Tax Administration: IRS Notices Can Be Improved (Letter Report, 12/07/94,
GAO/GGD-95-6).

Each year, the Internal Revenue Service (IRS) sends millions of notices
to taxpayers about the status of their tax accounts. Notices are often
the first form of IRS contact that taxpayers receive to alert them to a
potential tax problem.  In 1993, IRS sent more than 60 million notices
affecting about $190 billion in taxpayer transactions.  GAO identified
clarity problems with 31 of the 47 most commonly used notices it
received.  GAO also believes that taxpayers with multiple tax problems
would be better served by receiving a single, comprehensive notice
summarizing the status of their accounts, rather than the stream of
multiple notices that IRS now sends out.  Through a tax systems
modernization initiative that is exploring ways to issue a single notice
addressing multiple tax matters, IRS hopes to be able to deliver
comprehensive tax account notices to taxpayers. Despite IRS' progress
and commitment to improving clarity, in some cases taxpayers continued
to receive notices that IRS' Notice Clarity Unit (NCU) deemed
problematic.  Although NCU may have reviewed the notice and recommended
text changes, IRS continued to issue the inferior version, since the
revisions were not made promptly.  Many of the recommended changes were
delayed or never made because of IRS' computer system, which is
antiquated and requires labor-intensive programming to make the simplest
of text changes.  Improvements may result from the transfer of notices
to Correspondex, a more modern computer system that generates other IRS
correspondence.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-95-6
     TITLE:  Tax Administration: IRS Notices Can Be Improved
      DATE:  12/07/94
   SUBJECT:  Tax administration
             Federal taxes
             Federal forms
             Taxpayers
             Computerized information systems
             Systems conversions
             Information dissemination operations
             Computer software
             Systems analysis
IDENTIFIER:  IRS Tax System Modernization Program
             TSM
             IRS Correspondex Expert System
             IRS Business Master Plan
             IRS Business Master File
             IRS Individual Master File
             IRS Integrated Data Retrieval System
             IRS Tele-Tax System
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Oversight, Committee on Ways
and Means, House of Representatives

December 1994

TAX ADMINISTRATION - IRS NOTICES
CAN BE IMPROVED

GAO/GGD-95-6

IRS Notices Can Be Improved

(268604)


Abbreviations
=============================================================== ABBREV

  BMF - Business Master File
  CP - computer paragraph
  EIC - Earned Income Credit
  IDRS - Integrated Data Retrieval System
  IMF - Individual Master File
  IRS - Internal Revenue Service
  ISM - Information Systems Management
  NAAG - National Automation Advisory Group
  NCU - Notice Clarity Unit
  RIS - Request for Information Services
  SSA - Social Security Administration
  TSM - Tax Systems Modernization

Letter
=============================================================== LETTER


B-258452

December 7, 1994

The Honorable J.J.  Pickle
Chairman, Subcommittee on Oversight
Committee on Ways and Means
House of Representatives

Dear Mr.  Chairman: 

Each year the Internal Revenue Service (IRS) sends millions of
notices to taxpayers concerning the status of their tax accounts. 
Notices are often the first form of IRS contact that taxpayers
receive to alert them to a potential tax problem.  In 1993, IRS sent
more than 60 million such notices affecting about $190 billion of
taxpayer transactions. 

This report responds to your continuing interest in IRS' ability to
provide taxpayers with notices that are understandable. 
Specifically, you asked us to review a group of commonly used notices
for clarity and offer suggestions for improvement where appropriate,
as we did on a more limited basis in our 1993 report.\1 You also
requested that we examine IRS' processes for ensuring that the
notices IRS issues convey essential information to taxpayers as
clearly as possible. 


--------------------
\1 Tax Administration:  Selected IRS Forms, Publications, and Notices
Could be Improved (GAO/GGD-93-72, Apr.  30, 1993). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Using a checklist of items that should be present for purposes of
clarity, we identified clarity concerns with 31 of the 47 most
commonly used notices we reviewed.  We selected high-volume notices
that were frequently sent to individual and business taxpayers.  Our
concerns addressed both the content and appearance of the notice as
well as the sufficiency of the instructions given to taxpayers to
resolve their problems.  In addition, we believe taxpayers with
multiple or inter-related tax problems would be better served by
receiving a single, comprehensive notice summarizing the status of
their accounts, rather than the stream of multiple notices that IRS
now sends to them.  This would provide taxpayers with a clearer
picture of their tax account status and minimize the confusion that
might occur when taxpayers start receiving numerous pieces of IRS
correspondence.  Through a Tax Systems Modernization (TSM) initiative
that is exploring ways to issue single notices addressing multiple
tax issues, IRS hopes to be able to deliver comprehensive tax account
notices to taxpayers. 

The Chief of IRS' Notice Clarity Unit (NCU), the national office unit
charged with reviewing notices for clarity, and other pertinent IRS
officials agreed to consider most of the suggestions we made to
improve clarity of the 31 notices.  Our suggestions and IRS'
responses related to specific notices are contained in appendix III. 

Despite IRS' process and commitment of resources to improve notice
clarity, in some cases, taxpayers continued to receive notices that
the NCU said were problematic.  Although NCU may have reviewed the
notice and recommended text changes, IRS continued to issue the
inferior version, since the revisions were not programmed in a timely
fashion.  For example, one balance due notice revised by NCU in May
of 1991 was not programmed for use until January 1993.  In calendar
year 1992, this notice was issued to more than 1.2 million taxpayers. 
According to NCU officials, implementation of many revisions has been
delayed for months, while others have never been implemented. 

Many of the recommended notice revisions were delayed or never made
due to IRS' limited computer programming resources.  The IRS computer
system, which currently generates master file notices regarding
account status, is antiquated and requires labor-intensive
reprogramming to make the simplest of text changes.  Further
complicating this situation are higher priority programming demands,
such as those implementing tax law changes and essential preparation
for processing tax returns during the next filing season. 
Consequently, even revisions with strong organizational support may
be significantly delayed. 

Improvements may be gained from the transfer of notices to
Correspondex, a more modern computer system that produces other IRS
correspondence.  Correspondex has many enhancements that are not
found on the computer system producing master file notices.  For
example, the text of these notices can be changed more readily, and
text can also be viewed on a computer screen.  The production of a
select group of collection notices is currently being tested on this
system.  These collection notices do not run on the same computer
system as the master file notices that are frequently issued to
taxpayers.  While the system supporting these collection notices is
more compatible with Correspondex than the system generating master
file notices, Correspondex and NCU officials are both optimistic
about the possibility of ultimately producing master file notices on
the Correspondex system.  IRS has also initiated several other
efforts that may improve the quality of notices to taxpayers. 


