added things up wrong. When that happens, the IRS then sends a “math error notice” to the taxpayer; the agency also sends such notices for other mistakes that are easily fixed, like if someone put the right information in the wrong place, if a return is internally inconsistent, or if someone gives the wrong Social Security Number or forgets to include one entirely.
About 2 million of these notices are usually sent out each year — although, as you can see below in this chart by the Tax Policy Center, that number skyrocketed to 17 million during the pandemic (primarily because of errors people made in claiming stimulus checks and the expanded Child Tax Credit).
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If someone receives a math error notice in the mail, they have 60 days to quibble with it. If they don’t appeal within that timeframe, they are considered to owe the corrected amount the IRS is asking for. When everything works well, this is a win-win for the government and for the taxpayer: there’s no reason for either side to go through a more drawn-out and expensive audit or legal process if the only issue is that John wrote “$3,650” where he meant to put “3,506.”
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For each of the last four years, Collins has proposed that Congress pass a law telling the IRS to fix their math error system, so that the notices sent out to Americans actually tell them what their mistake was and how long they have to appeal it. (It’s Recommendation #9 on this year’s list.) The IRS MATH Act, signed by Trump last week, is Congress finally taking her up on it.
Under the measure, the IRS math error notices will have to describe the “mathematical or clerical error” a taxpayer made “in comprehensive, plain language,” including by explaining to them “the nature of the error” and pointing them to “the specific line of the return on which the error was made.”
The IRS will also have to give an “itemized computation” of how the correction will change their adjusted gross income, taxable income, deduction amount, or tax credits.
Hey, that's my representative! Nice to see he's doing something useful. I've had my own struggles with the IRS - I'm happy to pay my taxes, yet I despise the system for doing so. It is purposely...
Hey, that's my representative! Nice to see he's doing something useful. I've had my own struggles with the IRS - I'm happy to pay my taxes, yet I despise the system for doing so. It is purposely byzantine and hostile to the average taxpayer.
What I don't get about the tax system in the US is why it's set up like a yearly exam. If you're flagging that I've made errors on my taxes, you obviously already know what the correct values are....
What I don't get about the tax system in the US is why it's set up like a yearly exam.
If you're flagging that I've made errors on my taxes, you obviously already know what the correct values are.
This is a step in the right direction, but return free filing is a no brainer. Just automatically file a tax return for everyone and send them a preview of their tax liability a few months in advance. If someone has an adjustment to make, they can file that adjustment on their return. If not, no problem.
You don't have to worry about people making errors if you're not having them take a pointless, stressful yearly math and paperwork quiz.
There's no reason it couldn't be vastly simplified for a large majority of people where the government does have everything reported to it. There was an attempt to simplify filing, but the Trump...
There's no reason it couldn't be vastly simplified for a large majority of people where the government does have everything reported to it. There was an attempt to simplify filing, but the Trump administration killed it.
The problem with doing this for "everyone" is that US income tax laws are very complicated and there are a lot of different situations. For people with simple situations, the government already knows everything. But for businesses, the business has to do its own tax accounting, based on numbers that only the business tracks.
Another example is anyone with foreign accounts. It will probably never be true that everyone worldwide reports your income to the US government for you, like US banks and brokerages do. The world is just not that centralized.
It’s not. They don’t know how much in taxes you owe because they only know what has been reported, most notably W2 income. There’s a lot that doesn’t get automatically reported, like many forms of...
It’s not. They don’t know how much in taxes you owe because they only know what has been reported, most notably W2 income. There’s a lot that doesn’t get automatically reported, like many forms of investment, all forms of deductions, and so forth.
The math errors they’re talking about is internal inconsistencies in what you send them. It’s not that they know the answers and are getting you in a gotcha, it’s that you said 2 + 2 = 5.
There’s certainly a lot of friction in the US tax system, but people also overstate it. If you’re a W2 worker only using the standard deduction and no outside income, your tax experience is uploading one document (the w2) and that’s about it.
If you do have a more complicated return, you’re going to have to file anyway, since the IRS can’t know what it doesn’t know.
W2 is the sole source of most people's income though. Investment account returns are also reported to the IRS by the financial institutions they're managed by. Most people would only have to...
