Tax Administration

Pursuant to a congressional request, GAO analyzed the Internal Revenue Service's (IRS) mid-fiscal year (FY) 1989 financial review and actions to offset a budget shortfall of about $360 million.

GAO found that IRS: (1) established a hiring freeze and restrictions on travel, training, and equipment acquisitions at the beginning of FY 1989 to offset the shortfall; and (2) determined during the mid-year review that those actions would not sufficiently offset the shortfall, and further reduced support services, equipment, training, and space alterations, in addition to various service center programs and the level of post-filing season taxpayer service. GAO also found that, although the full effect of IRS cutbacks would not be apparent until after FY 1989: (1) taxpayers experienced more difficulty in reaching IRS over the telephone; (2) the manageability of certain service center correspondence inventories decreased; and (3) IRS expected decreased revenues from its document-matching activities. In addition, GAO found that other potential effects of the cutbacks depended on the extent to which IRS: (1) would have to hire inexperienced personnel to compensate for furloughed employees who did not return to IRS; and (2) could fund items, such as space alterations, that it had deferred until the next year.