   BACKGROUND
------------------------------------------------------------ Letter :2

In recent years IRS and we have reported problems with IRS' written
communications to taxpayers.  Instances of IRS correspondence being
incorrect, incomplete, unclear, and nonresponsive have been
documented by GAO and IRS.  The need to improve the formats of
notices has also been identified.  In a recent annual report,\2 IRS
acknowledged that taxpayers too often find its notices confusing. 
Describing its written communications with taxpayers as a "seemingly
intractable problem," IRS made a commitment to improve the clarity of
these documents.  Its current Business Master Plan, a strategic
planning document, establishes measurable clarity improvements in
notices as one of its goals. 

IRS master file notices may request payment, seek information, inform
taxpayers of account activity, or provide instructions related to
account settlement.  Many notices concern discrepancies identified
during the processing of returns or result from collection efforts,
examination of returns, and related audit activities. 

Under IRS procedures, notices are comprised of standard paragraphs
written by staff in IRS functional units such as Returns Processing,
Collections, Examination, and IRS field offices.  NCU reviews notices
to ensure that the text is clear and understandable. 

IRS' master files contain specific account information for each
taxpayer and IRS relies on these data to generate notices.  The
Individual Master File (IMF) and the Business Master File (BMF)
contain histories of transactions maintained by IRS, including
returns submitted by taxpayers, information returns submitted by
third parties, and payments made.  IMF and BMF notices may be
generated, for example, when a discrepancy occurs between information
reported on a taxpayer's return and data stored in the master file. 
At that point, the notice is automatically printed and sent to the
taxpayer.  Appendix I illustrates a flowchart of a common situation
precipitating the issuance of a notice--a mathematical error made by
the taxpayer.  The flowchart shows the steps involved in processing
the notice. 

IRS has 94 different IMF-generated notices that it sends to
taxpayers.  However, as figure 1 shows, in 1993 13 IMF notices
comprised approximately 71 percent of all IMF-generated notices sent
that year. 

   Figure 1:  Percentage of
   IMF-Generated Notices IRS Sent
   in 1993

   (See figure in printed
   edition.)

Source:  IRS data. 

Figure 2 shows the distribution of the 152 different BMF-generated
notices during 1993.  A total of 31 BMF notices accounted for 92
percent of all BMF-generated notices sent to business taxpayers. 

   Figure 2:  Percentage of
   BMF-Generated Notices IRS Sent
   in 1993

   (See figure in printed
   edition.)

Source:  IRS Data

Because a notice's content and format may affect the taxpayer's
ability and willingness to comply, it is important that notices be
clear, informative, and comprehensive.  If a notice is unclear, a
taxpayer may become less willing to respond out of frustration with
IRS.  IRS recognized the need to improve the quality of its written
communication to taxpayers and established NCU in 1990 to initiate
clarity reviews.  NCU was tasked with evaluating notice revisions
proposed by functional units as well as examining notices suspected
of confusing taxpayers.  This unit, comprised of approximately eight
professional staff, analyzes notices for clarity, readability, and
logical material presentation.  According to IRS officials,
functional units are required to obtain NCU's approval of new notices
and text revisions to existing notices before computer programs
containing text will be created or altered.  Appendix II depicts the
notice revision process and the various IRS units involved. 


--------------------
\2 Internal Revenue Service, Annual Report 1990. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :3

Our objectives were to (1) review a group of commonly used notices
and offer suggestions to enhance their clarity where appropriate and
(2) determine if the IRS' process for issuing notices produces clear
notices. 

To address the first objective, we examined 47 high-volume IMF and
BMF notices.  We selected the notices that were most frequently sent
to taxpayers by IRS, excluding those we previously reviewed for our
April 1993 report.  These 47 notices resulted in the issuance of more
than 33 million notices in 1993, or almost 52 percent of all IMF and
BMF notices sent to taxpayers that year.  We reviewed the versions of
the notices currently being sent to taxpayers as well as any
revisions to these notices proposed by NCU, but not yet implemented. 

In reviewing these notices for clarity, understandability, and
usefulness, we considered if more specific language, clearer
references, and consistent use of terminology would enhance these
documents.  We assessed whether the material was logically presented,
whether sufficient information and detail was provided so taxpayers
could evaluate their situations, and whether the taxpayer could
resolve the matter without additional guidance.  We also evaluated
the notice's format, the suitability of the notice's title, the
directions or guidance provided in enclosures or remittance forms,
and whether IRS provided the taxpayer with all pertinent information
in a single notice or whether additional notices would have to be
sent to resolve the situation. 

Each notice was independently reviewed by at least two GAO
evaluators.  They considered the same factors in determining if the
notices clearly conveyed the message IRS wanted to convey to
taxpayers, including whether the

  -- text of the notice contained IRS' intended message;

  -- title of the notice was consistent with the text;

  -- tax statement or statement of adjustment or other transaction
     was easy to read and compare to the taxpayer's return;

  -- notice made any assumptions and, if so, whether they were
     clearly explained;

  -- terminology in the notice was easy to understand and logically
     presented;

  -- notice clearly explained what, if any, action was expected of
     the taxpayer and when;

  -- notice provided the taxpayer with sufficient, but not excessive,
     information regarding the situation; and

  -- notice provided the taxpayer a telephone number to call or
     address to write to should he or she have questions or need
     additional guidance. 

We used appropriate guidance found in IRS' Taxpayers Service's
Handbook and the Catalog of Federal Tax Forms, Form Letters and
Notices to verify the purposes of the 47 notices.  We also discussed
all of our concerns and suggestions with the NCU Chief.  However, we
did not attempt to determine if the notices we reviewed were
appropriate given a taxpayer's particular circumstances. 

In addressing the second objective, we also gathered information to
help us assess whether IRS had established a workable process for
adopting and implementing notice text improvements.  We also obtained
data on the number of notice revisions proposed by NCU and the number
implemented.  However, data were not available on the length of time
IRS took to implement the revisions.  We identified the computer
programming changes required to implement the revisions.  We also
gathered information concerning how IRS set priorities for requested
computer programming changes, including notice revisions, and
obtained information on proposed revisions that were rejected. 
Finally, we identified IRS' efforts to improve the quality of notices
and documented its recent testing of notice production on the
Correspondex computer system, which may make revisions more
efficiently. 

