System Integrity

IRS Can Reduce Processing Errors With Better Controls and Information Gao ID: IMTEC-88-25 August 2, 1988

GAO assessed the Internal Revenue Service's (IRS): (1) controls for correcting errors in processing tax returns and issuing refunds and notices; and (2) efforts to identify the causes of processing errors.

GAO found that: (1) automated controls detected errors in 327 of the 389 IRS adjustment cases GAO reviewed, with taxpayers causing 57 percent of errors, IRS coding and editing causing 29 percent, and IRS data conversion causing 36 percent; (2) in at least 281 cases, error resolution examiners did not properly correct the errors or follow IRS instructions to compare master file system data with return data; (3) data transcribers should have corrected 49 of the cases that examiners overlooked before sending them to the next processing phase; (4) IRS stopped and corrected incorrect refunds and tax-due notices in 306 cases, causing a 3- to 11-week delay in sending them out; (5) IRS sent incorrect refunds and tax-due notices in 86 cases, resulting in taxpayers receiving $7 to $5,000 more in refunds than IRS owed them and others receiving notices requiring them to pay $1 to $8,100 more than they owed; (6) the cost to correct these errors after initial processing was about $4.00 per case, but only $0.30 during the error resolution stage; (7) some IRS quality monitoring activities' management reports were inaccurate and untimely; and (8) service center managers did not believe that the reports addressed certain management needs.


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.

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