If you have ever received a letter from the IRS, chances are it left your head spinning. And not necessarily because you were in trouble (although that’s a possibility) but most of the times these letters are confusing—leaving you wondering exactly what the agency wants.
I’ve had numerous clients come in with such letters. My favorite example of such a letter is a CP2000 that runs 12 pages. A CP2000 is an IRS form letter advising the taxpayer that he or she left a piece of valuable information off the tax return. Usually it’s a stock sale or bank interest or some other piece of income that the IRS received a third party document for (1099, K-1, etc.) that wasn’t declared on a return. Unfortunately, this information is buried around page eight. Most recipients make it to page three and go running to a tax professional for translation.
A few years ago, the IRS realized that its correspondence was in dire need of change. It needed to focus on simplicity and user-friendliness. So in 2011, the agency hired Siegel+Gale, the simplicity company, to revamp many of its letter templates.
According to Howard Belk, co-CEO and chief creative officer of Siegel+Gale, the catalyst was the confusion IRS’ correspondences left with recipients. “The IRS realized they had a brand problem. There are more than 1000 different letter templates. There are 120 different people generating these letter templates. There are 40 different technology systems generating the content and tracking the back and forth. It turns out that a mere 37 letter templates could handle 70% of the volume of correspondence. Of all the 1000 letter templates, there were only three topics:
- A request for more information;
- A request for more money, or
- To advise the taxpayer that a refund is forthcoming.”
Inform, respect and suggest became the new IRS mantra. And this came down from the Taxpayer Advocate who is the ombudsman between the IRS and the taxpayer. The Taxpayer Advocate takes her job very seriously. According to Belk, “What quickly became apparent [to the Taxpayer Advocate] was the full impact this project could have. There were literally billions of dollars in taxes that had not been remitted because the exact amount was continually being discussed between the IRS and the taxpayer. Tax revenues were falling so it was necessary to bring in what they could.” Revising the letters to provide a clear and accurate statement to the taxpayer became the key to solving this issue.
Belk adds, “Approximately 97-98% of taxpayers wanted to pay and wanted it all to go away. They didn’t want to be in ongoing correspondence with the IRS. But it was never clear what they owed.”
The first letter their firm re-evaluated was the CP2000. Belk states that in a CP2000 letter, “Six or eight topics were discussed and they were fragmented. In the opening paragraph the taxpayer was being referred to different documents and different sections of the letter.” No wonder taxpayers were left confused.
Aside from creating a cohesive format, the workers from Siegel+Gale had to address reading and comprehension levels and stick with a 9th grade level. The company spent more time in research than design.
The new design was introduced to the public in 2013, and the IRS also created a FAQ page to explain how to read the letter: Understanding Your CP2000-Notice.
The letter has been reduced to three pages, according to Belk. However, the sample shown on the FAQ page is five pages long. I believe the length of the letter will vary depending on the individual situation. One of Siegel+Gale’s designers commented that the letter could have been carved down to one page, but claims the IRS wouldn’t be able to handle it.
Bonnie Lee is an Enrolled Agent admitted to practice and representing taxpayers in all fifty states at all levels within the Internal Revenue Service. She is the owner of Taxpertise in Sonoma, CA and the author of Entrepreneur Press book, “Taxpertise, The Complete Book of Dirty Little Secrets and Hidden Deductions for Small Business that the IRS Doesn't Want You to Know.” Follow Bonnie Lee on Twitter at BLTaxpertise and at Facebook.