W2 is the sole source of most people's income though. Investment account returns are also reported to the IRS by the financial institutions they're managed by. Most people would only have to supply deductions, and for most people, those are the same each year. You could just update your info as needed on an IRS site and otherwise leave it alone.
For the majority of people, that's the extent of their taxes. Instead, we make people jump through hoops and spend millions on tax pros and prep software. It's ridiculous.
That is how it works in most of the world, btw. If you're an equivalent of a W-2 worker, your employer actually withholds and sends the government your taxes without you even having to lift a...
That is how it works in most of the world, btw. If you're an equivalent of a W-2 worker, your employer actually withholds and sends the government your taxes without you even having to lift a finger. If you make any extra income (stock market, side hustle, etc), you file that separately (EDIT: or amend your filing).
The why is because Intuit/Turbo Tax is making it so. No other reason than having seized and monopolized tax returns. You can still do free tax returns of course, though the method remains archaic...
The why is because Intuit/Turbo Tax is making it so. No other reason than having seized and monopolized tax returns.
You can still do free tax returns of course, though the method remains archaic because not enough people use it, Turbo Tax likes it that way, and like @skybrian mentioned, a change was killed.
I'm gonna choose to call this law a Good Thing. It doesn't beat the free filing DOGE shitcanned earlier this year, but it sure is a hell of an improvement.
I'm gonna choose to call this law a Good Thing. It doesn't beat the free filing DOGE shitcanned earlier this year, but it sure is a hell of an improvement.
From the article:
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Hey, that's my representative! Nice to see he's doing something useful. I've had my own struggles with the IRS - I'm happy to pay my taxes, yet I despise the system for doing so. It is purposely byzantine and hostile to the average taxpayer.
What I don't get about the tax system in the US is why it's set up like a yearly exam.
If you're flagging that I've made errors on my taxes, you obviously already know what the correct values are.
This is a step in the right direction, but return free filing is a no brainer. Just automatically file a tax return for everyone and send them a preview of their tax liability a few months in advance. If someone has an adjustment to make, they can file that adjustment on their return. If not, no problem.
You don't have to worry about people making errors if you're not having them take a pointless, stressful yearly math and paperwork quiz.
There's no reason it couldn't be vastly simplified for a large majority of people where the government does have everything reported to it. There was an attempt to simplify filing, but the Trump administration killed it.
The problem with doing this for "everyone" is that US income tax laws are very complicated and there are a lot of different situations. For people with simple situations, the government already knows everything. But for businesses, the business has to do its own tax accounting, based on numbers that only the business tracks.
Another example is anyone with foreign accounts. It will probably never be true that everyone worldwide reports your income to the US government for you, like US banks and brokerages do. The world is just not that centralized.
It’s not. They don’t know how much in taxes you owe because they only know what has been reported, most notably W2 income. There’s a lot that doesn’t get automatically reported, like many forms of investment, all forms of deductions, and so forth.
The math errors they’re talking about is internal inconsistencies in what you send them. It’s not that they know the answers and are getting you in a gotcha, it’s that you said 2 + 2 = 5.
There’s certainly a lot of friction in the US tax system, but people also overstate it. If you’re a W2 worker only using the standard deduction and no outside income, your tax experience is uploading one document (the w2) and that’s about it.
If you do have a more complicated return, you’re going to have to file anyway, since the IRS can’t know what it doesn’t know.
W2 is the sole source of most people's income though. Investment account returns are also reported to the IRS by the financial institutions they're managed by. Most people would only have to supply deductions, and for most people, those are the same each year. You could just update your info as needed on an IRS site and otherwise leave it alone.
For the majority of people, that's the extent of their taxes. Instead, we make people jump through hoops and spend millions on tax pros and prep software. It's ridiculous.
That is how it works in most of the world, btw. If you're an equivalent of a W-2 worker, your employer actually withholds and sends the government your taxes without you even having to lift a finger. If you make any extra income (stock market, side hustle, etc), you file that separately (EDIT: or amend your filing).
The why is because Intuit/Turbo Tax is making it so. No other reason than having seized and monopolized tax returns.
You can still do free tax returns of course, though the method remains archaic because not enough people use it, Turbo Tax likes it that way, and like @skybrian mentioned, a change was killed.
I'm gonna choose to call this law a Good Thing. It doesn't beat the free filing DOGE shitcanned earlier this year, but it sure is a hell of an improvement.