Tax Administration:

Opportunities to Improve IRS Correspondence on Withholding Allowances

GGD-91-122: Published: Sep 27, 1991. Publicly Released: Sep 27, 1991.

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GAO reviewed correspondence the Internal Revenue Service (IRS) sends to taxpayers when it questions the number of withholding allowances claimed on the taxpayer claims of exemption from withholding, focusing on ways IRS could improve such correspondence.

GAO found that: (1) the standard letter IRS sends to ask taxpayers for more information justifying their withholding allowances could be made clearer if it were more specific as to which of the two circumstances, verifying a taxpayer's claim of exemption from withholding or verifying the number of withholding allowances claimed, it applied; (2) if Form 6450 were required only when an exemption was being sought, taxpayer confusion and burden could be minimized; (3) the second piece of correspondence notifying the taxpayer that the employer had been directed to withhold as if the taxpayer were single and claiming no allowances was disjointed and confusing; (4) IRS had expanded its monitoring of correspondence quality and has introduced technology that helps tax examiners compose and review a complete letter; (5) IRS will begin testing a new quality measurement system for all service center correspondence, including that generated by the collection branches, beginning September 1, 1991; and (6) IRS could make the second piece of correspondence clearer by explaining the reason why it disallowed the W-4 in the first paragraph, adding a sentence telling the taxpayer that if IRS decides the new W-4 is okay it will tell the employer to honor the new form, and adding a deadline to the last paragraph that tells the taxpayer it is going to assess a penalty unless the taxpayer justifies its statements on the W-4.

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