IRS's 2002 Tax Filing Season
Returns and Refunds Processed Smoothly; Quality of Assistance Improved Gao ID: GAO-03-314 December 20, 2002The tax filing season is when millions of taxpayers file their returns and seek assistance by calling or visiting IRS's offices or Web site. Because of the large number of returns and critical nature of IRS's filing season activities, GAO was asked to assess IRS's 2002 filing season performance in processing tax returns and refunds and providing timely and accurate assistance to taxpayers.
The Internal Revenue Service (IRS) processed returns and issued refunds smoothly and the quality of assistance provided to taxpayers improved in the 2002 filing season. In light of this, IRS should be commended for the various efforts it took to prepare for the 2002 filing season and improve performance. Still, opportunities exist for IRS to further improve aspects of its performance and some of its performance measures. In 2002, IRS's performance included issuing almost all refunds on time, providing more accurate telephone service than in 2001, and meeting many of its 2002 performance goals in all areas. IRS also began measuring the accuracy of assistance at its walk-in sites to obtain better performance data. In addition, IRS's redesigned Web site was easier to access and more user friendly. IRS's improved performance can be traced to its use of performance measures, which are part of its strategy to improve returns processing and taxpayer assistance as shown below. However, GAO identified opportunities for IRS to make further improvements. For example, IRS's suite of telephone measures lacks an indicator of how long callers wait to speak to an assistor--a key aspect of assistance that provides useful information for decision making by external stakeholders. Although not a primary focus of this report, GAO also found that IRS lacked comprehensive plans related to the extent and timing of anticipated workload and staffing changes at its walk-in sites.
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Report to the Chairman, Subcommittee on Oversight, Committee on Ways
and Means, House of Representatives:
United States General Accounting Office:
GAO:
December 2002:
IRS‘s 2002 Tax Filing Season:
Returns and Refunds Processed Smoothly; Quality of Assistance Improved:
2002 Tax Filing Season:
GAO-03-314:
GAO Highlights:
Highlights of GAO-03-314, a report to the Chairman, Subcommittee on
Oversight, Committee on Ways and Means, House of Representatives.
Why GAO Did This Study:
The tax filing season is when millions of taxpayers file their
returns and seek assistance by calling or visiting IRS‘s offices
or Web site. Because of the large number of returns and critical
nature of IRS‘s filing season activities, GAO was asked to assess
IRS‘s 2002 filing season performance in processing tax returns and
refunds and providing timely and accurate assistance to taxpayers.
What GAO Found:
The Internal Revenue Service (IRS) processed returns and issued
refunds smoothly and the quality of assistance provided to taxpayers
improved in the 2002 filing season. In light of this, IRS should be
commended for the various efforts it took to prepare for the 2002
filing season and improve performance. Still, opportunities exist
for IRS to further improve aspects of its performance and some of
its performance measures. In 2002, IRS‘s performance included
issuing almost all refunds on time, providing more accurate telephone
service than in 2001, and meeting many of its 2002 performance goals
in all areas. IRS also began measuring the accuracy of assistance at
its walk-in sites to obtain better performance data. In addition,
IRS‘s redesigned Web site was easier to access and more user friendly.
IRS‘s improved performance can be traced to its use of performance
measures, which are part of its strategy to improve returns processing
and taxpayer assistance as shown below. However, GAO identified
opportunities for IRS to make further improvements. For example,
IRS‘s suite of telephone measures lacks an indicator of how long
callers wait to speak to an assistor-a key aspect of assistance that
provides useful information for decision making by external
stakeholders.
Although not a primary focus of this report, GAO also found that
IRS lacked comprehensive plans related to the extent and timing of
anticipated workload and staffing changes at its walk-in sites.
[See PDF for image]
[End of figure]
What GAO Recommends:
GAO recommends that IRS (1) reinstate a telephone assistance caller
wait-time measure, (2) revise its bi-weekly wait-time reports for
walk-in sites, (3) explore the feasibility of revising its sampling
plan for assessing the accuracy of walk-in account assistance, and
(4) comprehensively evaluate walk-in site resource requirements after
clarifying the extent and timing of workload and other changes at the
sites.
In commenting on a draft of this report, IRS cited actions it has
taken or plans to take that appear responsive to three of GAO‘s four
recommendations. IRS‘s comments did not specifically address the
recommendation that bi-weekly wait-time reports be revised.
www.gao.gov/cgi-bin/getrpt?GAO-03-314.
To view the full report, including the scope and methodology,
click on the link above. For more information, contact James R.
White at 202-512-9110 or whitej@gao.gov.
Contents:
Letter:
Results in Brief:
Scope and Methodology:
Background:
IRS Processed Individual Income Tax Returns and Refunds Smoothly in
2002 Despite Challenges:
IRS Exceeded Its 2002 Electronic Filing Performance Goal and Is Taking
Action to Help Ensure Future Growth:
Telephone Service Improved Compared with Last Year:
Quality of Walk-in Assistance Showed Some Improvement, While the Number
of Taxpayers Assisted Continued to Decline:
Performance of IRS‘s Web Site Was Generally Better Than Last Year, but
Improvements Still Needed:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Data on IRS‘s Processing Performance Relative
to Fiscal Year 2001 Performance and Fiscal Year
2002 Goals:
Appendix II: Challenges Affecting the 2002 Filing Season and IRS‘s
Response:
Advance Tax Refunds and the Rate Reduction Credit Led to Many Errors on
Filed Returns:
Terrorist Actions Required Tax Relief for Affected Taxpayers and
Security Enhancements:
IRS‘s Reorganization Required a Shifting of Computer Files and Affected
Processing Performance:
Appendix III: Changes to Third-Party Authorizations in 2002:
Authority to Designate a Third Party Expanded:
Oral Authorizations Offered:
Appendix IV: Results of Surveys of Taxpayers and Tax Practitioners Who
Prepared Returns on a Computer but Filed on Paper:
Appendix V: IRS Received Fewer E-Mail Questions Via Its Web Site and
Did
a Worse Job Responding to the Questions:
Appendix VI: Comments from the Internal Revenue Service:
Appendix VII: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Tables:
Table 1: Number of Individual Income Tax Returns Received, by Filing
Type:
Table 2: IRS‘s Performance in Providing Filing Season Telephone
Assistance:
Table 3: IRS‘s Processing Performance Relative to Fiscal Year 2001
Performance and Fiscal Year 2002 Goals as of September 2002:
Table 4: Processed Returns with Rate Reduction Credit Errors as of
September 27, 2002:
Table 5: Third-Party Authorizations:
Table 6: Factors That Influence Preparers of Returns on a Computer Not
to File Electronically and Incentives That Could Influence Them to File
Electronically:
Figures:
Figure 1: IRS‘s Primary Filing Season Activities Are Processing Returns
and Assisting Taxpayers:
Figure 2: Highlights of IRS‘s Filing Season Preparations, Challenges,
and Responses:
Figure 3: Number of Individual Income Tax Returns Filed Since 1995:
Figure 4: Of 104.1 Million Calls to IRS, 30.4 Million Were Covered by
Accessibility and Accuracy Performance Measures:
Figure 5: IRS Walk-in Assistance, 1999-2002 Filing Seasons:
Abbreviations:
CSR: customer service representative:
ETAAC: Electronic Tax Administration Advisory Committee:
IRS: Internal Revenue Service:
NAP: National Account Profile:
ODC: Oral Disclosure Consent:
OTIA: Oral Tax Information Authorization:
PIN: personal identification number:
Q-Matic: Queuing Management System:
SSN: Social Security number:
TIGTA: Treasury Inspector General for Tax Administration:
W&I: Wage and Investment Operating Division:
United States General Accounting Office:
Washington, DC 20548:
December 20, 2002:
The Honorable Amo Houghton
Chairman, Subcommittee on Oversight
Committee on Ways and Means
House of Representatives:
Dear Mr. Houghton:
In response to your request, this report discusses various aspects of
the Internal Revenue Service‘s (IRS) performance during the 2002 tax
filing season.[Footnote 1] It is during the filing season that most
taxpayers have their only contacts with IRS, generally to either seek
assistance or resolve problems, such as computational errors or missing
Social Security numbers (SSN), on their returns. The normal challenges
associated with any filing season were exacerbated in 2002 primarily by
a new tax credit on the individual income tax forms and efforts IRS
took in response to terrorist activities in 2001. Because of the large
number of returns and the essential nature of IRS‘s filing season
activities, IRS‘s filing season performance is important to taxpayers
and the Congress.