We did our work at IRS' National Office in Washington, D.C., from
August 1993 to June 1994 in accordance with generally accepted
government auditing standards.  We provided a draft of this report to
pertinent IRS officials including the National Director of Planning,
the Chief of NCU, and representatives from the Information Systems
Management Division (ISM) and other organizational units involved in
the notice development and review process.  We met with these
officials on September 26, 1994, to discuss this report.  They
suggested several minor technical modifications, which we adopted,
but generally agreed with the facts presented as well as our
conclusions and recommendations. 


   NOTICE LANGUAGE AND FORMAT CAN
   BE IMPROVED
------------------------------------------------------------ Letter :4

Our review of 47 IMF and BMF notices revealed problems with both the
language and format of 31 of these notices.  For example, we found
that many of the 31 notices would have been improved by more specific
language, clearer references, consistent terminology, logical
presentation of material, and sufficient information and guidance. 

Format problems included instances where the attached remittance form
contained directions that were in conflict with those found in the
body of the notice.  Another format problem we identified was IRS'
inability to issue notices that addressed multiple or inter-related
tax problems with a taxpayer's account in a single piece of
correspondence.  Instead, taxpayers would receive several notices in
a relatively short time period that addressed several different
problems with their tax accounts rather than a detailed,
comprehensive notice.  This could cause taxpayers confusion and
frustration and give taxpayers the impression that IRS is unsure of
its position. 


   IRS COMPUTER SYSTEM AND
   COMPETING PRIORITIES IMPEDE
   NOTICE REVISION
------------------------------------------------------------ Letter :5

IRS' computer system is old and inefficient and is largely
responsible for the delay in implementing notice language changes. 
Because of the time-consuming nature of the programming required to
make notice text revisions along with other program changes, a
bottleneck occurs.  Consequently, IRS must evaluate and prioritize
program requests. 

Notices are presently maintained on an aging computer system, which
uses an old computer programming language--known as assembler
language--that is difficult to change.  Each master file notice
exists as a separate program and, because of the technical
difficulties involved in implementing language changes, minor
revisions can result in major reprogramming efforts.  Unlike modern
word processing technology, which processes text changes almost as
quickly as typing, the assembler language uses an older programming
technique that requires each letter of every word and every character
to be separately programmed.  This character-by-character programming
is known as hard coding and affects all IMF and BMF notices. 
Consequently, these notice revisions are not simple or quick to do. 
A single change in a word or punctuation mark would require that
every subsequent character be reprogrammed.  This is time consuming
and inefficient and serves as a deterrent to improving notices. 

IRS established the National Automation Advisory Group (NAAG) in 1992
to facilitate establishment of programming priorities.  According to
IRS officials, NAAG is comprised of representatives from IRS' Returns
Processing, the major initiator of programming changes, and computer
programming officials from ISM.  NAAG allows Returns Processing to
establish its own priorities, in view of limited resources and the
technical difficulties specifically associated with the proposed
changes. 

Faced with numerous demands to alter existing operational programs,
ISM has found that it does not have the resources to respond to all
requests.  Programming changes to process returns for the next filing
season and those related to implementing new tax laws, for example,
take precedence over notice text revisions.  These higher priority
demands for computer programming changes lessen the likelihood that
notice text changes will be made.  While recommended notice text
changes remain unprogrammed, the old version of the notice continues
to be issued to taxpayers. 

The cyclical nature of IRS' programming activities further delays
prompt implementation of text revisions.  Because certain programming
must be performed at certain times of the year, IRS schedules
specific programming tasks to be performed at particular times--for
example, preparation for the upcoming filing season.  If the
development of a notice revision does not coincide with the
appropriate programming cycle, its implementation may be delayed for
months, until the next available cycle.  Generally, because of the
high demand for programming changes, IRS staff submit programming
requests 6 to 12 months in advance of their preferred implementation
date, to allow sufficient scheduling time. 

IRS officials responsible for programming notice text changes said
that in most instances proposed notice revisions should be submitted
at the beginning of the calendar year so they can be scheduled. 
Those submitted later in the year may not be considered for
scheduling until the beginning of the next calendar year. 


      DEMAND FOR REPROGRAMMING NOT
      MET
---------------------------------------------------------- Letter :5.1

Because of the high demand for computer programming changes, the
submission of a revision request by a functional unit does not
guarantee that the reprogramming will be done.  Revisions may be
assigned as priority 1 or priority 2, or the revision may be rejected
outright.  According to NCU officials, a priority 2 status has only a
slight chance of being programmed. 

Only one programming request for a notice was given a priority 1
status at NAAG's March 1994 meeting.  Fifty-nine various programming
requests were presented, and 17 related to notices.  Of the 59
programming requests, only 22 received priority 1 status, 8 were
granted a priority 2 status, 1 was withdrawn, and the remaining 28
were rejected.  Of the 17 notice-related requests, only 1 was
assigned as priority 1.  This request called for the establishment of
new notices to accompany a new tax form.  IRS needed these notices
for those taxpayers with tax problems who used the new form.  Four
notice-related requests were designated as priority 2s.  The
remaining 12 requests were rejected.  Although a few of these
rejected requests called for changes that would improve IRS' internal
processing of notices, others involved improving the clarity or
usefulness of the notices to taxpayers.  These rejected requests for
improvements to benefit taxpayers could have enhanced over 3 million
taxpayer contacts, the notice volume associated with these notices in
1993. 

One rejected request concerned a notice sent in 1993 to nearly 1
million earned income credit (EIC) filers.  NCU officials identified
an erroneous reference to a section of the EIC tax form in the text
of the notice.  By the time this error was discovered, the notice had
already been sent to a group of recipients.  When the request to
correct the language was brought to NAAG, it decided to retain the
incorrect reference.  According to NCU officials, NAAG made this
decision because some taxpayers had already received the incorrect
version and, it seemed too late to do anything about the problem,
which was not viewed by NAAG members from other units as very serious
compared to other programming needs. 

Another request would have merged information now contained in two
notices into a single notice with revised text.  IRS had anticipated
that this merger would not only simplify matters for taxpayers but
also annually save an estimated $2.4 million in reduced processing
and mailing costs.  This request received a priority 2 status and was
forwarded to ISM for consideration.  Because of higher priority
requests, including legislative changes, ISM determined it could not
implement the change in January 1995 as requested.  According to ISM
computer programming officials, they could not make the large
commitment of resources needed to make the change. 

Even when notice revisions are approved, it may be months before they
are actually programmed.  Because of the backlog of programming
requests, the intense level of effort associated with those changes,
and the cyclical nature of completing the program changes, revisions
were often submitted months in advance.  For example, the requester
of the single notice revision that was approved at the March 1994
NAAG meeting had proposed a January 1995 implementation, as had many
others requesting changes during that session. 


