IRS Can Do More To Identify Tax Return Processing Problems and Reduce Processing Costs

GAO reviewed Internal Revenue Service (IRS) procedures to determine how well it processes individual income tax returns and whether improvements can be made in the tax return processing system.

The review showed that IRS can reduce individual income tax return processing costs by gathering and analyzing additional data on return processing problems. The most specific data on return processing errors should provide IRS with the detailed information it needs on the causes of processing problems so that preventive action could be taken. In fiscal year 1981, IRS processed about 94 million individual returns and identified about 33 million errors on those returns. Although IRS corrects most errors it detects, its present quality monitoring activities do not produce the detailed data necessary to readily determine systematic and procedural causes of errors so that it can take corrective action. GAO also gathered specific data on the errors, including the cause of error, and where on the tax return the error occurred. GAO believes that these kinds of data are essential for determining the systematic and procedural weaknesses which cause the errors. Through its evaluation of the return processing system, GAO found that IRS could reduce costs by as much as $1.7 million annually if it made several changes to its return processing operations.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Johnny C. Finch Team: General Accounting Office: General Government Division Phone: (202) 512-7824