This report discusses IRS‘s performance in five key filing season
activities: (1) processing individual income tax returns, refunds, and
remittances;
(2) increasing the extent to which individual income tax returns are
filed electronically; (3) assisting taxpayers over the telephone; (4)
providing face-to-face assistance at its walk-in locations; and (5)
providing services via its Web site on the Internet. For each of those
five areas, we discuss
(1) IRS‘s performance compared with its performance in 2001 and its
performance goals for 2002, as well as any other evidence relating to
IRS‘s performance and (2) any factors or initiatives that substantively
enhanced or impeded IRS‘s performance and its ability to meet
performance goals.
We testified before the Subcommittee on Oversight on the interim
results of our assessment in April 2002.[Footnote 2] Our assessment was
based on analyses of IRS data and data obtained from sources outside
IRS, interviews of IRS officials and persons in the private sector, and
observations of IRS operations.
Results in Brief:
Available data for each of the five filing season activities we
reviewed indicated that IRS‘s performance in 2002 was generally better
than or comparable to its performance in 2001 and that IRS met many of
its
2002 performance goals. Overall, individual income tax returns and
refunds were processed smoothly (i.e., without any significant
disruption); the use of electronic filing continued to grow; and the
quality of assistance provided over the telephone, at walk-in sites,
and through the Web site improved.
Processing--Available evidence indicates that IRS was able to smoothly
process about 131 million individual income tax returns and about 99
million refunds in 2002. This assessment is based on IRS‘s performance
in 2002 compared with its performance in 2001 and its goals for 2002 as
well as other evidence, such as testimony from the tax practitioner
community. IRS‘s smooth processing was accomplished despite several
challenges that were unique to the 2002 filing season, including a new
rate reduction credit that led to a significant number of errors that
IRS had to correct. IRS attributed its ability to successfully meet
these challenges, in part, to extensive preparation in advance of the
filing season.
Electronic Filing--The number of individual income tax returns filed
electronically grew from about 40.2 million in 2001 to about 46.9
million in 2002, an increase of about 16.5 percent, and the percentage
of individual tax returns filed electronically reached 35.9 percent.
This 16.5-percent increase over the number of returns received
electronically in 2001 was more than IRS‘s goal of 15 percent and
continued the upward trend in the number of returns filed
electronically since 1995. IRS took some positive steps, including an
increased focus on taxpayers and tax practitioners who prepare returns
on computer but file on paper, that helped it achieve that increase and
that could lead to further increases in the future.
Telephone Service--IRS‘s performance measures showed that IRS provided
more accessible and accurate telephone service in the 2002 filing
season than in 2001 and met most of its telephone service performance
goals. IRS achieved these results despite an increase in calls due to
the rate reduction credit. Although it is difficult to determine
specific cause/effect relationships, several initiatives that IRS
implemented for the 2002 filing season, including the implementation of
an accuracy improvement strategy and enhancements to the telephone call
routing system, likely contributed to the improved service. IRS‘s
accessibility and accuracy measures reflect the experiences of those
callers who attempted to reach an IRS assistor (30.4 million calls),
but not the experiences of other callers who received automated service
or either hung up or were disconnected without receiving service (73.7
million calls).
Walk-in Assistance--Despite data limitations, there was enough evidence
to suggest that the accuracy of tax law assistance provided by IRS‘s
walk-in sites improved in 2002 compared with 2001, although the level
of accuracy (about 50 percent) was still low. Some of that improvement
might be attributed to better training of field assistance employees.
Although field assistance has made and anticipates making more workload
and staffing changes at its walk-in sites, it has no comprehensive
plans for doing so. When we discussed this with field assistance
officials, they told us that they put the changes on hold until they
are able to do more comprehensive planning.
Internet Web Site--Our assessment and external assessments indicated
that IRS‘s redesigned Web site, which became operational in January
2002, was easier to access and more user friendly, although there are
certain aspects of the site that need attention. For example, someone
using the site‘s search engine to find information on the earned income
credit would receive a list of over 1,500 items and would have to
scroll down several pages of items before finding reference to the
primary publication on that credit. IRS is aware of this problem and is
working to identify solutions. IRS data also indicated that the Web
site was used more often in 2002, although IRS‘s primary measure of
usage--number of hits--overstates usage.
We are making recommendations to the Commissioner of Internal Revenue
to improve certain performance measures and to ensure that changes to
walk-in sites and staffing are thoroughly analyzed and planned. In
commenting on a draft of this report (see app. VI), the Acting
Commissioner of Internal Revenue cited actions that IRS has taken or
plans to take that appear responsive to three of our four
recommendations. The Acting Commissioner‘s comments on our fourth
recommendation did not speak to the specific issue addressed by the
recommendation.
Scope and Methodology:
To assess IRS‘s performance in the five key filing season activities
covered by this report, we:
* reviewed and analyzed IRS documents and data, including workload and
performance data;
* interviewed IRS officials about current operations, performance
relative to 2001 performance and 2002 goals, and significant factors
and initiatives that affected performance;
* observed operations at three of the eight processing centers operated
by IRS‘s Wage and Investment Operating Division (W&I) and four of IRS‘s
approximately 470 walk-in locations;[Footnote 3]
* observed a leadership conference and program review at one processing
center;
* analyzed information posted to IRS‘s Web site, specifically assessing
the ease of finding information on the site (i.e., navigation) and the
accuracy and currency of data on the site (i.e., content);
* reviewed information from private firms that assessed various aspects
of IRS‘s Web site;
* reviewed information from and interviewed representatives of various
private organizations that prepare tax returns and participated in IRS
and other conferences about their views on IRS‘s 2002 operations and
performance; and:
* reviewed related congressional testimony and work performed by the
Treasury Inspector General for Tax Administration (TIGTA).
This report discusses measures that reflect the continuing interest of
the Subcommittee--including the quality, accessibility, and timeliness
of IRS‘s performance during the filing season. We did not independently
verify the data reported by IRS or, in most cases, assess the
methodologies used for computing performance measures or the
appropriateness of IRS‘s goals. However, we recently issued a report
that discussed whether the performance measures that IRS and we use to
assess various aspects of IRS‘s filing season performance had certain
key desirable attributes, such as objectivity, reliability, and
clarity.[Footnote 4] Although we reported that some measures had
weaknesses in these and other areas and we made recommendations to
address the weaknesses we identified, IRS and we still consider the
measures useful in providing data to assess performance.
We did our work at IRS headquarters; W&I headquarters and Joint
Operations Center in Atlanta;[Footnote 5] and W&I processing centers in
Atlanta, Memphis, and Philadelphia and walk-in locations in Georgia. We
selected these offices for a variety of reasons, including the
proximity of our audit teams and the location of IRS managers. We
performed our work from January through November 2002 in accordance
with generally accepted government auditing standards.
Background:
IRS‘s filing season activities encompass two critical areas--returns
processing and taxpayer assistance. Figure 1 provides information on
the number of returns processed and the extent of assistance provided.
