Tax Administration

Pursuant to a congressional request, GAO investigated reported problems relating to controls over tax returns, inventory backlogs, improperly discarded or destroyed documents, and refunds at the Internal Revenue Service's (IRS) Philadelphia Service Center (PSC).

GAO found that, although the error resolution inventory at PSC reached several hundred thousand before dropping significantly, it was still higher than the inventory at any other service center. Service center officials stated that the inventory level was high because: (1) various hardware and software problems caused delays in processing the tapes of transcribed tax returns; (2) there was a backlog in the Error Resolution System (ERS) which was not properly staffed to handle it; (3) ERS had a greater downtime than anticipated; (4) the ERS unit lost 45 tax examiners, of which 36 were experienced; (5) following guidelines to give priority to large dollar refund returns decreased productivity by about 50 percent; (6) PSC was unable to expeditiously process returns because of overflows in file space; (7) response times on the ERS terminals were unacceptably long; (8) there were errors in loading tapes; and (9) there were incidents of improperly discarded or destroyed documents. Because of the problems in processing 1985 returns, IRS established a program to expedite receipt of taxpayers refunds where the taxpayers could file a duplicate return; however, the program has proved more costly than resolving returns through normal processing.