IRS Will Watch Its Language More Carefully
In late September, Allen Lewis, proprietor of Lewis Unique Wrought Iron in Pasadena, got a form letter from the Internal Revenue Service. Titled “Request for Payment,” it said simply, “Our records show you owe $102.43 on your return for the above tax period,” told him how and by when to make his payment, and displayed some computation:
Tax on Return $6,807.95
Total credits $6,807.94
Underpayment .01
Penalty 102.42
Interest .00
Amount you owe $102.43
A penalty of $102 for a penny due seemed absurd. “When I looked at the form,” says Alfred Krueger, Lewis’ bookkeeper, “I was shocked.” Figuring there’d been a computer error, and that the computer which generated the notice would catch its absurdity, Lewis and Krueger let it pass.
But a month later they received a second notice (“We have previously written . . . “) that not only added 89 cents in interest, but announced imminent filing of a tax lien against the business, and perhaps a seizure of property. It seemed excessive.
In fact, the IRS penalty had nothing to do with the penny owed, and the bill wasn’t absurd but merely “distorted,” says an IRS technician in Fresno.
The company, he said, apparently made a monthly deposit of federal employment taxes a few days late (“a deposit not timely made,” he called it), as suggested by a notation (“See Codes 03”) at the bottom of the letter. Unfortunately, Code 03 could also be read as confirming the one-penny theory: “A penalty has been added because your tax deposits were not made in sufficient amounts by the dates required.”
Viewed as Capricious
For many people, such communications reinforce a view of the IRS as capricious, unbending and certainly elliptical. Unfortunately, much of the IRS communication with taxpayers utilizes standard forms that are supposed to cover all situations. This approach to correspondence has precipitated a great deal of taxpayer complaint, much of it, said a 1983 IRS study, focused on “the complexity, lack of clarity, inadequacy and misleading nature of our computer-generated notices.”
These notices, the most common IRS communications, tell the taxpayer that he still owes money, has failed to report certain income, has a problem with the given Social Security number, has sent in a payment without noting where it should be applied. Barely personalized, they combine general boilerplate with coded references for the particular situation.
A notice of “math error,” for example, may bear any one of 70 separate codes on individual returns, 12 on non-resident returns and 34 for prior year returns. And what is called a “math error,” say tax preparers, may not be. What’s more, notices often assess penalties or interest without showing how it was computed.
Granted, the IRS’ task isn’t easy, given the number of individual situations it must cover and the varied sophistication of its audience. Furthermore, says Michael Allen, director of returns processing and accounting in the national office in Washington, “the law on some of these things is very difficult, or they’re highly technical, with lots and lots of exceptions, and it must be put into language that’s understandable.”
Could Confuse Issue
And if the notice itself bore a full explanation of how penalties and interest were calculated and charted the different penalties and ever-changing interest rates, it could run on for pages, says Allen, “confusing the issue.”
Nevertheless, the IRS is well aware of its communications problem, having authorized a nationwide study that reported on “taxpayer correspondence” problems in 1983. Heavy on technical jargon (“broad, multi-functional perspective,” “projected . . . cross-func tional impact,” “inconsistent control criteria”), it nevertheless admitted that previous studies of IRS correspondence had been useless or ignored and strongly recommended “corrective actions.”
Reviewing everything from mail routes to tear-off stubs, the study made a number of individual recommendations. Taxpayers, for example, should always be given a “specific time frame” to respond to the IRS’ inquiries and to expect IRS response to an inquiry of theirs. They should be asked for their phone numbers and the best time to call. Also, the three weeks between second and third notices should be extended, because it allowed almost no time for a taxpayer response.
There was also a general “thrust,” not readily apparent to a layman trying to read the verbal aphasia of IRS bureaucrats, but understood and acknowledged within the IRS. The IRS is concerned about how it speaks to its public--not just its clarity (its “notice clarity policy,” in the study) but its tone, trying, says Assistant Commissioner Ed Pecorella, “to remove any threatening language, keeping it neutral and relative to the issue involved.”
It is also concerned about speaking more to the public. The study, and its continuing implementation, says Allen, represent “a qualitative effort on the part of the service to be more responsive to the taxpayer.” This effort is supposed to include better, faster answers to taxpayer correspondence, as well as reiterated invitations to the taxpayer to ask questions, with phone numbers, and sometimes names, on every communication, so taxpayers can call in, maybe, says Allen, just “to say, ‘We don’t know what you want.’ ”
Many of those taxpayers simply pay up, without understanding, as Lewis was going to if the computer didn’t back down. But the IRS doesn’t want it that way; it wants a new approach.
True to the new responsiveness, the Fresno “assistor” who took the penny penalty call first explained it, then agreed that the notice could confuse, saying: “I’ll make a suggestion on that”--just like a real customer-service representative. After all, says Allen, “to an extent, taxpayers are our customers.”