      NOTICE REVISIONS NOT TRACKED
---------------------------------------------------------- Letter :5.2

Revisions to improve the clarity of notices made by NCU were not
always adopted promptly.  Among the notices we reviewed were several
that had been revised by NCU more than a year earlier, but not
implemented as of May 1994.  We believe that the changes NCU had made
will improve the clarity of these notices, but we are concerned with
the length of time that has elapsed since NCU revisions were
proposed. 

Although programming delays are significant, IRS has not established
a tracking system that would enable it to measure the extent of the
delays.  There is no system for monitoring whether requested changes
are made, or if approved, the progression of notice revisions from
submission to implementation.  Without a system to track the progress
of these revisions through the computer programming stage, it is
difficult to document the overall timeliness of notice revision
implementation.  Without this documentation, delays and other
problems may go unobserved. 

To collect data on the implementation of its recommendations, NCU
conducted a special review in March 1993 to determine the status of
all its prior recommendations.  The study revealed that 36 percent of
NCU's revisions were never implemented.  Although the report did not
document the extent of overall delays in implementing those revisions
that were ultimately programmed, it identified several instances
where revisions to high-volume notices took a year or more to
implement. 


   IRS EFFORTS TO IMPROVE NOTICE
   DEVELOPMENT AND ISSUANCE
   PROCESS
------------------------------------------------------------ Letter :6

IRS recognizes that notices need improvement and has several
initiatives in process to enhance notice quality.  First, several
high-volume collection notices have been programmed and tested on
IRS' Correspondex computer system, a letter-writing system used for
replying to taxpayers' correspondence.  Text changes can be made more
quickly and easily on the Correspondex system than on the assembler
language system currently producing notices. 

Correspondex officials acknowledge that while this system is not as
efficient as word processing technology, Correspondex can make text
revisions much sooner than the 6 to 12 months that it often takes to
implement assembler language system changes.  These officials told us
that text changes to IRS' Correspondex letters typically take 30 days
but under critical circumstances can be made within 1 day. 

Correspondex has the capacity to produce most IMF and BMF notices. 
According to Correspondex officials, it seems that only those notices
with an unusually large amount of data imported from a taxpayer's
master file record are unsuitable for transfer.  Correspondex also
provides the advantage of more visually appealing print features
presently unavailable on the assembler language system, such as
lower-case letters.  Figure 3 shows an example of a commonly sent
collection notice as it would look if produced by the assembler
system.  Figure 4 shows the same notice produced by Correspondex. 

   Figure 3:  Example of a Current
   Assembler Language System Style
   IRS Notice CP 504

   (See figure in printed
   edition.)

   Figure 4:  Example of the
   Correspondex System Version of
   IRS Notice CP 504

   (See figure in printed
   edition.)

The testing of notices on Correspondex has not fully demonstrated its
suitability for producing IMF and BMF notices.  Testing has been
limited to the collection notices maintained on the Integrated Data
Retrieval System (IDRS), which operates on the same computer system
as Correspondex.  This computer system is different from the computer
system on which IMF and BMF operate.  IDRS notices are easier to
convert to Correspondex than IMF and BMF notices. 

However, Correspondex officials said that they are confident they can
successfully produce IMF and BMF notices even though transferring
these notices will technically be more difficult than the IDRS
notices.  While the officials said it would be fairly simple to
reproduce the standard notice text on Correspondex, new computer
programs would have to be written to merge taxpayer data into the
appropriate places in the new Correspondex text.  Assembler language
system programmers would need to develop these programs and would
continue to be responsible for accessing the master file.  However,
once this programming transition is complete, the assembler
programming staff would play a smaller role in the notice process and
may be able to devote more time to higher priority work. 

Correspondex officials also told us that they hope to test several
IMF and BMF notices this year and, if successful, would like to
ultimately transfer most notices, including IMF and BMF notices, to
Correspondex.  Even if all IMF and BMF notices could not be
transferred, a substantial number of other notices could be improved
by transferring those with recognized clarity problems or volume.  As
we discussed earlier, many taxpayer contacts could be improved by
changing a relatively few notices. 

Both Correspondex and NCU officials are optimistic about this testing
and view it as a way to improve the clarity and format of notices, at
least until more sophisticated developments arrive later this decade
under TSM.  However, IRS management has not committed to expanding
the testing to IMF and BMF notices. 

A second effort in progress is the testing of a new notice format,
which includes a revised "tax statement" modelled after a version
suggested in our April 1993\3 report on IRS forms, publications, and
notices.  Taxpayers who are sent math error notices from the IRS
Kansas City Service Center receive either the traditional IRS format
or the new version modelled after our suggestion.  Each version has a
unique control number.  Taxpayers calling or writing IRS about the
notice provide this unique number, thereby enabling IRS to determine
which version generates the most questions.  This test will help IRS
decide whether it would be cost beneficial to convert to the new
format. 

Preliminary response data clearly demonstrate that taxpayers who
receive the traditional version continue to contact IRS with
questions at twice the rate of the taxpayers receiving the new
version. 

A third effort involves the acquisition of new printing equipment for
IRS' 10 service centers.  These printers should improve the general
appearance of notices.  IRS prints master file notices in upper-case
type because with the current equipment its lower-case type is
illegible.  The new printers could feature lower-case type and
different fonts.  Another advantage would be that the notice borders
would be printed as text.  These borders often contain important
information regarding where taxpayers should call or write for
additional assistance.  Presently, borders are contained on various
plastic overlays that are copied on to paper before the notice text
is printed.  By printing these borders as text, the likelihood that a
notice would be issued with an inappropriate border, which could
confuse taxpayers, should be reduced. 

Finally, a fourth effort involves a TSM initiative that may also lead
to improved notices.  TSM is exploring ways of issuing single notices
that could address multiple tax issues.  IRS currently sends
taxpayers with multiple or inter-related tax problems a separate
notice for each tax matter.  The receipt of several notices within a
brief period may both confuse and frustrate taxpayers.  The master
file lacks the ability to identify and address multiple tax problems
in a single notice.  However, TSM officials hope to be able to
deliver to taxpayers comprehensive notices containing all account
activity and adjustments. 

