Listed below are glitches reported by the IRS. Not all are necessarily Y2k-related, and I've only listed some details.

Visit the website for more information, present status situation, and actions taken by the agency to fix the problems:

http://www.irs.ustreas.gov/plain/hot/prob-alert.html

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Department of the Treasury - Digital Daily

Special Report - Index of Problem Alerts

Heads up. Here's a quick list of the most recent problems we've discovered. If you find one you think affects you, select it for more detail about the problem, how we're fixing it and what you should do about it.

02/10/00 - Rejection of e-filed returns with child care credit or dependent care benefits....

Problem: Due to a processing error, the IRS e-file system has improperly rejected most individual returns which claimed a child care credit or reported dependent care benefits from an employer. After the IRS corrected an initial system error at the end of January, the system continued to reject returns with more than one Form W-2 in which the W-2 that reflected dependent care benefits was not the first one entered. All of the affected returns had Error Reject Code 090 in the rejection notice.

Who's affected: The IRS has rejected about 40,000 e-filed returns because of these problems this year. It is not known how many of these returns were repeatedly re-transmitted and rejected.

02/09/00 - The Power of Attorney (POA) indicator was erroneously turned off during the first few weeks of Processing Year 2000....

Problem: Due to a programming problem, the Power of Attorney (POA) indicator was erroneously turned off during the first few weeks of Processing Year 2000. This problem affected individual taxpayers only. Therefore, some notices or letters issued to individual taxpayers did not include a copy to the third party representative when authorized. Some refunds that should have been mailed to the authorized third party representatives were issued to some taxpayers in error.

Who's affected: This problem affected some individual taxpayer notices or letters dated January 31 through February 21, 2000.

06/24/99 - Incorrect dates on estimated tax vouchers....

06/17/99 - Incorrect interest in refunds to business taxpayers....

Problem: On June 11, 1999, the Treasury sent more than 31,000 refunds which included an incorrect interest amount of $9.55. This error resulted from a computer programming feature; it was not related to any Y2K changes. The IRS is changing the software and developing other systemic checks to prevent a repeat of this error. The IRS discovered the error before the refunds went out, but issued them so that taxpayers would receive the principal amount and some interest in a timely manner. Stopping the refunds to correct them would have excessively delayed the payments.

Who's affected: This error affects around 31,000 business taxpayers who received refunds with interest payments within a few days of June 11. Nearly 25,000 should have received less interest than they did. The remaining taxpayers should have received larger interest amounts.

06/04/99 - Some taxpayers who used EFTPS to make deposits during May 1999 may receive an erroneous notice from IRS....

Problem: Some taxpayers who used EFTPS to make deposits during May 1999 for Form 1120, U.S. Corporate Income Tax Return, for fiscal year ending Jan 31, 2000 may receive an erroneous notice from IRS. The notice may state that "We could not determine the tax period on your Federal Tax Deposit we received on May XX, 1999. Based on our records, we decided to apply the Deposit to: Type of Tax 1120; Tax Period Ending Jan. 31, 1900; Amount $X, XXX.00". The notice would give the taxpayer the chance to correct IRS's placement of the deposit if IRS assumed the wrong type of tax or period. This notice is not correct. The IRS received payments in the wrong format from a bank whose software was improperly changing year 2000 payments to year 1900 payments. When IRS's EFTPS system received the payments, the tax period was corrected to year 2000 and properly posted to taxpayers accounts. However, the correction generated the notices mentioned above.

Who's affected: The IRS estimates that notices were generated to less than 900 taxpayers and because the problem was discovered so quickly very few, if any, were actually mailed. The process of preventing the mailing of these incorrect notices is largely manual, and it is possible some taxpayers got the notice. The number "108" in the lower left corner near the IRS return address identifies the notice.

06/03/99 - Credit Card Payment Errors....

