Tax Administration

The IRS Restructuring and Reform Act of 1998 granted IRS greater flexibility for handling personnel issues. Among other things, the act requires IRS to create a new performance management system; terminate employees for specific types of misconduct, such as lying under oath in a taxpayer matter; eliminate the use of enforcement statistics in employee evaluations; and develop a new training plan that emphasizes customer services. Other provisions give the agency greater discretionary authority in hiring, paying, and recruiting staff. This report discusses the status of IRS' implementation of these provisions. GAO also discusses tax administration concerns that have arisen in connection with the implementation.

GAO noted that: (1) IRS has implemented or begun to implement the mandated personnel flexibility provisions in the Restructuring Act; (2) specifically, the agency has: (a) begun implementing a new three-phase performance management system; (b) been reviewing alleged employee misconduct, and, as of March 1, 2000, had terminated 17 employees for misconduct; (c) been working to eliminate enforcement statistics in employee evaluations; and (d) implemented a new training program emphasizing customer service; (3) IRS has also begun using some of the discretionary personnel flexibility provisions permitted by the Restructuring Act; (4) senior managers have been hired at critical pay, a new pay-banding system for non-Senior Executive Service managers has been adopted, and several streamlined demonstration projects and new separation incentive payments are under development; (5) also, certain recruitment, retention, and performance bonuses have been paid; (6) IRS' implementation of the personnel flexibility provisions raises several tax administration concerns; (7) as GAO's prior report and a Treasury Inspector General for Tax Administration (TIGTA) report have noted, IRS has had difficulty in eliminating the use of enforcement statistics in employee evaluations; (8) another TIGTA report found that IRS has had difficulty developing an accurate system for counting taxpayer complaints of employee misconduct; (9) in addition, as GAO has previously reported, IRS employees have taken significantly fewer enforcement actions to collect delinquent taxes since passage of the Restructuring Act; and (10) frontline employees GAO spoke to believed that the decline was due to a lack of agency guidance on how to interpret the provision concerning employee misconduct.