Figure 1: IRS‘s Primary Filing Season Activities Are Processing Returns
and Assisting Taxpayers:
[See PDF for image]
Note: Workload data in this figure are for the following time periods:
returns processing--1/1/02 to 10/25/02; toll-free telephone--1/1/02 to
7/13/02; walk-in--1/1/02 to 4/20/02; and Internet downloads--1/1/02 to
8/31/02.
[End of table]
The Economic Growth and Tax Relief Reconciliation Act of 2001[Footnote
6] directed the Secretary of the Treasury to issue advance tax refunds
to eligible taxpayers. Accordingly, about 86 million taxpayers received
checks of up to $600 between July and December 2001. Taxpayers who did
not receive an advance tax refund as part of that process or who
received less than the maximum allowed by law may have been entitled to
a rate reduction credit when filing their tax year 2001 returns in
2002.[Footnote 7] Accordingly, IRS added a line to the individual
income tax forms for eligible taxpayers to enter a credit amount and
provided a worksheet for taxpayers to use in determining if they were
eligible.
In accordance with the IRS Restructuring and Reform Act of
1998[Footnote 8] and the Government Performance and Results
Act,[Footnote 9] IRS established a balanced performance measurement
system to emphasize accountability for achieving specific results and
to reflect its mission and its three strategic goals--top quality
service to all taxpayers through fair and uniform application of the
law, top quality service to each taxpayer in every interaction, and
productivity through a quality work environment. IRS has defined three
elements of a balanced performance measurement system--customer
satisfaction, employee satisfaction, and business results (quality and
quantity measures)--to ensure balance. IRS intends to use balanced
measures to hold managers and frontline staff more accountable for
improving filing season performance. Although IRS had measures of
performance prior to its establishment of balanced measures beginning
in fiscal year 2001, IRS managers have spent much effort revising
measures since that time.
IRS Processed Individual Income Tax Returns and Refunds Smoothly in
2002 Despite Challenges:
Qualitative and quantitative information indicates that IRS processed
about 131 million individual income tax returns and about 99 million
refunds smoothly (i.e., without any significant disruption, such as a
computer breakdown that could cause major delays in issuing
refunds).[Footnote 10] Part of that information resulted from our
comparison of IRS‘s processing performance in 2002 with its performance
in 2001 and its goals for 2002.
The smooth processing in 2002 was accomplished despite:
* the new rate reduction credit, which led to a significant number of
errors by taxpayers and tax return practitioners;
* the terrorist attacks of September 11th, which led to IRS reissuing
notices as part of its effort to provide relief to affected taxpayers,
and the subsequent anthrax attacks perpetrated through the mail, which
led to significant security enhancements; and:
* IRS‘s reorganization, which caused IRS to shift computer files to
match its new organizational units.
IRS attributed its success in meeting those challenges, in part, to
extensive preparation in advance of the filing season. In addition, IRS
continued initiatives begun last year to improve processing
performance.
IRS‘s Processing Went Smoothly:
Regarding IRS‘s processing in 2002,
* IRS‘s performance in 2002 improved relative to 2001 for five measures
(deposit error rate, deposit timeliness-paper, refund timeliness-
individual (paper), refund error rate-individual (paper), and refund
interest paid). As discussed later, we could not compare IRS‘s
performance for three other measures (letter error rate, notice error
rate, and productivity). Table 3 in appendix I describes these eight
measures and shows the results IRS reported for each of the measures as
of September 2002.
* IRS met its fiscal year 2002 performance goal for four measures
(deposit timeliness-paper, refund timeliness-individual (paper),
refund error rate-individual (paper) and refund interest paid) and
missed its goals for two measures (deposit error rate and
productivity). As discussed later, we could not compare IRS‘s
performance against goals for the other two measures (letter error rate
and notice error rate).
* Production data that IRS uses to monitor operations and identify and
resolve issues that could disrupt operations showed IRS met processing
deadlines and did not experience significant disruptions.
* In testimony given April 2002 before the Subcommittee, the
Commissioner of Internal Revenue testified that, among other things,
the filing season was smooth, with returns being processed on time.
* At that same hearing, (1) H&R Block, the largest tax return
preparation firm, testified that the filing season had gone smoothly
with some exceptions, such as the rate reduction credit, and commented
on how well IRS and the tax preparation industry were working together
and (2) a representative of the National Association of Enrolled
Agents[Footnote 11] characterized the filing season, on the whole, as
smooth.
* Representatives of other tax return preparation firms told us that,
from their perspective, processing went relatively smoothly.
* Directors, managers, and staff at processing centers we visited in
Memphis, Atlanta, and Philadelphia voiced similarly positive views
about the filing season and processing based, in part, on their
monitoring of production and inventory levels and their ability to meet
processing deadlines despite the additional error-correction workload
resulting from the rate reduction credit.
* W&I‘s Director of Submission Processing characterized processing
activities as smooth because of the lack of major disruptions and IRS‘s
ability to handle the extensive error-correction workload and still
meet projected production rates and processing timeframes. He and other
IRS officials attributed IRS‘s success to several factors, including
extensive planning and close monitoring of tax return receipts and
inventory levels at the eight W&I processing centers through such means
as weekly production meetings and a well-qualified workforce.
* According to TIGTA‘s report on the 2002 filing season, IRS had a
successful filing season despite implementing numerous tax law changes
related to the Economic Growth and Tax Relief Reconciliation Act of
2001, having to correct millions of errors related to the rate
reduction credit, and experiencing problems with its error-correction
system.[Footnote 12] TIGTA reported that IRS was able to complete the
additional workload without any material slowdowns in processing and
issue refunds in a timely manner by working extra hours when
necessary.[Footnote 13]
Revisions to Two Measures Precluded a Complete Quantitative Comparison:
Because IRS revised its letter error rate and notice error rate
performance measures since last filing season, we could not compare its
performance in 2002 with its performance in 2001 or against its goals
for 2002.[Footnote 14] In computing these error rates, IRS eliminated
certain errors, such as capitalization mistakes, that it referred to as
’professionalism errors.“ As a result, IRS established new baselines
for these two measures in 2002.[Footnote 15] According to IRS
officials, the decision to eliminate professionalism errors in
computing these measures was based on the fact that although those
errors may make documents, such as letters and notices, less
professional in appearance, they do not make the documents inaccurate.
According to IRS officials, changes to measures used to assess
processing activities were necessary and not unexpected because the
measures are relatively new and still under development and because
2002 processing goals were based on limited 2001 performance data.
Furthermore, although comparisons cannot be made between 2001 and 2002,
IRS officials believe that the measures provide important information
to assess current year performance.
IRS Faced Several Challenges in Processing Returns in the 2002 Filing
Season and Took Steps to Meet Those Challenges:
IRS‘s ability to process returns and refunds in 2002 without any major
disruptions was enhanced by extensive early preparation and
coordination. That preparation and coordination helped IRS meet the
following significant challenges that were unique to the 2002 filing
season:
* Passage of the Economic Growth and Tax Relief Reconciliation Act of
2001, specifically the provisions relating to advance tax refunds and
rate reduction credits.
* The September 11, 2001, attacks, which led to actions by IRS to
provide tax relief to affected taxpayers, and the subsequent anthrax
attacks perpetrated through the mail, which led to significant security
enhancements.
* IRS‘s shifting of computer files in conjunction with its
reorganization.
Details about these challenges can be found in appendix II.
Preparation and Coordination Helped IRS Meet Challenges:
Preparation and coordination helped ensure smooth processing during the
2002 filing season. IRS begins extensive preparation well in advance of
each filing season to help ensure smooth processing. Figure 2 reflects
some of IRS‘s key activities and associated deadlines in preparation
for each filing season. It also reflects the challenges that IRS faced
in planning and delivering the 2002 filing season and IRS‘s responses
to those challenges.