Problem: US Audiotex, the company which processed credit card tax payments made by phone, mistakenly coded the payments made on April 15, 1999, as being for tax year 1999 rather than 1998. The IRS credited the payments to the taxpayers accounts, but for the wrong tax year. The company and the IRS did not discover this error until after the IRS had sent some bills to taxpayers for the taxes they had already paid by credit card.

Whos affected: This error affects all taxpayers who made a federal tax payment with a credit card by calling 1-888-2-PAY-TAX on April 15, 1999, (about 13,700 taxpayers). In addition, those whose earlier credit card tax payments were adjusted by US Audiotex, due to the correction of a reject condition, on or after April 15, 1999, are also affected.

05/28/99 - Incorrect Letters on Schedule J TaxCalculation....

05/13/99 - Incorrect IRS letters on District of Columbiafirst-time homebuyer credit....

Problem: Some taxpayers who claimed the District of Columbia First-Time Homebuyer Credit (Form 8859) have received a letter from the IRS stating that their credit was limited by the alternative minimum tax (AMT) computation, even though the taxpayers were not subject to the AMT itself. This letter is not correct. Congress changed the tax law in October 1998 to remove the usual AMT limitation on this and certain other credits for the 1998 tax year. The IRS revised Form 8859 to reflect this change. However, in the short time it had to update its tax processing software before the start of the filing season in January, it inadvertently failed to remove this limitation for the D.C. First-Time Homebuyer Credit.

Who's affected: The IRS estimates that it sent letters to about 900 taxpayers who had claimed the D.C. First-Time Homebuyer Credit before it found and corrected this error. Affected taxpayers would have received a letter from the IRS telling them that their credit was limited by the AMT computation.

03/31/99 - Approximately 14,000 employee plans administrators recently received tax packages from the IRS with erroneous address labels....

0318/99 - Problem Alert for Letter 1058, Notice of Intent to Levy and Notice of Your Right to a Hearing....

Problem: Some taxpayers owing back taxes in five Midwestern states have mistakenly received letter Number 1058, Notice of Intent to Levy and Notice of Your Right to a Hearing. The letter outlines the possibility that the IRS could take levy action to settle the tax debt, and it outlines legal rights available to taxpayers to appeal the case and suspend enforced collection activity. The letter was designed to be delivered on a case-by-case basis to taxpayers facing a levy on their property. However, the letters were sent to people in five states who owed back taxes but were not facing the immediate threat of levy, so they should not have received the notice.

Who's affected: About 4,000 taxpayers in Illinois, Minnesota, Texas, North Dakota and South Dakota received the letters starting Jan. 19.

02/05/99 - W-2 Forms with box 15 error....

02/03/99 - Problem Alert for Package 1040-ES/V, Estimated Tax for Individuals....

Problem: Production of Package 1040-ES/V, Estimated Tax for Individuals, has been delayed approximately one week due to ice and snowstorms for some taxpayers. Each year the mailing is scheduled for the fourth week of January. The package is used by individuals who are required to make estimated tax payments for 1999. The package consists of 1040-ES instructions, four 1040-ES personalized tax vouchers, and, four 1040-ES return envelopes.

Who's affected: Approximately 1.6 million taxpayers who file their estimated tax returns in Fresno, Memphis, and Ogden Service Centers are affected by this delay.

02/02/99 - Human error caused a review of more electronic returns than planned at the Atlanta Service Center....

Problem: Human error caused a review of more electronic returns than planned at the Atlanta Service Center. Some Direct Deposit refunds due on January 29, 1999, were delayed one week. During the first 4 days of the electronic filing season that began January 15, 1999, the Atlanta Service Center identified returns for review at a rate that was significantly higher than the national average.

Who's affected: Taxpayers living in Georgia, Florida, and South Carolina who filed electronically and requested a Direct Deposit refund during the first 4 days of the electronic filing season.

01/13/99 - Error in the printing of the Form 4562, Depreciation and Amortization, that is included in some Form 1040 tax packages....

-- Lee Maloney (leemaloney@hotmail.com), February 11, 2000

Answers

From the sounds of this report, we should expect to see more bugs in the IRS tax system, Y2k or otherwise.....

Tax agency updating decades-old services

February 06, 2000

By Curt Anderson WASHINGTON -- For years, trying to get a tax question answered by calling the Internal Revenue Service meant frustration for millions of people. Taxpayers frequently can't even get through on 1 (800) 829- 1040.

Last year was particularly rocky for the IRS as it tried to implement a new national call-routing system that would link experts with people who have more complicated questions and move all calls to the first able worker.

To make things worse, the phone lines were opened 24 hours, 7 days a week for the first time -- but there was no increase in staff.

"We had a rough go of it," said Paul Cosgrave, chief information officer at the IRS.

According to the congressional General Accounting Office, the percentage of taxpayers who actually got through to an IRS helper via telephone dropped to 55 percent last year from 74 percent the year before.

The GAO audit said the drop resulted from "unrealistic assumptions," such as an expectation that 24-hour service would even the calls out throughout the day instead of peaking at certain times.

"Last year's filing season was really getting the bugs out," Cosgrave said. "This year, we're not going to have the same problems. We are much further ahead."

The new phone system integrates what had been 25 largely autonomous sites into one system centered in Atlanta. A taxpayer's call could be routed virtually anywhere in the country instead of staying in one geographic region, as had been the case for years.

The more complicated calls are to be handled by IRS workers with more expertise in those areas, and they won't get bogged down with more routine matters, said IRS Commissioner Charles Rossotti. "From the taxpayers' point of view, we hope they'll have a better chance of getting through and getting the right answer," he said. "I think we'll be somewhat better. It will take years to get what I consider top-quality level of service."

In some cases, taxpayers are asked to record their question with the IRS and leave a telephone number, with the answer promised within three business days.

The IRS is aiming for a phone response rate of 85 percent by 2001. This year, Cosgrave said, "we will be somewhere between 70 and 85 percent."

Taxpayers can also access the IRS Web site -- irs.gov -- and find answers to dozens of questions. Last year, the page received nearly 794 million hits, a 114 percent increase from 1998. In addition, 155,000 people e-mailed questions to the agency, although accuracy was a problem there, too.

Sluggish phone service is only the tip of an iceberg at the IRS that dates back to the 1960s: an ancient system of tape computer files that store all U.S. taxpayer data. These tapes can only be updated once a week, meaning even simple questions about refunds and payments can take days to answer.

After years of fits and starts -- and billions of wasted dollars -- the IRS is in the midst of a multi-year computer modernization program aimed at improving accessibility to taxpayer data, improving electronic filing and improving taxpayer assistance.

The improved phone system is a part of that. In future years, those tape taxpayer files will be gradually switched over to modern disks.

"There's a reason nobody has replaced the master files in 35 years," Rossotti said. "It's a very risky and difficult job. It's a feasible project, but it's a high-risk, large-scale, difficult project."

Source: San Bernardino Sun archive #135181

http://www.newschoice.com/Newspapers/Gannett/Sun/default.asp

-- Lee Maloney (leemaloney@hotmail.com), February 17, 2000.

No sooner did I post the above article, then I received two emails from a friend :

"I talked to my sister-in-law this morning who works for H&R Block. She said that they haven't had any problems filing electronically to the IRS and she submitted her own this past weekend. However, for several days last week the IRS would not accept electronic filing because THEIR computers were down. Now this makes sense. The problem is not with H&R Block...the problem is with the IRS (just as Gary North said). I asked her to keep an eye on it and let me know what she comes up with as she asks around."

"I asked her again about the IRS down time on their computer and she said they were down two days OVER A WEEKEND. They can usually submit tax returns over a weekend but not that time. The IRS had problems of some sort."

-- Lee Maloney (leemaloney@hotmail.com), February 17, 2000.

Sysops, please delete the answer above, which begins: "No sooner did I post the above article, then I received two emails from a friend"

I'm placing it in the H&R Block thread at http://greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=002ZW6

Thanks!

-- Lee Maloney (leemaloney@hotmail.com), February 17, 2000.