The IRS “Math Error” Letters

IRS error letter

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The IRS is Finally Catching Up

After shutting down for over a year, the IRS is finally catching up with all of the tax returns filed in 2019 and 2020. With that, many people are getting an IRS “math error” letter. The IRS has sent out over 11 million such letters all reducing refunds or demanding payments from taxpayers based upon 2020 tax returns. This is not an audit, however. The IRS letter simply states that the taxes you paid were incorrect and now you owe more than was originally calculated.

Stimulus Checks

Many of these IRS letters are a result of the stimulus checks that were issued during 2020. Those payments were based on income, and if your tax return showed income above $75,000, or $150,000 for a couple, then you may have received more than you should have. The IRS letter is adjusting for that overpayment, thus stating you owe more taxes. If you believe the adjustment is incorrect, you can dispute the adjustment within 60 days. However, if you do not provide adequate documentation, it may lead to an actual audit.

If it turns out the IRS letter is accurate, and you now have a tax obligation, you will be allowed to make payments on the balance or request that your account be designated as uncollectible. However, doing so does not eliminate the debt and interest and penalties will continue to accrue.

2021 Increase in IRS Letters

2021 has seen a sharp increase in the number of IRS letters that were sent out primarily due to the stimulus payments that were received in 2020. In fact, 14 times as many “math error” letters were sent out regarding 2020 tax returns than were sent out last year for 2019 tax returns. With the third round of stimulus payments having been sent out in 2021, you can expect more IRS “math error” letters again in 2022.

Consider Chapter 13 as a Tool to Address Tax Debts

If you find yourself in a situation where you cannot pay your IRS taxes, you should consider filing a Chapter 13 case. A Chapter 13 bankruptcy will allow you to take up to 5 years to pay your past due taxes with no additional penalties or interest accruing during that payback – which is a huge benefit. If you have other debt such as credit cards or medical bills, most Chapter 13 bankruptcies will simply wipe out those debts without requiring them to be repaid. And, you almost certainly will not lose your house, car or any other property in a Chapter 13 case. If you think a Chapter 13 case might be beneficial for you, feel free to contact WM Law for a free, no obligation consultation.

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Jeffrey L. Wagoner


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