Figure 2: Highlights of IRS‘s Filing Season Preparations, Challenges,
and Responses:
[See PDF for image]
[A] The deadline for filing tax year 2000 individual income tax returns
was April 16, 2001, because April 15 was a Sunday.
[See PDF for image]
IRS began preparing for the 2002 filing season by translating tax law
requirements into computer system changes and testing those system
changes in early 2001. As IRS continued preparing for the filing
season, it had to make changes to the computer systems to accommodate
the tax law changes related to the rate reduction credit and test those
changes concurrently with regular testing and September 11 work. In
March
2002, TIGTA concluded that IRS appropriately prepared for the effective
processing of tax returns by modifying its computer systems, updating
procedural and training manuals, and performing staffing
analyses.[Footnote 16] In responding to that report, IRS officials
indicated that preparatory efforts were successful and were
instrumental in ensuring smooth processing.
IRS also established a new office--the Release and Filing Season
Readiness Office--in October 2001 to support the coordination of
computer system development, testing, and operation in the actual
processing environment. Among other things, this office helped IRS
respond to changing priorities and unanticipated challenges by
monitoring the status of computer system changes, facilitating
discussions between information technology and other processing units
on how to mitigate problems, and helping support and coordinate testing
and resources.
IRS Implemented or Expanded Initiatives to Improve Processing
Performance:
IRS implemented or expanded several initiatives to improve processing
performance for both the 2002 and 2003 filing seasons. For example:
* IRS established site-level performance goals in 2002 to allow better,
more individualized comparison of each processing center‘s performance
against its previous performance and toward corporate goals. According
to IRS officials, these site-level comparisons should help identify
best practices.
* In October 2001, IRS conducted a 2-day ’leadership conference“ at all
eight W&I processing centers to communicate site goals and train
managers and employees on the importance of performance measures and
individual employees‘ role in helping achieve goals. IRS officials
credit the conferences, in part, with helping improve performance in
2002.
* Given the perceived success of last year‘s leadership conferences,
IRS conducted similar conferences in 2002. At the same time, IRS
officials assessed whether the processing centers and employees were
following procedures when sampling returns for review and reporting
performance data for balanced measures. As a result, IRS identified
issues that can be corrected by updating processing guidance, which
will likely improve performance. In addition, IRS identified local
procedures to help reduce the interest paid on refunds that officials
said are being communicated to the other centers as a best practice.
* During the 2002 filing season, IRS expanded the third-party checkbox
authorization, to allow taxpayers to designate friends, family members,
or paid practitioners to help resolve problems IRS might encounter in
processing their returns, such as a missing SSN, that could result in
incorrectly computing a refund, for example. See appendix III for more
information on the third-party checkbox authority.
IRS Exceeded Its 2002 Electronic Filing Performance Goal and Is Taking
Action to Help Ensure Future Growth:
IRS received about 47 million individual income tax returns
electronically, or about 36 percent of all individual income tax
returns filed, as of October 25, 2002. The growth rate in 2002
projected through 2007 would bring IRS very close to its long-term goal
of 80 percent of all individual income tax returns filed electronically
by 2007.[Footnote 17] However, the Electronic Tax Administration
Advisory Committee (ETAAC)[Footnote 18] does not believe that the
current growth rate can be sustained and, instead, expects the growth
rate to decline. According to ETAAC, if IRS is to continue or increase
its current growth rate, it needs to overcome various barriers to
electronic filing. IRS took several steps that were aimed at overcoming
existing barriers and that may have helped it exceed its electronic
filing goal for 2002. Those steps could lead to more growth in the
future. In addition, two initiatives planned for 2003 could further
encourage many taxpayers and practitioners to convert from paper filing
to electronic filing.
Electronic Filing Continued to Grow:
As shown in table 1, the number of individual tax returns filed
electronically grew from about 40.2 million in 2001 to about 46.9
million in 2002--an increase of about 16.5 percent--and the percentage
of individual income tax returns filed electronically reached 35.9
percent. This
16.5-percent increase over the number of returns received
electronically in 2001 was more than IRS‘s goal of 15 percent and
continued the upward trend in the number of returns filed
electronically since 1995.
Table 1: Number of Individual Income Tax Returns Received, by Filing
Type:
Number of returns in thousands.
Paper; 1/1/00 to 10/27/00: 92,322; 1/1/01 to 10/26/01: 89,834;
Percentage
change 2000 to 2001: -2.69; 1/1/02 to 10/25/02: 83,816; Percentage
change 2001 to 2002: -6.70.
Electronic; 1/1/00 to
10/27/00: [Empty]; 1/1/01 to
10/26/01: [Empty]; Percentage
change 2000
to 2001: [Empty]; 1/1/02 to
10/25/02: [Empty]; Percentage
change 2001
to 2002: [Empty].
Traditional[A]; 1/1/00 to
10/27/00: 25,211; 1/1/01 to
10/26/01: 28,988; Percentage
change 2000
to 2001: 14.98; 1/1/02 to
10/25/02: 33,286; Percentage
change 2001
to 2002: 14.83.
On-line[B]; 1/1/00 to
10/27/00: 5,022; 1/1/01 to
10/26/01: 6,838; Percentage
change 2000
to 2001: 36.16; 1/1/02 to
10/25/02: 9,428; Percentage
change 2001
to 2002: 37.88.
TeleFile[C]; 1/1/00 to
10/27/00: 5,161; 1/1/01 to
10/26/01: 4,419; Percentage
change 2000
to 2001: -14.38; 1/1/02 to
10/25/02: 4,176; Percentage
change 2001
to 2002: -5.50.
Subtotal; 1/1/00 to
10/27/00: 35,394; 1/1/01 to
10/26/01: 40,245; Percentage
change 2000
to 2001: 13.71; 1/1/02 to
10/25/02: 46,891; Percentage
change 2001
to 2002: 16.51.
Total; 1/1/00 to
10/27/00: 127,716; 1/1/01 to
10/26/01: 130,079; Percentage
change 2000
to 2001: 1.85; 1/1/02 to
10/25/02: 130,708; Percentage
change 2001
to 2002: 0.48.
Percentage filed electronically; 1/1/00
to
10/27/00: 27.7; 1/1/01 to
10/26/01: 30.9; Percentage
change 2000
to 2001: [Empty]; 1/1/02 to
10/25/02: 35.9; Percentage
change 2001
to 2002: [Empty].
Source: IRS data.
Note: Totals may not add due to rounding.
[A] Traditional electronic filing involves the transmission of returns
over communication lines through a third party, such as a tax return
practitioner, to an IRS processing center.
[B] On-line returns are prepared and transmitted by taxpayers through
on-line intermediaries using personal computers and commercial
software.
[C] Under TeleFile, certain taxpayers who are eligible to file a Form
1040EZ are allowed to file using a toll-free number on touch-tone
telephones.
[End of table]
Figure 3 shows that the growth in electronic filing in 2002 continued
the upward trend started in 1995 and the rate of growth in 2002 was
larger than the rate of growth in 2001.
Figure 3: Number of Individual Income Tax Returns Filed Since 1995:
[See PDF for image]
[End of figure]
Assuming continued annual growth rates of 16.51 percent for individual
returns filed electronically and 0.48 percent for the total number of
individual tax returns filed, about 75.2 percent of all tax returns
will be filed electronically by 2007, slightly below the long-term goal
of 80 percent. However, in its 2002 report to the Congress, ETAAC said
that although the electronic filing goal for 2002 was exceeded, the
trend of electronic filing is clearly towards lower annual growth
rates, primarily for the following reasons:
* The taxpayers most easily attracted to electronic filing have already
made the switch to electronic filing while the remaining taxpayers will
be more difficult to convert.
