Tax Administration

GAO uncovered many examples of waste and inefficiency, along with cases of abuse and employee misconduct, at the Internal Revenue Service (IRS). Many of these problems can be traced to antiquated IRS computer systems, a fragmented organizational structure, and inefficient work processes. In those cases in which the costs or lost revenues were quantified, the amounts totaled about $87 million. In some cases, the dollar effects were calculated on the basis of audit work at a few IRS locations. The dollar implications could be far greater if the examples are indicative of conditions throughout the agency. Many cases suggest that if the causes of waste, inefficiency, and abuse are not eliminated, taxpayer confidence in IRS and voluntary compliance with the tax system may be undermined. IRS recognizes these problems and is modernizing its systems and reassessing the roles and the responsibilities of its components.

GAO found that: (1) much of the waste and inefficiency in IRS has resulted from antiquated computer systems, fragmented organizational structure, and inefficient work processes; (2) lost revenue from waste and inefficiency has totalled $87 million; (3) some of the examples of waste for which there is no dollar effect could result in potentially large savings; (4) IRS failure to eliminate the causes of waste, inefficiency, and abuse will erode taxpayer confidence in IRS and diminish voluntary compliance with the tax system; (5) IRS has identified many of the problems that contribute to its inefficiency in its Taxpayer System Modernization documentation; and (6) when TSM and related organizational changes are fully implemented, many IRS inefficiencies should be alleviated.