Tax Administration

In fiscal year 1998, the Internal Revenue Service (IRS) sent more than 80 million notices to taxpayers about various enforcement actions, such as audits or demands for payment of past due tax debts. Taxpayers who disagreed with or did not understand how to respond to a notice could call IRS toll-free. IRS received upwards of 20 million calls about notices in fiscal year 1998. Members of Congress have raised concerns about the burden imposed on taxpayers and questioned whether information obtained during taxpayer telephone calls could be useful in understanding the causes of various problems, such as confusing instructions or incorrect information. This report discusses (1) whether IRS tracks information about notices from taxpayers who call IRS and (2) if not, whether such a tracking could be useful and feasible.

GAO noted that: (1) IRS does not track information during telephone calls from taxpayers about notices; (2) such information could include the number of calls generated about each notice or the problems cited during the calls; (3) instead, IRS identifies problem notices through ad hoc discussions with IRS employees who have interacted with taxpayers; (4) IRS officials said that it has not developed a tracking system because its higher priority is modernizing IRS' computer systems and stabilizing its existing systems as it modernizes; (5) IRS officials said that a tracking system could be useful in improving notices; (6) they said that the degree of usefulness would depend on the information tracked; (7) the literature GAO reviewed and three other tax agencies GAO visited reported that collecting such information from customers was useful in identifying problems; (8) IRS officials believed it would be feasible to track some information about notices during telephone calls; (9) these officials identified at least three existing systems that could be modified to track information, such as the type of notice and problems associated with the notice; (10) these systems included one that helps IRS assistors handle all calls, a quality review system for a sample of calls, and a system used to survey a sample of callers about their satisfaction with IRS' services; (11) IRS officials also identified planned systems that could be enhanced to track notice information; (12) the cost of tracking information from taxpayers about notices is also an important factor in deciding whether such a tracking system is economically feasible; (13) costs would include those to modify an existing system and to enhance computer systems that are to be developed over the next 5 to 7 years so that they collect the information about notices; (14) the amount of additional cost incurred to collect the information would depend on the number of calls involved in the tracking, the amount of information collected, and the extent to which extra time is spent on such calls; (15) IRS officials raised two concerns with modifying an existing system for the purpose of tracking in the short term; (16) the officials said that major modifications to an existing system could create instability in that system causing other problems; and (17) the officials were concerned that spending significant resources to modify any existing system could disrupt IRS' computer modernization effort.

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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