* As the base of total filers and electronic filers grows, the number
of new electronic filers needed to sustain the same growth rate
increases.
Taxpayers and Tax Practitioners Report Being Satisfied with Electronic
Filing:
Each year, IRS surveys taxpayers and tax practitioners who
electronically file to determine their satisfaction level with
electronic filing. The survey for 2002 showed that about 98 percent of
the responding taxpayers and
85 percent of the responding tax practitioners were either satisfied or
very satisfied with electronic filing, which compares favorably with
IRS‘s goal of 85 percent. Although the percentage of responding
practitioners who expressed overall satisfaction was relatively high
(85 percent), it was lower than in 2001 (90 percent), which, in turn,
was lower than in
2000 (93 percent). It is not clear why the level of satisfaction among
practitioners has been decreasing because the customer satisfaction
survey does not probe for reasons behind a respondent‘s choices.
IRS Initiatives May Have Helped It Exceed Its 2002 Electronic Filing
Performance Goal:
Over the years, IRS has identified many impediments to electronic
filing, including privacy and security concerns, cost, a lack of
awareness of or interest in electronic filing, an inability to file all
forms and schedules electronically, and a need to send certain paper
documents to IRS even if the return was filed electronically. In 2002,
IRS took numerous steps to alleviate these impediments and thus
encourage more electronic filing that included the following:
* Increasing the electronic filing marketing budget from $9 million in
2001 to about $15 million in 2002 and focusing the marketing campaign
on taxpayers and practitioners who filed computer-prepared returns on
paper.
* Mailing a postcard to about 23 million taxpayers, including about
8 million taxpayers who had prepared their returns on a computer but
filed on paper, informing them of the benefits of electronic filing and
the self-select personal identification number (PIN) program. The
postcard also informed them that a professional tax practitioner could
be used to file their returns electronically and explained how the
self-select PIN can be used to sign returns filed through a tax
practitioner.
* Mailing two different letters to tax practitioners. The first letter
was sent to practitioners who were already participating in the
electronic filing program to thank them for participating and encourage
them to continue to support the program. The second letter was sent to
practitioners who were not participating in the electronic filing
program and told them about the benefits of electronic filing, changes
that had been made to the program, and pending changes. IRS enclosed a
document with both letters that provided more information on the
benefits of electronic filing and the self-select PIN program. In
total, about 250,000 letters were sent to practitioners.
* Reinstating the practitioner PIN program. In 2001, practitioners
informed IRS that they liked the practitioner PIN program, which IRS
had terminated in favor of the self-select PIN program, and would like
to see it reinstated. As of October 25, 2002, 83.9 percent of the tax
returns prepared by practitioners and signed by a PIN were signed
through the practitioner PIN program. The other 16.1 percent were
signed using a self-select PIN.
* Changing the self-select PIN program at the request of tax
practitioners. In 2002, taxpayers entered only their adjusted gross
income from the prior tax year to verify their identity. In
2001, taxpayers had to enter not only their adjusted gross income but
also their total tax to verify their identity. Tax practitioners wanted
the number of items used to verify identity--known as ’shared secrets“-
-reduced from two to one, because errors related to shared secrets
resulted in numerous electronic tax returns being rejected. Consistent
with the reduction in the number of shared secrets from two to one, the
number of reject conditions on electronic tax returns as a result of
shared secrets went down from about 2.1 million in 2001 to about
1.3 million in 2002.
* Making 30 additional forms and schedules eligible to be filed
electronically, thereby enabling, according to IRS, 99 percent of all
individual forms and schedules to be filed electronically.
Although no information is available to confirm the extent to which
these actions, either individually or collectively, contributed to the
growth of electronic filing, it seems reasonable to assume that they
had a positive effect since they address most of the identified
impediments noted earlier.
IRS also took steps to obtain additional information on impediments to
electronic filing. As in the past, for example, it held electronic
filing forums and practitioner meetings and conducted attitudinal
surveys and market research. One significant step was the surveying of
taxpayers and tax practitioners who prepared returns on a computer but
filed them on paper. We had recommended such surveys in our report on
the 2001 filing season in response to the fact that about 40 million
computer-prepared individual income tax returns were filed on paper in
2001.[Footnote 19]
The surveys revealed that taxpayer and tax practitioner costs, security
and technology concerns, and a perceived lack of interest were among
the primary reasons why taxpayers and tax practitioners are not filing
electronically. With respect to the perceived lack of interest, (1) 87
percent of taxpayers who used paid practitioners indicated on the
survey that their practitioner never discussed electronic filing with
them and 4 percent said that their practitioner recommended against
electronic filing and
(2) 66 percent of tax practitioners said that they did not offer
electronic filing because their clients did not ask for it. See
appendix IV for more details on what survey respondents cited as
factors that strongly influenced them not to file electronically and
incentives that could encourage them to do so.
Planned Initiatives for 2003 Could Lead to More Electronic Filing:
IRS has two initiatives planned for the 2003 filing season--making
electronic filing free for millions of taxpayers and offering services
to practitioners who file a certain number of returns electronically.
IRS intends for these initiatives to address two major impediments--the
cost to taxpayers and the lack of interest on the part of some
practitioners.
In an attempt to remove cost as an impediment to electronic
filing,[Footnote 20] IRS entered into an agreement with a consortium of
companies in the electronic tax preparation and filing industry that
will offer free on-line tax filing services via IRS‘s Web site. IRS
estimates that 78 million taxpayers will be eligible to file their tax
returns for free through this consortium. However, in its 2002 report
to the Congress, ETAAC stated that lack of access to a computer and/or
the Internet may prevent many of the
78 million eligible taxpayers from taking advantage of the free-filing
service.
To address the lack of interest on the part of some practitioners, IRS
plans to offer electronic services (such as taxpayer identification
number matching and account resolution) to tax practitioners who file a
certain number of returns electronically. The aim of this initiative is
to provide practitioners who file electronically with valuable tools to
improve their service to their customers and reduce costs. In its 2002
report to the Congress, ETAAC stated that electronic services are
likely to provide a major incentive for practitioners to file their
clients‘ returns electronically.
Telephone Service Improved Compared with Last Year:
IRS‘s performance measures showed that (1) telephone service was more
accessible and accurate during the 2002 filing season than it was in
2001and (2) IRS met most of its 2002 performance goals. IRS implemented
several initiatives and strategies to improve performance, particularly
in the area of accuracy where improvement was greatest.
IRS serves telephone callers either through assistors, who are also
known as customer service representatives (CSR), or automation,
depending on how callers respond to menu prompts. As shown in figure 4,
of the about 104.1 million calls that IRS received in the 2002 filing
season,
* 21.2 million of the 30.4 million calls IRS estimates were from
callers attempting to reach an assistor[Footnote 21] actually reached
one;
* 42.9 million calls resulted in the caller receiving automated
service; and:
* 40 million calls resulted in the caller hanging up or being
disconnected without receiving service, including callers who received
a busy signal.
Figure 4: Of 104.1 Million Calls to IRS, 30.4 Million Were Covered by
Accessibility and Accuracy Performance Measures:
Note: Data are for calls made to IRS‘s three main live-and-automated
assistance numbers; its special number for victims of the September 11,
2001, terrorist actions; and its automated-service-only (TeleTax)
number from January 1, 2002, through July 13, 2002.
