In a Program Manager Technical Advice 2018-017 (PMTA), IRS has concluded that it can assess a tax under its math error authority under Code Sec. 6213(b) at any time prior to the expiration of the statute of limitations on assessment, regardless of whether the return has already been initially processed.
The U.S. Treasury Inspector General for Tax Administration (TIGTA) reviewed tax year 2014 returns filed and processed during the 2016 filing season and identified more than $34.8 million in EITC, CTC/ACTC, and AOTC credits that were paid to taxpayers filing tax returns for years before their TINs were issued, i.e., credits that should have been disallowed by IRS based on the PATH Act changes. The PMTA noted that IRS didn't have procedures in place to catch these errors when processing the returns due to the "unique circumstances created" by the PATH Act's effective date and the onset of the filing season.
The issue in the PMTA is whether IRS may use its math error authority as described above, after the initial processing of a return.
The PMTA concluded that, aside from the statute of limitations on assessment under Code Sec. 6501, there is no timing limitation on IRS's use of math error authority under Code Sec. 6213(b). Accordingly, IRS can assess at any time that the limitations period remains open.
The PMTA reasoned that this conclusion is, in IRS's view, consistent with Congressional intent. While IRS's math error authority was originally limited to "garden-variety mathematical and clerical errors that appeared on the face of returns," it has been expanded over time to include matters that are not strictly mathematical errors and that are not necessarily identifiable on the face of the return (e.g., whether a TIN was timely issued).
The logical implication of including these types of items within IRS's math error authority means that IRS is not limited in its exercise of such authority to the initial processing of the return; and nothing in Code Sec. 6213 itself or its legislative history suggests otherwise.
In addition, the PMTA found that IRS's use of its math error authority in this manner would present only minimal litigation hazards and wouldn't implicate due process concerns. While there are "cognizable fairness concerns" about using math error authority after refunds have been issued, especially in respect to lower-income taxpayers, the PMTA noted that IRS can opt to follow regular audit procedures and issue notices of deficiency instead.
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