Tax Administration

Pursuant to a congressional request, GAO reviewed steps the Internal Revenue Service (IRS) took to monitor and improve the quality of its service center activities, focusing on the: (1) quality of correspondence with taxpayers regarding their accounts; (2) extent to which IRS erred in processing tax returns; and (3) accuracy of notices sent to taxpayers informing them about return changes.

GAO found that: (1) IRS improved its correspondence quality; (2) between February 1989 and August 1990, IRS statistics indicated that its percentage of letters with critical errors decreased from 38 percent to 14 percent; (3) IRS planned to expand its monitoring of other types of service center correspondence in 1991; (4) it could not determine IRS progress in improving tax return processing accuracy; (5) IRS data indicated that the error rate in processing decreased from 23 percent in 1988 to 18 percent in 1990, but the percentage was not a valid indicator of IRS processing quality, since it included taxpayer errors and incorrect error counts; (6) service centers' recurring errors hindered IRS progress in improving the quality of its processing performance; (7) IRS began studying ways to reduce such recurring errors, and anticipated solutions for the 1991 filing season; (8) IRS lacked an effective measure for monitoring the accuracy of its notices; (9) while output review units reviewed notices having a high probability of an error and helped to target limited resources toward the most error-prone notices, such reviews did not provide IRS with a valid measure of accuracy; and (10) two centers' output review units did not follow IRS directions to report identified errors to the unit managers that originated the notices.

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.

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