IRS High-Risk Issues

The Internal Revenue Service (IRS) has for years struggled to collect the nation's tax revenue using outdated processes and technology. The result has often been inefficient and ineffective programs that are prone to waste, fraud, abuse, and mismanagement. Of particular concern are IRS' efforts to modernize its tax systems, manage its administrative and revenue accounting systems, identify and collect taxes owed the government, detect and prevent the filing of fraudulent tax returns, protect the confidentiality of taxpayer information, and prevent the disruption of services because of computer malfunctions. At a minimum, IRS needs an implementation strategy that includes both cost-benefit analyses and reasonable estimates of the extent, time frames, and resources needed to correct its high-risk vulnerabilities. IRS also needs to (1) better define, prioritize, and manage new information systems; (2) ensure that its administrative and revenue accounting systems fully comply with government accounting standards; (3) design and implement both administrative and electronic control to protect taxpayer data from unauthorized access; and (4) develop performance measures that will allow its managers, Congress, and GAO to track its progress. Above all, IRS management needs to sustain an agencywide commitment to solving the agency's high-risk problems.

GAO noted that: (1) for years GAO has chronicled IRS' struggle to modernize and manage its operations, especially in the high-risk areas, and has made scores of recommendations to improve IRS' systems, processes, and procedures; (2) it is clear that in order to achieve its stated goals of reducing the volume of paper tax returns, providing better customer service, and improving compliance with the nation's tax laws, IRS must successfully modernize its systems and operations; (3) to accomplish this modernization, however, IRS needs to develop comprehensive business strategies to ensure that its new and revised processes drive systems development and acquisition; (4) solving the problems in the high-risk areas is not an insurmountable task, but it requires sustained management commitment, accurate information systems, and reliable performance measures to track IRS' progress and provide the data necessary to make informed management decisions; and (5) at a minimum, IRS needs an implementation strategy that includes both performing cost-benefit analyses and developing reasonable estimates of the extent, time frames, and resources required to correct its high-risk vulnerabilities.