Tax Administration

Internal Revenue Service (IRS) indicators show that IRS generally met or exceeded its performance goals for the 1998 tax filing season. Included in IRS indicators are measures of the timeliness of its processing of refunds, the accessibility of its telephone service, the accuracy with which it processes returns, and the accuracy of the assistance it gives over the telephone. Although millions of taxpayers used the services provided by IRS' walk-in sites during the 1998 tax filing season, the agency lacked meaningful nationwide data for assessing the performance of those sites. This report also discusses six specific areas: (1) IRS efforts to increase the use of electronic filing; (2) IRS' progress in addressing an issue discussed in GAO reports on the 1996 and 1997 filing seasons involving the use of private banks to process some tax payments; (3) IRS' implementation of the 1997 tax law change dealing with capital gains; (4) the status of IRS' efforts to reduce Earned Income Credit noncompliance; (5) the ability of taxpayers seeking assistance to reach IRS by telephone; and (6) other IRS efforts to provide information to taxpayers, such as its web site on the Internet and TeleTax. GAO also discusses IRS' test of a new processing system that has implications for future filing seasons.

GAO noted that: (1) IRS has several indicators that it uses to judge the success of a filing season; (2) for the 1998 filing season, those indicators showed that IRS generally met or exceeded its performance goals; (3) included in IRS' indicators are measures of the timeliness of its processing of refunds, the accessibility of its telephone service, the accuracy with which it processes returns, and the accuracy of assistance it provides over the telephone; (4) although millions of taxpayers used the services provided by IRS' walk-in sites during the 1998 filing season, IRS did not have meaningful nationwide data for assessing the performance of those sites; (5) although the overall number of individual income tax returns filed in 1998 increased by less than 2 percent from 1997, the number of returns filed electronically, including the number filed over the telephone, increased about 28 percent; (6) even with the 28 percent increase in electronic filing, about 98.5 million returns were filed on paper in 1998; (7) IRS uses private banks, known as lockboxes, to process some tax payments submitted with forms 1040; (8) the government pays the banks several million dollars to sort those returns and ship them to IRS for processing; (9) as GAO reported in 1997, IRS has inadequate evidence to justify the additional cost associated with having banks handle tax returns; (10) the return processing procedures that IRS adopted in implementing a legislative change relating to capital gains led to processing delays and increased taxpayer burden in 1998; (11) IRS plans to revise its procedures for the 1999 filing season; (12) the revisions, if effectively implemented, should alleviate some of the problems encountered in 1998; (13) IRS expanded its efforts to ensure that taxpayers filed correct EIC claims in 1998; (14) the measures that IRS uses to judge the accessibility of its telephone service showed substantial improvement; (15) use of IRS web site, as measured by the number of hits, increased by 187 percent, while the number of files downloaded from that site increased by 313 percent; (16) use of Teletax decreased about 15 percent during the 1998 filing season; (17) GAO also monitored IRS' test of a new system for processing returns and remittances; and (18) because of problems with the part of the system that processes remittances, IRS has decided to revise the system's implementation schedule and its contingency plan for 1999.

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.

Director: Team: Phone: