Simplified Tax Notices: IRS New Move for Clarity

With the 2024 tax season upon us, last month, Treasury Secretary Janet Yellen announced, on a call with reporters, that as part of its new Simple Notice Initiative, the IRS has rewritten most commonly received notices. The notices should now be shorter, clearer, and easier to understand. According to Yellen, “Taxpayers will see the difference when they open the mail and when they log into their online accounts.”

More than 170 million notices are sent out annually by the IRS to taxpayers regarding credits, deductions, and taxes owed. The notices are often needlessly long and filled with legal jargon, forcing many confused taxpayers to call the agency and jam up phone lines. “Simpler notices in plain language will help people understand their tax liability and improve tax enforcement,” said IRS Commissioner Daniel Werfel. According to Werfel, “We need to put more of these letters into plain language— something an average person can understand. The clearer our notices are, for example, when a balance is due, the more rapidly and effectively those balance dues will be understood by the taxpayer and paid.”

It is anticipated that this should help the agency be more effective in its collection efforts. The initiative is paid for with funding from the Democrats’ Inflation Reduction Act. The agency received an $80 billion infusion of cash for the IRS over 10 years under the IRA which was passed into law in August 2022. It should be noted that some of that money has been cut back and is in constant threat of cuts. According to Werfel, the simplification initiative, “is another reason why the Inflation Reduction Act funding is so important.”

The effort to reduce paperwork and make the IRS easier to work with is part of the agency’s paperless processing initiative announced last August. This is an effort to reduce the exorbitant amount of paperwork that has plagued the agency for years and expanded during the COVID epidemic when IRS offices were closed. Under the Inflation Reduction Act, most people will be able to submit everything but their tax returns digitally in 2024.

As the IRS pilots its new electronic free file tax return system in 2024, the agency says it will be able to process everything, including tax returns, digitally by 2025. We salute the IRS for their effort to simplify notices that were confusing and difficult to understand.

For more information on the new Simple Notice Initiative, please contact LMC Tax & Legal Manager David Neuman, JD at dneuman@lmcas.com who leads the firm’s Tax Controversy Group.