The measures that IRS and we used to assess the accessibility and
accuracy of IRS telephone assistance during the 2002 filing season,
which are discussed in the next section, reflect only the calls that
IRS estimates were from callers attempting to reach an
assistor.[Footnote 22] Specifically, the CSR level of service measure
reflects the experience of the 30.4 million callers who IRS estimates
were attempting to reach an assistor, and other measures reflect the
experiences of the 21.2 million callers who actually reached an
assistor. The measures do not reflect the experiences of the 73.7
million calls from callers who either completed an automated service or
hung up or were disconnected without receiving service.[Footnote 23] As
a result, for example, the measures do not reflect an increased number
of calls in 2002 from callers who hung up without completing menu
responses or an automated service. According to IRS officials, the
biggest part of this increase was probably due to problems with IRS‘s
telephone service menu, particularly during the early weeks of the
filing season. When IRS revised the menu in mid-February, it noted a
decline in the hang-up rate, which may indicate that taxpayers had been
frustrated or confused by the menu.
Telephone Service Was More Accessible and Accurate Than Last Year, and
Most 2002 Goals Were Met:
Table 2 provides information on IRS‘s performance in providing
telephone assistance to taxpayers who were attempting to reach or who
received service from an IRS assistor in the 2002 filing
season.[Footnote 24] In summary, the table shows the following:
* A greater percentage of calls got through and received service, and
IRS met two of its three accessibility goals for 2002. IRS likely would
have performed better in the other measure, CSR level of service, if
not for the significant demand for telephone assistance related to the
rate reduction credit.
* The accuracy of assistance improved considerably in 2002 compared
with 2001, and IRS met most of its goals. The quality and correct
response rates for both tax law and account calls were better in
2002, indicating that assistors more closely adhered to IRS procedural
guidance and more often provided callers accurate information and
service.
* Customer satisfaction was comparable to 2001. Detailed data show that
customers who were successful in reaching an assistor were least
satisfied with the time they had to wait to speak with an assistor in
both 2001 and 2002.
Table 2: IRS‘s Performance in Providing Filing Season Telephone
Assistance:
Accessibility measures[A]: CSR level of service[B]; 2001: Actual: 68%;
2002: Actual: 71%; Goal: 72%.
Accessibility measures[A]: Assistor response level[C]; 2001: Actual:
39%; 2002: Actual: 51%; Goal: 44%.
Accessibility measures[A]: Average speed of answer[D]; 2001: Actual:
337 seconds; 2002: Actual: 268 seconds; Goal: 289 seconds.
Accessibility measures[A]: Accuracy measures[E]; 2001: Actual:
[Empty]; 2002: Actual: [Empty]; Goal: [Empty].
Accessibility measures[A]: Tax law quality rate[F]; 2001: Actual: 75%
+/-1%; 2002: Actual: 82% +/-1%; Goal: 78%.
Accessibility measures[A]: Accounts quality rate[F]; 2001: Actual: 69%
+/-1%; 2002: Actual: 76% +/-1%; Goal: 72%.
Accessibility measures[A]: Tax law correct response rate[G]; 2001:
Actual: 79% +/-1%; 2002: Actual: 85% +/-1%; Goal: 85%.
Accessibility measures[A]: Accounts correct response rate[G]; 2001:
Actual: 88% +/-1%; 2002: Actual: 91% +/-1%; Goal: 93%.
Accessibility measures[A]: Customer satisfaction[H]; 2001: Actual:
[Empty]; 2002: Actual: [Empty]; Goal: [Empty].
Accessibility measures[A]: Wage and Investment; January through March;
April through June; 2001: Actual: ; 3.45 +/-.03; 3.46 +/-.03; 2002:
Actual: ; 3.51 +/-.03; 3.43 +/-.03; Goal: ; 3.49.
Accessibility measures[A]: Small Business/Self-Employed; January
through March; April through June; 2001: Actual: ; 3.49 +/-.03; 3.43 +/
-.03; 2002: Actual: ; 3.52 +/-.03; 3.47 +/-.03; Goal: ; 3.58.
Source: IRS data.
[A] Accessibility data are based on actual counts from January 1
through July 13. The actual data shown here for the 2001 filing season
differ from data we cited in an earlier report. See U.S. General
Accounting Office, IRS Telephone Assistance: Limited Progress and
Missed Opportunities to Analyze Performance in the 2001 Filing Season,
GAO-02-212 (Washington, D.C.: Dec. 7, 2001). According to IRS, the
difference in CSR level of service is due to an error in data it
provided and a change in the way it calculates the measure, and
differences in the other accessibility measures are due to enhancements
to the telephone database that resulted in more accurate data.
[B] The percentage of callers that IRS estimates attempted to reach an
assistor that received service, including some callers that received
automated service.
[C] The percentage of callers that waited 30 seconds or less before
speaking to an assistor.
[D] The average number of seconds callers waited before speaking to an
assistor.
[E] Accuracy measures are based on representative samples and are
estimated at the 90-percent confidence level from January through June.
[F] The percentage of calls in which assistors followed all IRS
procedures for the call type and provided correct answers.
[G] The percentage of calls in which assistors provided correct answers
for the call type, discounting procedural errors.
[H] The overall satisfaction rating on a 4-point scale based on a
survey of callers who reached an assistor, estimated at the 95-percent
confidence level. IRS compiles and reports these data quarterly by the
two operating divisions that provide toll-free telephone assistance.
[End of table]
CSR Level of Service Improved Despite Increased Volume Due to the Rate
Reduction Credit:
The volume of calls is a key factor that can affect CSR level of
service. As we previously reported, IRS data suggest that demand for
telephone assistance related to the rate reduction credit was
significant during the 2002 filing season and negatively affected
telephone performance, especially in mid-to late-February, when the
greatest number of taxpayers called with questions about the
credit.[Footnote 25] Although performance declined significantly
during this period of peak demand for information on the rate reduction
credit, IRS performed well enough during the rest of the
2002 filing season so that, as shown in table 2, the CSR level of
service in 2002 improved compared with 2001, and IRS almost met its
goal. According to IRS officials, although taxpayers had greater
difficulty getting access to IRS‘s telephone system during certain
weeks--when there was great demand for rate reduction credit assistance
and, as discussed earlier, there were problems with IRS‘s telephone
service menu--taxpayers, overall, had a considerably better telephone
service experience in the 2002 filing season than in 2001.
IRS Made Changes to Its Measures and Plans to Make More:
Effective October 2001, IRS stopped using the assistor response level
and average speed of answer measures to assess its performance in
providing telephone assistance. According to IRS officials, IRS adopted
these measures in fiscal year 2001 to focus its efforts on improving
access and allow it to gauge its performance against world-class
telephone service organizations. However, officials said that
subsequent experience showed that IRS‘s telephone call sites do not
have control over, nor are they directly accountable for, key factors
that affect these measures, such as the volume of calls routed to them.
Although the sites‘ control over these measures may be limited, they
are an important component of any assessment of IRS‘s telephone
performance because they measure a key aspect of the customer
experience--how long callers wait to speak to an assistor. In that
regard, selected noteworthy public and private call centers we studied
often used caller wait-time measures to set service-level goals and
benchmarked their performance against the best practices of leading
telephone service providers.[Footnote 26] Without a caller wait-time
measure similar to those used by others, IRS‘s suite of telephone
measures is missing an important indicator of the ease with which
taxpayers reach IRS.
According to IRS officials, the current accuracy measures, while useful
in assessing the filing season, do not adequately reflect customer
needs and employee performance. With the assistance of a contractor,
IRS developed new measures that it believes better reflect what matters
most to its customers--accuracy, timeliness, and professionalism. IRS
plans to baseline the new measures in 2003 and use them in 2004 to
replace the current accuracy measures.
IRS Implemented Various Initiatives to Improve Telephone Service:
IRS implemented several initiatives to improve telephone service in the
2002 filing season. For example, IRS established accessibility
performance measures and goals for its call sites and enhanced its
call-routing capabilities to provide taxpayers better access to
assistors. IRS also implemented several initiatives, including earlier
assistor training, as part of a strategy to improve accuracy and
piloted a new hiring program to get candidates with higher aptitudes
and skill levels.
IRS Established Accessibility Performance Measures and Goals for Call
Sites:
In 2002, IRS established two new accessibility performance measures--
services provided and total handle time[Footnote 27]--and related goals
for its
26 telephone call sites. These measures replace those discontinued in
1998. IRS officials said that the measures and goals were intended to
provide the sites with incentives for handling calls efficiently and
answering their share of total calls, thereby enhancing their
contributions to meeting IRS‘s overall accessibility goals. According
to IRS officials, the new measures led to improved performance by
giving the call sites a clearer understanding of what they were
expected to achieve and how their performance would help IRS achieve
its goals. IRS took action to get employees to understand the measures
and contribute to achieving goals, by, for example, holding ’leadership
conferences“ for telephone operations managers similar to those
conducted in the processing centers.
IRS Enhanced Call Routing:
IRS enhanced its call routing system by implementing a feature, called
’network call screening.“ Before network call screening, IRS‘s contract
long-distance service provider routed calls to one of IRS‘s call sites
where the caller heard and responded to a menu of options. The number
of calls IRS received often exceeded its telephone system capacity,
resulting in many calls receiving busy signals. Also, because calls
were routed before the callers had indicated, through use of a menu,
the subject matter of their calls, callers were sometimes given access
to only automated service, even though assistors were available to
handle their calls. With network call screening, callers hear and
respond to the menu options before the call is routed to a call site.
According to IRS officials, this reduced the number of calls that
receive busy signals, increased the chance that a caller would reach an
assistor, and decreased wait times. In that regard, (1) IRS data show
that the number of busy signals callers received decreased from about
1.5 million in the 2001 filing season (or about
3 percent of total call attempts) to about 0.7 million in the 2002
filing season (or about 1 percent of total call attempts) and (2) an
IRS analysis showed that the percentage of calls sent to automated-only
service decreased from 11 percent in the 2001 filing season to 8
percent in the 2002 filing season.
IRS Implemented an Accuracy Improvement Strategy:
According to IRS officials, improving the accuracy of telephone
assistance was a major emphasis in planning for the 2002 filing season.
With the assistance of a contactor, IRS analyzed its accuracy data to
identify problems and developed initiatives to improve accuracy. IRS‘s
accuracy rates in January were historically the lowest of any month for
tax law inquiries and, according to the analysis, a classic learning
curve was evident from January through April. IRS implemented several
initiatives to combat this January slump, including training assistors
in their specialized topics in November and December and requiring
their managers to certify them, by the start of the filing season, as
capable of providing the correct response to taxpayer questions. Other
initiatives included reviewing and correcting the guidance assistors
use to respond to taxpayer questions and assigning call site managers
ownership of selected tax law topics, thus making them accountable for
assistor training and improving assistors‘ performance in their
assigned topics.
IRS Tested a New Process
for Hiring Better Qualified Assistors:
For the 2002 filing season, IRS piloted a new hiring method at some
call sites to improve service to taxpayers by hiring better-qualified
assistors. The new method used live role-playing to identify candidates
with the required competencies for successful job performance, free up
front-line manager‘s time previously spent interviewing possible
candidates, and reduce assistor turnover. As we previously reported,
IRS officials have said that attrition has negatively affected IRS‘s
performance,[Footnote 28] and the lack of time to interview applicants
has led to concerns about the suitability of new hires.[Footnote 29]
With respect to attrition, IRS data showed that the turnover rate at
sites that hired under the new process was 9.3 percentage points lower
than the turnover rate at comparable call sites that used the
traditional hiring method. IRS plans to expand this initiative in 2003.
Quality of Walk-in Assistance Showed Some Improvement, While the Number
of Taxpayers Assisted Continued to Decline:
Quality of walk-in assistance improved and wait-time was about as good
as last year, based on available information, although fewer taxpayers
were assisted. The accuracy of walk-in tax law assistance--the only
type of walk-in assistance[Footnote 30] for which quality was measured
in recent filing seasons--appears to have improved compared with the
2001 filing season. IRS took several steps in 2002 to improve walk-in
service--some may have helped improve the accuracy of tax law
assistance in 2002, the effect of others should be realized later. IRS
also anticipates changes in the workload to be handled by walk-in
staff. Thus, although the number of taxpayers assisted at the walk-in
sites declined about 20 percent over the past 3 filing seasons, IRS has
been increasing the number of field assistance staff years used to
provide that assistance. However, the extent and timing of the workload
changes are not clear, and field assistance does not have comprehensive
plans that clearly relate that workload to resource needs.
Accuracy of Tax Law Assistance by Walk-in Sites Improved Since Last
Year but Remains Low:
The Congress directed TIGTA to review the accuracy of assistance
provided by all of IRS‘s more than 400 walk-in sites. TIGTA expects to
complete its review in fiscal year 2003. From January through April
2002, TIGTA reviewers made 157 anonymous visits to 77 walk-in sites,
asking two tax law questions on each visit. TIGTA found that only about
50 percent of its questions were answered correctly.[Footnote 31]
The reviews TIGTA did in 2002 were not comparable to the reviews it did
in 2001 because TIGTA asked questions from a broader range of tax law
topics in 2002 (i.e., 22 topics in 2002 compared with 4 topics in
2001). It seems reasonable to assume, and TIGTA agrees, that covering
22 topics versus 4 required a broader knowledge of the tax law and thus
increased the possibility for error. Yet, despite the increased
possibility for error, reported accuracy was about double the 24-
percent accuracy TIGTA reported for 2001.
In commenting on a draft of this report, the Acting Commissioner of
Internal Revenue said that our use of TIGTA‘s accuracy rates is
inappropriate because TIGTA included referrals to IRS publications as
errors. While noting that IRS does not want employees to improperly
refer questions, the Acting Commissioner said that those referrals
should not be counted as incorrect answers. According to the Acting
Commissioner, the ’true cumulative accuracy rate“ through June 2002 was
66 percent instead of 50 percent. We disagree. As TIGTA explained in
its report, referrals were counted as incorrect when the IRS employee
merely provided the publication, without walking the customer through
it to identify the answer, as required by established field assistance
procedures. In our view, the complexity of tax laws and varying
education levels among taxpayers seeking assistance suggest that
requiring field assistance employees to walk the taxpayer through a
publication to identify the correct response is a necessary procedure
that should be followed in practice for the response to be considered
correct.
Most Taxpayers Waited 30 Minutes or Less for Walk-in Assistance in
2002, but Many Others Waited Much Longer:
IRS‘s data for January 1 through April 20, 2002, showed that about
85 percent of the 2.6 million walk-in customers for whom wait-time was
tracked waited 30 minutes or less to obtain assistance between January
1 and April 20, 2002.[Footnote 32] However, IRS made the following two
changes to the way it reported wait-time in 2002 that precluded any
comparison to 2001.
* IRS reduced the number of sites for which wait-time data was tracked.
In 2001, all walk-in sites tracked wait-time either automatically, if
they were equipped with the Queuing Management System (Q-Matic), or
manually, if they did not have Q-Matic.[Footnote 33] As of March 2002,
however, the approximately 297 sites not equipped with Q-Matic were no
longer required to track or report wait-time--a decision we believe was
prudent because manual tracking was not practical at some sites with
limited staff and because manual tracking of wait-times is an error-
prone process.
* IRS doubled the threshold used for wait-time tracking from 15 minutes
or less in 2001 to 30 minutes or less in 2002, thus increasing the
reported percentage of taxpayers receiving timely assistance.
