IRS' 1996 Tax Filing Season

As compared with the 1995 filing season, the Internal Revenue Service (IRS) received 119 million fewer telephone calls for assistance and answered about 4 million more calls during the 1996 filing season. That combination of reduced demand and increased service enabled IRS to increase the percentage of calls answered from 8 to 20 percent and to increase the percentage of callers who were eventually able to get through to IRS from 41 to 50 percent. Still, there is considerable room for improvement. In 1995, IRS delayed about 7 million refunds to give itself time to verify social security numbers, especially for filers claiming the earned income credit. Although that verification effort yielded some positive results, there were problems. For example, IRS identified many more missing or invalid social security numbers than it was able to pursue and eventually sent out the refunds without resolving the discrepancies. For the 1996 filing season, IRS revised its procedures and ended up delaying many fewer refunds than it did in 1995, thereby avoiding the negative press it received that year. IRS' modernization efforts met with mixed results in 1996. Although a new document scanning and imaging system performed better in 1996 than it did in 1995, the system still was not meeting performance expectations and may end up costing much more than originally anticipated. Also, although the system that allows taxpayers to file their returns by telephone worked very well and a high percentage of its users were satisfied with it, only about 10 to 14 percent of those eligible to use the system in 1996 did so.

GAO found that: (1) IRS met or exceeded its timeliness and accuracy goals for processing individual income tax returns and issuing taxpayer refunds, answered more telephone calls from taxpayers seeking assistance than it had planned to answer, and received more returns through alternative filing methods than it had projected; (2) for the 1996 tax filing season, IRS revised its procedures to limit the number of delayed refunds to the volume of cases it could review, and focus on the cases most in need of review, and as a result, IRS delayed many fewer refunds in 1996 than it did in 1995 and avoided the kind of negative press it received in 1995 as taxpayers and tax return preparers reacted to the delays; (3) recognizing that much could be done to improve its systems and procedures, IRS has initiated several modernization efforts, and those efforts achieved mixed results in 1996; (4) IRS is developing a strategy to increase the use of electronic filing and reassessing its strategy for processing paper returns; and (5) IRS' decision to have taxpayers send not only their payments but also their tax returns to a lockbox and to have the banks sort those returns before sending them to IRS has increased program costs, unnecessarily in GAO's opinion, by $4.7 million.

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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