Summary
In 2006, the Internal Revenue Service (IRS) spent about 38 percent of its $10.8 billion budget on processing returns and providing taxpayer assistance. GAO was asked to (1) assess IRS's 2006 filing season performance processing paper and electronically filed tax returns and providing telephone, Web site, and face-to-face assistance relative to 2006 goals and prior years' performance; (2) identify potential cost savings or other improvements; and (3) report on the status of IRS's Taxpayer Assistance Blueprint (TAB). To address these issues, GAO collected relevant information from IRS and other sources, reviewed performance measures and past filing season assessments, and interviewed officials.
IRS improved most filing season services in 2006, continuing improvements since 2001. IRS also generated efficiencies from increased electronic filing and benefits for taxpayers through systems modernization. IRS's processing of individual tax returns and refunds improved by most measures, but the growth rate of electronic filing continued to slow in part because of changes to the Free File Program, which reduced the number of taxpayers eligible to use it and the elimination of a program that allowed taxpayers to file via the telephone. Access to IRS's telephone assistors was comparable to last year. The accuracy of responses to telephone inquiries was 90 percent or over in 2006. Use of IRS's Web site increased substantially and IRS reconfigured the site to improve service. Continuing past trends, fewer taxpayers used IRS walk-in sites and more used less-costly volunteer sites. Also, IRS completed Phase I of the TAB, which identified strategic themes for improving taxpayer service; TAB Phase II is expected to be completed by early 2007. With the slowing growth rate in electronic filing, IRS is missing an opportunity to generate additional savings. Federal and state mandates for electronic filing have demonstrated success in increasing electronic filing; however, IRS currently lacks the authority to mandate electronic filing for certain income tax returns such as individual returns filed by paid tax preparers. Using IRS estimates, savings from such a mandate could be on the order of $60 million per year. IRS has another opportunity to generate savings because of excess space at its call sites. However, IRS lacks a strategy for eliminating that space by consolidating call sites. To replace its aging legacy computer system, IRS continues to implement a modernized system for processing tax returns and refunds. However, IRS does not report information on the chief benefit realized to date, faster refund issuance. Such information could be useful for the Congress when making decisions about funding the completion of the individual tax return processing part of the system, estimated by IRS to require at least another $500 million.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
James R. White
Government Accountability Office: Strategic Issues
(202) 512-5594
Matters for Congressional Consideration
Recommendation: Given the efficiencies to be gained, the Congress may wish to mandate electronic filing by paid tax preparers meeting criteria such as a threshold number of returns filed.
Status: In process
Comments: Our review of pending legislation related to electronic filing shows that while some language has been proposed to increase electronic filing of returns prepared by paid preparers, such as legislation proposed by the Senate Committee on Finance (S.1321), this legislation has not yet passed. Also IRS's Advancing Efile Study due out around September 2008 should address this recommendation.
Recommendations for Executive Action
Recommendation: The Commissioner of Internal Revenue should direct the appropriate officials to timely develop, validate, and implement a plan to consolidate call sites.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: IRS has completed a workload analysis designed to evaluate changes in telephone resources and call demand, resulting in a preliminary ranked list of call sites for potential closure. According to IRS officials, the next steps include (1) conducting an extensive cost-analysis review of different options for reducing excess capacity at call sites (i.e. closing sites versus leasing smaller spaces for some sites), (2) formulating a consolidation timeline and workload redistribution plan, and (3) developing external communication plans. IRS expects to begin the cost-analysis around October 2007 and complete it by April 2008. As of mid-September 2008, IRS officials had not yet responded to emails requesting updated information.
Recommendation: The Commissioner of Internal Revenue should direct the appropriate officials to report to the Congress refund timeliness for Customer Account Data Engine compared to the Master File legacy system.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: IRS reported that, as of January 2007, it will explore the feasibility of extending information for the refund timeliness measure in order to provide a measure of refund issuance for paper and electronically filed returns processed through CADE or the Masterfile legacy system. IRS expects to complete this feasibility study by December 15, 2007. During interviews with GAO, IRS officials noted that complications related to implementing this recommendation include the need to isolate the correct data to report and the lack of a systemic way to distinguish returns posted through CADE or the legacy system. Update: In the 2008 filing season, IRS has developed a refund timeliness measure for the files that are posted by CADE. This information is reported monthly. This recommendation is still open because IRS has not confirmed whether or not they are sharing the timeliness measure with Congress.
