When the IRS decides to audit a return, they have the ability to correct mathematical errors inside the Service Center when they process the return. The IRS has a program called the mathematical/clerical error abatement program which is designed to assess additional tax resulting from errors on a tax return. A key point to understand is that corrections made by the Service Center for mathematical errors are not subject to Notice of Deficiency procedures.
Defining a Mathematical Error
Typically a correspondence audit will go deeper and try to compare third party information with the tax return. A mathematical error is considered:
1. An error that is in addition, subtraction, multiplication, or division on a return
2. An incorrect use of any IRS table that is apparent from the information provided on the tax return
3. Any inconsistent entries on the tax return
4. An omission of information required to substantiate an entry on the return
Typically a corrective mathematical error will fall under these four provisions, but it is possible to have something that is very unusual corrected by the IRS.
Notifying the Taxpayer of a Correction
The IRS is obligated to notify the taxpayer of any mathematical error for which it intends to correct on their tax return. The notice will include an explanation of the mathematical error and give the taxpayer 60 days to request an abatement of the assessment of additional tax.
The IRS is unable to collect on the additional assessed tax until the taxpayer formally agrees to the assessment or the 60 day period has expired. In a case when the taxpayer chooses to dispute the summarily assessed amount, the IRS must abate the assessment and issue a Notice of Deficiency.