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November 5, 2013


Scanning errors and correspondence audits, part 2

In the first part of this post, we noted that problems with accurately scanning documents have been hindering the ability of the IRS to conduct correspondence audits effectively.

This is a concern because many potential tax issues are resolved through the paper-driven correspondence process, rather than through a full-scale, in-person tax audit.

In this part of the post, let’s look in more detail at what the Treasury Inspector General for Tax Administration (TIGTA) report found about scanning errors and how they affect correspondence audits.

The recent TIGTA report was not the first report to find that the IRS was struggling to process and organize paper correspondence from taxpayers. In 2007, TIGTA looked into the matter and made recommendations for the IRS to follow in creating a system to scan and manage so many documents from taxpayers.

In the six years since then, the IRS has made some progress in coping with the sheer volume of documents. During Fiscal Year 2012, it scanned more than 8 million pieces of paper from taxpayers into digital images.

The error rates, however, are troubling. Indeed, “troubling” was the word used by Russell George, the inspector general, to describe what the audit by his office found regarding scanning and cataloging errors.

In the report, TIGTA found that in a sample of 118 paper documents in the fall of 2012, fully 24 percent had at least one scanning error.

Why do scanning errors matter? They matter because the confusion they create causes delays in the resolution of tax issues between the IRS and taxpayers. For example, the IRS may end up requesting the same information multiple times if the agency failed to accurately scan and track the response sent in by the taxpayer.

Difficulty with maintaining the accuracy and organization of correspondence also makes it difficult for the IRS to respond effectively to concerns about identity theft.

In short, the IRS still has considerable work to do to embrace and navigate the digital revolution.

Source: Treasury Inspector General For Tax Administration, “Correspondence Scan Errors and Image System Limitations Can Delay Resolution of Taxpayer Cases,” Sept. 6, 2013