Filing errors spur TIGTA to recommend changes to Form 1040

The Internal Revenue Service (IRS) could reduce the number of errors made by individual taxpayers by clarifying instructions on and improving the layout of Form 1040, concludes a new report publicly released by the Treasury Inspector General for Tax Administration (TIGTA).

Each year, the IRS sends out more than seven million math error notices informing taxpayers of changes that were made to their tax returns as a result of mathematical or clerical errors made by such taxpayers.

TIGTA's review found that more than 2.3 million of those errors could have resulted from unclear or inadequate forms. An analysis of taxpayer errors on tax returns for 2005 that were filed in 2006 identified three specific areas where modifying Form 1040 and its associated instructions could reduce errors. These were:

  • Errors made computing the deduction for personal tax exemptions;
  • The omission of dependent Social Security numbers or Individual Taxpayer Identification Numbers (ITINs); and
  • Children claimed for the Child Tax Credit who exceeded the age limit.

Taxpayers made more than 210,000 errors computing their exemption amounts. Another 170,000 taxpayers failed to include their dependent's SSN or ITIN on their Form 1040, and approximately 137,000 taxpayers filing taxes in 2006 were denied the Child Tax Credit because the child claimed for the credit exceeded the age requirement.

"Changes to tax forms and instructions could reduce some of the errors made by taxpayers on their individual income tax returns," commented J. Russell George, the Treasury Inspector General for Tax Administration. "Moreover, simplifying the filing process for taxpayers by clarifying forms and instructions increases compliance and reduces burden." TIGTA recommended that the IRS use improved labeling, including the use of bold type to draw taxpayers' attention to instructions. Other changes to the Form 1040 recommended by TIGTA include adding language explaining the purpose and description of the exemption line; a statement that a SSN or ITIN is required for each dependent claimed and the inclusion of the qualifying age requirement necessary to claim the Child Tax Credit.

TIGTA also recommended that the IRS seek Congressional approval to use additional colors on tax returns and instructions to highlight important warnings and information.

In its response to a draft of TIGTA's report, the IRS said it would continue conducting its analysis of common taxpayer errors and agreed to modify the language explaining the Child Tax Credit. The IRS said it would consider how best to educate taxpayers of the need to include an SSN or ITIN for each dependent claimed as an exemption.

You can read the full report, including the scope, methodology and IRS's complete response to a draft of the audit.

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