US IRS wants to simplify tax notices to reduce anxiety, boost compliance

[January 24, 2024]  By David Lawder
 
WASHINGTON (Reuters) - The U.S. Internal Revenue Service on Tuesday said it was redesigning hundreds of types of notices mailed to taxpayers to make them simpler, clearer, and understandable in the hopes that this will help improve compliance and reduce taxpayer anxiety.  

IRS Commissioner Danny Werfel testifies before House Committee on Ways and Means on "Accountability and Transparency at the Internal Revenue Service" on Capitol Hill in Washington, U.S., April 27, 2023. REUTERS/Elizabeth Frantz/File Photo

The IRS and the U.S. Treasury rolled out the "Simple Notice Initiative" with 31 redesigned notices for the 2024 tax filing season, which starts on Monday.

WHY IT'S IMPORTANT

The changes are part of the IRS' modernization drive using $80 billion in new funding over a decade, an amount that will be reduced by about $20 billion under a bipartisan top-line spending agreement.

The agency wants to show continued progress after changes that aided the 2023 tax filing season, including the hiring of 5,000 additional staff to answer phones, new scanning technology that speeded the processing of paper returns, and a focus on wealthy individuals that had failed to file returns.

KEY QUOTE:

"When a letter arrives in the mail from the IRS, we all catch our breath. So given the initial apprehension, it's really important for us to get the information clear and understandable to help taxpayers," IRS Commissioner Danny Werfel told reporters.

"If it's not about an unpaid tax bill, we need to mark it clearly as 'this is not a bill.' If it's just a question about a tax return, we need to mark it clearly as 'this is not an audit,'" Werfel added.

BY THE NUMBERS

The IRS sent a redesigned 5071C notice, which guards against the filing of fraudulent returns and asks taxpayers to verify their identity, to 60,000 taxpayers, stating more clearly what steps needed to be taken immediately.

It said there was a 16% reduction in taxpayers who phoned the IRS as their first action, and a 6% increase in taxpayers who verified their identity online, freeing up staff for other tasks.

By the 2025 filing season, the IRS said it will redesign up to 200 individual income tax notices that make up 90% of the total notices sent to individual taxpayers.

(Reporting by David Lawder, Editing by Rosalba O'Brien)

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