Summary

Pursuant to a legislative requirement, GAO: (1) determined the extent of any problems the Internal Revenue Service (IRS) had with magnetic media returns filed by service bureaus; and (2) explored the need for any administrative or legislative measures to regulate service bureaus.

GAO found that: (1) the proportion of magnetic media submissions rejected from all filers, including service bureaus, has declined since 1987; (2) over 99 million of 670 million 1988 information returns were successfully processed the first time through; (3) 96.5 percent of all information returns submitted a second time were successfully processed; (4) rejection rates for service bureaus were about the same as the rejection rates for payors submitting their own returns; (5) 3,899 of the 4,102 potential service bureaus submitted acceptable information returns on magnetic media, but IRS needed to obtain better data on the nature and extent of the problems it may have with service bureaus; and (6) although a large number of information returns were rejected by IRS as unacceptable for processing, it could not determine how many of those returns were filed by service bureaus.