In addition to these ongoing efforts, IRS is considering other ways
of supplementing notices so they become more useful and
understandable to taxpayers.  IRS is considering (1) placing commonly
asked questions and answers on the back of each notice and (2)
expanding the existing tele-tax system to include notice information. 
This system operates on a toll-free number and provides prerecorded
explanations about tax return preparation.  IRS officials told us
that often taxpayers merely want to speak to a telephone assistor and
confirm that their interpretation of a notice is correct.  These
officials speculated that the common questions and answers placed on
the notices themselves, along with the general notice information to
be put on tele-tax, may provide some taxpayers with sufficient
information and a greater comfort level, thereby decreasing the
number of taxpayers who require the assistance of a telephone
assistor. 


--------------------
\3 GAO/GGD-93-72, April 30, 1993. 


   CONCLUSIONS
------------------------------------------------------------ Letter :7

IRS can do more to improve the clarity of its notices.  We suggested
clarity changes to 31 of the 47 notices we reviewed.  These
suggestions related to the content, appearance, and sufficiency of
instructions the notices provided to taxpayers.  In addition, the
series of multiple notices, which may be sent to taxpayers with
numerous or inter-related tax problems, is another area where gains
in clarity improvement can be made.  An ongoing TSM effort addressing
this problem, if successful, would make a major contribution to
notice clarity. 

While IRS recognizes the importance of better communications with
taxpayers and makes efforts to enhance taxpayer understanding of
existing notices, taxpayers continue to receive notices that do not
reflect the most recently recommended versions approved by NCU. 
These recommended notice changes include language and format
modifications that are designed to improve notice clarity and
usefulness. 

Computer limitations appear to be one of the most important causes of
continued use of notices that IRS processes have identified as
needing revision.  Notices are generated from the IMF-BMF computer
system, and this system cannot make notice revisions efficiently. 
Text changes require extensive and time-consuming programming
efforts.  Because of other high-priority programming requests and
limited programming resources, computer programming priorities
generally do not favor notice language changes.  Thus, few changes
survive this process.  Those that do are made with great difficulty
and may take over a year to complete because of the programming
requirements. 

IRS has a different computer system on which Correspondex operates,
and Correspondex may provide an alternative to the IMF-BMF computer
system for issuing notices.  Text changes can be made much more
quickly and easily on Correspondex.  Although Correspondex officials
are confident that Correspondex can produce IMF and BMF notices, they
said tests using those notices have not been made. 

The lack of a system to track the progress of proposed notice
language changes limits IRS' ability to oversee notice clarity
improvements.  Delays may not be detected and millions of unclear
notices may be issued to taxpayers in the interim. 


   RECOMMENDATIONS TO THE
   COMMISSIONER OF INTERNAL
   REVENUE
------------------------------------------------------------ Letter :8

We recommend that the Commissioner of Internal Revenue test the
feasibility of using Correspondex to produce IMF and BMF notices and,
if possible, transfer as many IMF and BMF notices as practical to the
Correspondex system.  To help the transition to Correspondex, we
recommend that notices be transferred in stages and that a mechanism
be established or an existing body, such as NAAG, establish the order
in which notices would be transferred.  The ease of the transition,
the costs of the transfer, and the benefits of making these transfers
should all be considered in establishing the order. 

We recommend that the Commissioner establish a system to monitor
proposed notice text revisions to oversee progress or problems
encountered in improving notice clarity.  This system should be able
to identify when a revision was proposed and the revision status at
all times until it is implemented.  We also recommend that the
Commissioner include in the monitoring system a threshold beyond
which delays must be appropriately followed up and resolved. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :9

We obtained oral comments on a draft of this report from IRS
officials.  These comments were supplemented by a memo elaborating on
remarks made during our previous discussion.  IRS agreed with our
comments that more can be done to improve the clarity of notices to
taxpayers and also with our recommendations.  IRS also suggested some
technical changes that we considered in preparing the final report. 

Specifically, IRS has agreed to test the feasibility of using
Correspondex to produce both IMF and BMF notices.  IRS has also
agreed to pursue the development of a system to monitor
implementation of proposed notice text revisions in the context of
its planned Tax System Modernization efforts and business
vision-related actions.  IRS intends for this system to ensure that
proposed revisions are considered and implemented in a timely manner. 

In addition, IRS also agreed to consider most of the suggested notice
text revisions we offered to clarify the text of the master file
notices we reviewed during the course of this assignment. 


---------------------------------------------------------- Letter :9.1

We are sending copies of this report to other congressional
committees, the Secretary of the Treasury, the Commissioner of
Internal Revenue, and other interested parties. 

Major contributors to this report are listed in appendix IV.  If you
or your staff have any questions concerning the report, please call
me on (202) 512-9110. 

Sincerely yours,

Lynda D.  Willis
Associate Director, Tax Policy and
 Administration Issues


FLOWCHART OF THE IRS' MATHEMATICAL
ERROR NOTICE PROCESS
=========================================================== Appendix I



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)


FLOWCHART OF THE IRS' NOTICE
REVISION PROCESS
========================================================== Appendix II



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)


GAO SUGGESTIONS FOR IMPROVING
CLARITY OF IRS NOTICES REVIEWED
========================================================= Appendix III

To assess the clarity and usefulness of IRS notices, we reviewed 47
Individual Master File (IMF) and Business Master File (BMF) notices
that IRS frequently sends to taxpayers.  These notices accounted for
about 50 percent of all IMF and BMF notices sent to taxpayers in
1993. 

As explained in more detail in the objectives, scope, and methodology
section of this report, we used a long list of factors to determine
whether each notice clearly conveyed the message IRS wanted to
convey.  For example, we reviewed each notice to determine whether
(1) the title of the notice was consistent with the text and (2) the
terminology in the notice was easy to understand and presented in a
logical order.  We used these factors to judge clarity because IRS
had not established guidance to determine what constitutes a clear
notice.  We identified items of concern in 31 of the 47 notices. 

Our concerns take into account the version of the notice currently
being sent to taxpayers and, if applicable, the revision proposed by
NCU.  At the time we did our work, NCU had reviewed 46 of the 47
notices.  Our concerns include the need for additional guidance, more
specific language, clearer references, appropriate terminology,
logical presentation of material, sufficient information or detail,
and correct and consistent formats.  We also identified several IMF
and BMF notices that could confuse or frustrate taxpayers who may
receive several of these notices, instead of a single comprehensive
notice, that would summarize the status of their tax accounts.  These
notices are also identified in this appendix. 

Among the notices we reviewed were several NCU revisions proposed
more than a year ago, but not yet implemented at the time we did our
work.  Our positions on these notices mirrored NCU's.  Our only
additional concern was the length of time that had elapsed since
NCU's revision was proposed. 

