Tax Administration

Each year, the Internal Revenue Service (IRS) sends millions of notices to taxpayers about the status of their tax accounts. Notices are often the first form of IRS contact that taxpayers receive to alert them to a potential tax problem. In 1993, IRS sent more than 60 million notices affecting about $190 billion in taxpayer transactions. GAO identified clarity problems with 31 of the 47 most commonly used notices it received. GAO also believes that taxpayers with multiple tax problems would be better served by receiving a single, comprehensive notice summarizing the status of their accounts, rather than the stream of multiple notices that IRS now sends out. Through a tax systems modernization initiative that is exploring ways to issue a single notice addressing multiple tax matters, IRS hopes to be able to deliver comprehensive tax account notices to taxpayers. Despite IRS' progress and commitment to improving clarity, in some cases taxpayers continued to receive notices that IRS' Notice Clarity Unit (NCU) deemed problematic. Although NCU may have reviewed the notice and recommended text changes, IRS continued to issue the inferior version, since the revisions were not made promptly. Many of the recommended changes were delayed or never made because of IRS' computer system, which is antiquated and requires labor-intensive programming to make the simplest of text changes. Improvements may result from the transfer of notices to Correspondex, a more modern computer system that generates other IRS correspondence.

GAO found that: (1) 31 of the 47 most commonly used notices that it reviewed have clarity problems such as language, content, and format; (2) needed improvements to the notices include more specific language, clearer references, consistent terminology, logical presentation of material, and sufficient information and guidance on how to resolve taxpayer problems; (3) despite internal reviews and recommendations to improve the notices, IRS has delayed many notice revisions and has failed to implement others primarily due to its limited computer programming resources and higher priority programming demands; (4) IRS does not have a system to track recommended notice revisions; (5) IRS is testing whether its correspondence system can generate collection notices and make more timely notice revisions, since it has a number of capabilities that the master file notice system does not; (6) two other IRS initiatives to improve notices include testing a new notice format and acquiring new printing equipment for the service centers; (7) IRS is using its Tax Systems Modernization initiative to explore ways to issue single, comprehensive notices for taxpayers with multiple and interrelated tax problems; and (8) IRS is considering ways to supplement notices with commonly asked questions and appropriate answers to improve the quality of 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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