A recently completed audit by the General Accounting Office shows that the IRS routinely sends notices to millions of Americans about mistakes in their returns, often involving amounts due of less than $5 or refunds of less than $1.

Depending on the circumstances, it costs the IRS between 42 cents and $14.32, including staff labor, to prepare and send each of these notices, the GAO estimated.

The IRS has indicated that it is upgrading its communications systems to avoid duplicate notices and past due notices that have already been paid.

But by law, the IRS is required to notify taxpayers of any change to their account. The IRS is hoping that Congress will modernize that law, outlining the appropriate circumstances under which small dollar notices are sent to taxpayers.

By the end of this month, IRS Commissioner Charles Rosotti hopes to make several moves toward improving the process, including:

• making changes in the error notices that could involve adding clear language pointing out when a notice is not a bill or request for payment;
• asking Congress to change the law requiring that taxpayers be notified of all adjustments;
• and changing computer programs so that small-dollar payments due are simply recorded as zero balances, with a notice sent to taxpayers explaining the change.