IRS already has efforts underway that should help address some of our
concerns.  NCU officials generally agreed with our suggestions but
typically could not specify if and when our suggestions would be
adopted.  The delays in implementing notice text revisions, as
discussed in the body of this report, often precluded the officials
from giving a more precise response. 

Our specific concerns with the IMF and BMF notices that we reviewed
are noted in this appendix.  IRS' response immediately follows. 
Also, examples of these notices currently being sent to taxpayers
accompany our concerns highlighting the potential problem.  In some
cases, we raised the same concern with more than one notice.  In
these instances, we described the concern in relation to a particular
notice and mentioned the other notices with comparable problems. 


   INDIVIDUAL MASTER FILE NOTICES
------------------------------------------------------- Appendix III:1


      CP 08--REFUND TO BE ISSUED,
      SSA RECORDS NEED CORRECTION
----------------------------------------------------- Appendix III:1.1


         GAO CONCERN 1
--------------------------------------------------- Appendix III:1.1.1

Type of change:  additional guidance and specific language. 

This notice assumes that to Social Security Association's (SSA)
records need correction, which may not be true.  It suggests that the
error was made either by the taxpayer or SSA and does not acknowledge
that the error could be IRS's.  We suggested IRS advise the taxpayer
how to correct IRS' information if the error was not made by SSA or
the taxpayer.  We also noted this concern on several other notices
including CP 54B, CP 54G, CP 54Q, and CP 59.  Examples of these
notices are not shown in this report. 

Similarly, we found the notice's title does not acknowledge the
possibility that IRS records may need correction.  We suggested a
more suitable title such as "IRS/SSA Records Do Not Agree."


         IRS RESPONSE
--------------------------------------------------- Appendix III:1.1.2

IRS agreed to consider this suggestion. 


         GAO CONCERN 2
--------------------------------------------------- Appendix III:1.1.3

Type of change:  specific language. 

This notice does not stress the importance of why the SSA' records
should be correct.  We suggested emphasizing that correct information
is needed so SSA can provide individuals with proper credit for all
earned income, thereby protecting their earnings record and future
social security benefits. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:1.1.4

IRS agreed to consider this suggestion. 

   Figure III.1:  Example of
   Notice CP 08

   (See figure in printed
   edition.)


      CP 14--REQUEST FOR TAX
      PAYMENT
----------------------------------------------------- Appendix III:1.2


         GAO CONCERN
--------------------------------------------------- Appendix III:1.2.1

Type of change:  appropriate terminology. 

This notice currently includes excerpts from the applicable penalty
and interest sections of IRS' Notice 746, which is a preprinted
explanation of IRS' penalty and interest policies.  The explanations
in this notice are extremely detailed and may be confusing for the
taxpayer.  Some of the explanations may not apply in every case.  We
suggested that a brief and clear explanation of the specific penalty
and interest charges being levied against the taxpayer receiving the
notice be provided. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:1.2.2

IRS agreed that our suggestion had merit.  IRS had already been
working on a CP 14 revision designed by one of its Service Centers as
an interim step in combining the CP 14 with the relevant parts of
Notice 746.  Typically, Notice 746 is enclosed with the CP 14. 

IRS plans to discontinue Notice 746 by providing only the applicable
penalty and interest explanations in the notice text.  Providing only
the pertinent explanations will prevent the taxpayer from searching
through irrelevant narrative.  IRS is also clarifying the language
and developing an easier to read format for the CP 14. 

   Figure III.2:  Example of
   Notice CP 14

   (See figure in printed
   edition.)


      CP 30--WE HAVE CHARGED YOU
      AN ESTIMATED TAX PENALTY
----------------------------------------------------- Appendix III:1.3


         GAO CONCERN 1
--------------------------------------------------- Appendix III:1.3.1

Type of change:  logical presentation of material. 

We suggested that the tax statement be placed at the top of this
notice.  Placing the paragraph requesting the taxpayer to write IRS
with questions after the tax statement enhances the clarity of the
notice. 

We also offered this suggestion on a related notice, the CP 30A,
concerning a reduction in the estimated tax penalty (see fig. 
III.4). 


         IRS RESPONSE
--------------------------------------------------- Appendix III:1.3.2

IRS agreed to consider this suggestion. 


         GAO CONCERN 2
--------------------------------------------------- Appendix III:1.3.3

Type of change:  logical presentation of material. 

We suggested that a tax statement similar to the one recommended on
page 8 of our previous report\1 be adopted.  Such a tax statement
would provide a better summary of what the taxpayer reported on their
return and how IRS had made any needed corrections. 

We also noted this concern on the CP 30A noted above and the CP 132,
which is an IMF math error notice. 


--------------------
\1 Tax Administration:  Selected IRS Forms, Publications, and Notices
Could be Improved (GAO/GGD-93-72, Apr.  30, 1993). 


         IRS RESPONSE
--------------------------------------------------- Appendix III:1.3.4

IRS agreed that our suggested tax statement is preferable.  They
stated, however, that IRS is not able to use this type of statement
at the present time because of the limitations of its current
printing equipment.  IRS is presently testing a new tax statement
format on two other math error notices.  The testing is being
conducted on special printing equipment in one of the service
centers.  IRS cautioned us that complete implementation of this
effort could not occur until 1995. 

   Figure III.3:  Example of
   Notice CP 30

   (See figure in printed
   edition.)


      CP 30A--WE HAVE REDUCED YOUR
      ESTIMATED TAX PENALTY
----------------------------------------------------- Appendix III:1.4


         GAO CONCERN
--------------------------------------------------- Appendix III:1.4.1

Type of change:  specific language. 

We suggested revising the first sentence of this notice to "We
reduced your Estimated Tax Penalty .  .  .," deleting the words "or
eliminated" because they are unnecessary.  If the penalty was
eliminated, it would, in fact, be reduced to zero.  We believe that
this change would be less confusing to taxpayers. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:1.4.2

IRS agreed to consider our suggestion. 

   Figure III.4:  Example of
   Notice CP 30A

   (See figure in printed
   edition.)


      CP 42--OVERPAID TAX APPLIED
      TO OTHER FEDERAL TAXES OWED
      ON SECONDARY SOCIAL SECURITY
      NUMBER
----------------------------------------------------- Appendix III:1.5


         GAO CONCERN
--------------------------------------------------- Appendix III:1.5.1

Type of change:  specific language. 

NCU has proposed a revision to this notice.  The currently programmed
title is more descriptive than the proposed title, which merely
refers to "another debt." The current title specifies "other federal
taxes owed." Because "another debt" could refer to debts owed to
other federal agencies and IRS already has another separate notice to
address such situations, we thought the title should be as specific
as possible and refer to the other federal taxes owed. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:1.5.2

IRS agreed to consider revising the title of the proposed version of
this notice and using the currently programmed title. 

   Figure III.5:  Example of
   Notice CP 42

   (See figure in printed
   edition.)


      CP 51A--WE FIGURED YOUR TAX
      FOR YOU--THERE IS AN AMOUNT
      DUE IRS
----------------------------------------------------- Appendix III:1.6


      GAO CONCERN
----------------------------------------------------- Appendix III:1.7

Type of change:  additional guidance. 

The text of this notice refers to a filing status code.  We noted
that taxpayers may not understand this code and may be confused.  We
suggested that IRS use a brief narrative explanation rather than a
numerical computer code. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:1.7.1

IRS agreed to consider this suggestion. 

   Figure III.6:  Example of
   Notice CP 51A

   (See figure in printed
   edition.)


      CP 71A--REMINDER OF BALANCE
      DUE
----------------------------------------------------- Appendix III:1.8


         GAO CONCERN 1
--------------------------------------------------- Appendix III:1.8.1

Type of change:  specific language and sufficient information and
detail. 

We suggested clarifying both the language and tax statement portion
of this notice so taxpayers would have an easier time understanding
IRS' computations. 

First, the notice states the amount unpaid from prior notices should
reflect any credits and payments made since the last notice.  We
suggested revising the last sentence in the first paragraph to read: 
"We figured this amount as follows:". 

Second, to make this clearer to the taxpayer, we suggested the
statement start with the amount due from the last notice.  Separate
lines could show credits or payments made since that notice.  This
would make it easier for the taxpayer to identify credits or payments
reflected in IRS' records since the last notice. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:1.8.2

IRS advised us that they do not maintain a history of taxpayers'
prior balances.  As payments or adjustments are made, the "balance
due" is updated and the prior balance is deleted.  However, the NCU
Chief noted that IRS may be able to show payments made by the
taxpayer since the last notice.  This would at least provide the
taxpayer with information about whether all payments had been
credited to the account.  IRS agreed to explore this possibility. 


         GAO CONCERN 2
--------------------------------------------------- Appendix III:1.8.3

Type of change:  appropriate terminology. 

We found the second sentence of the second paragraph to be confusing. 
We suggested revising it to read:  "The penalty and interest above
are based on amounts you paid late plus amounts unpaid from prior
notices."


         IRS RESPONSE
--------------------------------------------------- Appendix III:1.8.4

IRS agreed to consider this suggestion. 

   Figure III.7:  Example of
   Notice CP 71A

   (See figure in printed
   edition.)


   BUSINESS MASTER FILE NOTICES
------------------------------------------------------- Appendix III:2


      CP 101--CORRECTION NOTICE -
      AMOUNT DUE IRS
----------------------------------------------------- Appendix III:2.1


         GAO CONCERN
--------------------------------------------------- Appendix III:2.1.1

Type of change:  clear reference. 

We found the "Credit Balance" and "Underpayment" references in the
"Tax Statement of IRS Changes" section of the NCU's revision of this
notice confusing.  We thought the term Credit Balance suggested that
the taxpayer had overpaid the tax and hence, received a credit.  Yet
the term Underpayment on the next line clearly shows that the
taxpayer owes money to IRS.  As this is a balance due notice, we
suggested eliminating "Credit Balance" and replacing it with a term
less likely to confuse taxpayers, such as "Total Credits Applied."

We also noted this problem on another notice, currently in use, the
CP 161 --a request for payment notice (example not included in this
report). 


         IRS RESPONSE
--------------------------------------------------- Appendix III:2.1.2

IRS agreed to consider revising this terminology as we suggested. 

   Figure III.8:  Example of
   Notice CP 101

   (See figure in printed
   edition.)


      CP 128--REQUEST FOR PAYMENT
----------------------------------------------------- Appendix III:2.2


         GAO CONCERN 1
--------------------------------------------------- Appendix III:2.2.1

Type of change:  logical presentation of material. 

For clarity, we suggested reversing the second paragraph concerning
the amount owed and the third paragraph containing payment
instructions. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:2.2.2

IRS agreed to consider rearranging these paragraphs. 


         GAO CONCERN 2
--------------------------------------------------- Appendix III:2.2.3

Type of change:  clear reference. 

We questioned why the "penalty for late payment" appeared in the list
of charges when the amount charged was zero.  We suggested that if
the taxpayer was not charged a penalty this line in the statement
should be suppressed.  We also suggested that if the taxpayer was to
be charged a penalty, this fact should be explained in the preceding
paragraphs. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:2.2.4

IRS advised us that a programming command may be responsible for the
presence of the zero balance on the penalty line.  IRS agreed it
would be preferable to suppress this line if no penalty is to be
applied.  They agreed to pursue this matter.  IRS also agreed to
consider adding a brief explanation in the preceding paragraphs if a
penalty has been charged. 

   Figure III.9:  Example of
   Notice CP 128

   (See figure in printed
   edition.)


      CP 156--REMINDER OF
      INSTALLMENT PAYMENT DUE IRS
----------------------------------------------------- Appendix III:2.3


         GAO CONCERN
--------------------------------------------------- Appendix III:2.3.1

Type of change:  logical presentation of material. 

The "Tax Statement" summarizing the status of the taxpayer's account
is the last item appearing on this notice.  We suggested moving this
statement before the payment instructions to enhance clarity. 

We also noted this problem on the CP 161 and CP 163, notices
reminding taxpayers of balances due.  Examples of these notices are
not included in this report. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:2.3.2

IRS agreed to consider adopting our suggestion. 

   Figure III.10:  Example of
   Notice CP 156

   (See figure in printed
   edition.)


      CP 162--PENALTY -
      PARTNERSHIP RETURN
----------------------------------------------------- Appendix III:2.4


         GAO CONCERN
--------------------------------------------------- Appendix III:2.4.1

Type of change:  sufficient information and detail. 

To calculate the penalty, it is essential to know the number of
months by which the return was late or considered incomplete.  We
suggested that IRS provide this information on the notice so the
taxpayer can understand why a penalty has been assessed, determine
how IRS calculated the penalty, and then decide if they agree the
penalty is appropriate. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:2.4.2

IRS advised us that after the computer calculates the penalty it does
not retain a history or any information regarding dates used in that
calculation.  However, IRS agreed to explore the possibility of
inserting the date the return was due and the date it was received. 
This would allow the taxpayer to make this calculation themselves
with the same information available to IRS.  IRS said that the notice
should specifically indicate whether the penalty is for a late or an
incomplete return.  IRS also said they are trying to eliminate
notices with an "either/or" situation; in this case, the late or
incomplete return. 

   Figure III.11:  Example of
   Notice CP 162

   (See figure in printed
   edition.)


      CP 207--INFORMATION NOTICE
----------------------------------------------------- Appendix III:2.5


         GAO CONCERN 1
--------------------------------------------------- Appendix III:2.5.1

Type of change:  appropriate terminology. 

We found the level of detail provided in this notice to be
overwhelming, particularly as the notice is proposing, not assessing
a penalty.  We suggested requesting the necessary information from
the taxpayer and advising them that if the information is not
received within a specified time, that a penalty will then be
assessed on the basis of available information. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:2.5.2

IRS stated they had already identified the excessive detail in this
notice as a concern and raised this matter with Returns Processing,
the appropriate functional unit.  Although Returns Processing
officials regard this information as necessary, IRS agreed to pursue
this matter with a Returns Processing task force, which had recently
been established to identify and resolve returns processing type
problems.  IRS indicated that one alternative may be to delay sending
a notice until a penalty is actually assessed, rather than when it is
proposed. 


         GAO CONCERN 2
--------------------------------------------------- Appendix III:2.5.3

Type of change:  sufficient information and detail. 

We suggested that the notice contain a record of tax deposits.  This
would allow taxpayers to identify a discrepancy by reconciling their
records of deposits to IRS' records. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:2.5.4

IRS advised us that it is not possible for the existing computer and
printing equipment to supply this kind of information on a notice. 
It may be possible with the acquisition of the new equipment under
TSM. 

   Figure III.12:  Example of
   Notice CP 207

   (See figure in printed
   edition.)


      CP 210--STATEMENT OF
      ADJUSTMENT TO YOUR ACCOUNT
----------------------------------------------------- Appendix III:2.6


         GAO CONCERN
--------------------------------------------------- Appendix III:2.6.1

Type of change:  appropriate terminology. 

We found that the currently used versions of these notices were too
terse and lacked a sufficient explanation for taxpayers.  However, we
found the NCU's proposed version to be confusing because of an
excessive amount of detail.  We found the statements relating to the
installment agreements and the charges in the computation of change
statement to be the most likely ones to confuse taxpayers.  We
suggested that NCU seek a middle ground so taxpayers were supplied
with enough information to respond appropriately but were not
overwhelmed with unnecessary details and technical terminology. 

We also noted this concern on the CP 220, a balance due adjustment
notice. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:2.6.2

IRS agreed these notices are troublesome.  They agreed to review them
again to assess their clarity.  NCU is presently working with Returns
Processing to simplify these notices. 

   Figure III.13:  Example of
   Notice CP 210

   (See figure in printed
   edition.)


      CP 215--NOTICE OF PENALTY
      CHARGE
----------------------------------------------------- Appendix III:2.7


         GAO CONCERN
--------------------------------------------------- Appendix III:2.7.1

Type of change:  sufficient information and detail. 

We suggested that IRS provide additional information on the number of
forms involved and the period by which they were late.  This would
clarify IRS' penalty calculation and make the notice easier for the
taxpayer to understand. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:2.7.2

IRS agreed to consider our suggestion.  They explained there is a
similar notice--the CP 945, which deals with Form 1099--that is sent
in the same envelope.  IRS is now working to combine these notices
into a single notice.  However, the computer programming involved in
this change is complex and time consuming.  IRS is not sure when this
effort will be completed. 

   Figure III.14:  Example of
   Notice CP 215

   (See figure in printed
   edition.)


      CP 225--STATEMENT OF
      ADJUSTMENT TO YOUR ACCOUNT
----------------------------------------------------- Appendix III:2.8


         GAO CONCERN
--------------------------------------------------- Appendix III:2.8.1

Type of change:  specific language. 

We suggested that the title of this notice be supplemented with
"Statement of Your Account--Payment Applied".  This change would
alert the taxpayer and would also be consistent with other IRS
notices. 


         IRS RESPONSE
--------------------------------------------------- Appendix III:2.8.2

IRS agreed to consider this suggestion. 

   Figure III.15:  Example of
   Notice CP 225

   (See figure in printed
   edition.)


      CP 260--CREDIT ADJUSTMENT
----------------------------------------------------- Appendix III:2.9


         GAO CONCERN
--------------------------------------------------- Appendix III:2.9.1

Type of change:  appropriate terminology. 

We found the first sentence of this notice to be confusing.  We
suggested revising it to read:  "We removed a credit for an amount
that was incorrectly applied to your account for Form (xxxx) for Tax
Year (xxxx)."


         IRS RESPONSE
--------------------------------------------------- Appendix III:2.9.2

IRS said NCU had not performed an in-depth review of this notice and
indicated they would consider this suggestion. 

   Figure III.16:  Example of
   Notice CP 260

   (See figure in printed
   edition.)


      CP 263--
      ACKNOWLEDGEMENT OF RECEIPT
      FORM 2553 ELECTION BY A
      SMALL BUSINESS CORPORATION
---------------------------------------------------- Appendix III:2.10


         GAO CONCERN
-------------------------------------------------- Appendix III:2.10.1

Type of change:  sufficient information and detail. 

We questioned why this notice suggests that the taxpayer call the IRS
number in their local directory rather than provide a number for the
office that is most familiar with the taxpayer's case. 


         IRS RESPONSE
-------------------------------------------------- Appendix III:2.10.2

IRS said they are required to put both a local and toll-free number
on notices.  However, they acknowledged that including both the local
and toll-free numbers may be confusing, as the "local" number may
actually be a long-distance call.  IRS hopes to clarify that local
numbers may be long distance but that taxpayers are more likely to
reach a representative familiar with their case than those calling
the toll-free number. 

   Figure III.17:  Example of
   Notice CP 263

   (See figure in printed
   edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C. 

Harriet C.  Ganson, Assistant Director, Tax Policy and Administration
 Issues
Robert J.  McArter, Assistant Director, Tax Policy and Administration
 Issues
James G.  O'Donnell, Evaluator

CHICAGO REGIONAL OFFICE

Geraldine Redican-Bigott, Evaluator-in-Charge

PHILADELPHIA REGIONAL OFFICE

Linda Schmeer, Evaluator
Donald R.  White, Evaluator

*** End of document. ***