The bi-weekly wait-time reports submitted by the sites and derivative
summary data provided to us by IRS did not provide any details on the
wait-times for the 15 percent of customers (about 384,000 taxpayers)
who waited longer than 30 minutes for assistance, even though this
information was available through Q-Matic,[Footnote 34] thus limiting
management‘s ability to identify and minimize excessive wait-time.
IRS Took Steps in 2002 to Improve Walk-in Service:
IRS took steps to improve its walk-in service, some of which may have
helped improve the accuracy of tax law assistance in 2002. Other
efforts that involve implementing two new accuracy measures and testing
new
Q-Matic requirements have the potential for improved service in the
future.
IRS Took Steps to Improve Accuracy in 2002:
Field assistance officials said that they had taken a number of steps
to improve the accuracy of assistance in 2002. For example, they said
that IRS had completed all actions listed in response to our report on
the
2001 filing season[Footnote 35]--which included providing more
consistent and standardized services, better training, and improved
access to taxpayer account information. IRS also refined the process
for referring complex tax law questions that are beyond the scope of
normal walk-in staff training to expert field assistance, toll-free
telephone, or compliance staff. The impact of some of those improvement
efforts seemed to be reflected in the results of IRS‘s annual employee
satisfaction survey. For example, 49 percent of field assistance
employees reported being satisfied with their training in 2002 compared
with the 37 percent who reported being satisfied in 2001.
IRS Implemented Two New Accuracy Measures:
IRS implemented two new accuracy measures for account and return-
preparation assistance. We are concerned about one of those measures--
account accuracy--because the results of that measure are not
representative of all walk-in sites. Instead of using statistical
sampling methods to select the sites to be reviewed from among the
about 420 sites that provide account assistance, IRS selected for
review the largest walk-in sites from among the 123 that were equipped
with Q-Matic.
IRS had also planned to measure return-preparation accuracy through
visits to the largest walk-in sites. IRS subsequently decided to use
existing return-accuracy data generated by the submission processing
centers. This will allow IRS to measure the accuracy of all returns
prepared at its walk-in sites, rather than basing the measure on sample
observations.
IRS Is Testing New Q-Matic Requirements:
In May 2002, IRS changed its Q-Matic requirements to include networking
and summary reporting capabilities and decided to test these changes at
28 walk-in sites in California. In a stand-alone configuration, Q-Matic
provides site-level, real-time monitoring and tracking of assistance,
including customer wait-times, assistance provided, and staffing used.
Networking the systems is expected to provide the same real-time
monitoring and tracking at organizational levels above the site--group,
territory, area, and nationwide. Summary reporting capability is
expected to eliminate the requirement for manually recording and
summarizing assistance provided and staff resources used, which should
enhance site efficiency by increasing employee availability to provide
more, or more timely, assistance.
Number of Taxpayers Assisted Declined, but Field Assistance Staffing
Has Increased:
As shown in figure 5, the number of taxpayers assisted at IRS walk-in
sites[Footnote 36] declined for the third consecutive filing season--
from 6.1 million in 1999 to 4.9 million in 2002--a drop of about 20
percent. Included in that overall decline was a decrease in the number
of contacts involving return preparation, a very time-consuming
service.[Footnote 37]
Figure 5: IRS Walk-in Assistance, 1999-2002 Filing Seasons:
[See PDF for image]
Notes: ’Total Walk-in“ includes all face-to-face assistance. It does
not include the number of taxpayers assisted by walk-in employees via
telephone or correspondence, which ranged from over 100,000 taxpayers
in 1999 to over 125,000 taxpayers in 2002.
The time periods covered by this figure each began on January 1 and
ended on April 24, 1999; April 22, 2000; April 21, 2001; and April 20,
2002.
[End of figure]
Field assistance officials attributed these declines to the following
two factors:
* Taxpayers made greater use of the assistance available from
volunteers and from IRS‘s Web site and toll-free telephone network.
Data provided by the two major volunteer organizations--Volunteer
Income Tax Assistance and Tax Counseling for the Elderly--confirmed
that volunteer assistance increased substantially. Specifically, the
number of taxpayers assisted at volunteer sites increased about 45
percent from nearly 2.5 million to 3.6 million between the 2001 and
2002 filing seasons. Data on IRS‘s Web site and toll-free telephone
network are discussed elsewhere in this report.
* IRS has been reducing the income ceiling for return preparation
assistance, thus limiting the number of taxpayers eligible to receive
that kind of assistance. For the 2001 filing season, IRS had a ceiling
of $41,000. For the 2002 filing season, IRS reduced that ceiling to
$33,000--a level that approximated the $32,121 income ceiling on
taxpayer eligibility for the earned income credit.
Traditionally, IRS has detailed staff from its compliance functions
(such as Examination and Collection) to help provide assistance at
walk-in sites. Over the last 2 filing seasons, IRS has reduced its
reliance on compliance staff to provide walk-in assistance by about 53
percent, thus freeing those staff to perform their normal examination
and collection duties. At the same time, and despite the continued
decline in the number of taxpayers assisted, IRS increased the number
of field assistance staff years by about 31 percent, in anticipation of
field assistance staff eventually assuming some work currently done by
IRS‘s compliance functions, such as office audits.
Field Assistance Has No Comprehensive Workload and Staffing Plans:
Field assistance does not have clear, comprehensive plans and
timetables for making the workload changes just discussed as well as
other changes. When we discussed this issue with field assistance
officials, they informed us that they have put their plans on hold
until anticipated compliance workloads are clarified to enable more
comprehensive planning. Field assistance officials anticipated that
some compliance work would migrate to walk-in staff over the next
several years, although the extent and timing of that work was not yet
clear. As of October 4, 2002, a team was studying the technological and
other issues associated with compliance work anticipated to be done at
walk-in sites. Field assistance officials also planned to phase out
sites staffed with only one employee, because of difficulties providing
back-up staff,[Footnote 38] and add many new walk-in sites. The planned
phase-outs were to be done through a combination of methods, such as
staff attrition and/or site consolidation. Instead of closing some one-
employee sites, IRS may add staff where warranted by demand. However,
field assistance officials told us that these site changes also have
been put on hold until the aforementioned comprehensive planning is
completed.
Performance of IRS‘s Web Site Was Generally Better Than Last Year, but
Improvements Still Needed:
Our assessment of IRS‘s Web site on the Internet, external assessments
of the site, and IRS data indicate that, compared with last year, the
site was:
* more user friendly, although there are certain aspects of the site
that need attention;
* generally used more often, although IRS‘s primary measure of usage--
number of hits--is flawed; and:
* easier to access.
IRS‘s Web site provides a vehicle whereby taxpayers can receive
assistance without having to call or visit an IRS office. Among other
things, the site provides the potential to download hundreds of tax
forms and publications, contains current information on tax issues and
electronic filing, and gives taxpayers the opportunity to ask IRS tax
law and procedural questions via E-mail (see app. V for information on
IRS‘s performance in answering E-mail questions.):
Web Site More User Friendly Than Last Year:
Our observations of IRS‘s Web site indicated that the site was more
user friendly than it was in 2001, although we still encountered some
navigation problems and identified some problems with the site‘s
content.
Navigation of Web Site:
The Web site had many changes that improved navigation over 2001. For
example, the home page was formatted more logically, with like items
being grouped together, and we observed only a couple of broken links
compared with last year when we found many more.[Footnote 39] However,
there were still some navigational problems. The most significant
problem in navigating the site is a search engine that often generates
a very large number of items relating to the subject of the search,
which makes it extremely difficult to locate the most useful/
appropriate item. For example, when we entered ’earned income credit“
into the general search engine, we were provided a list of over 1,500
items. The publication that would provide someone interested in the
earned income credit with the most thorough information (Publication
596--“Earned Income Credit“) was the 64th item on the list. This would
require users to scroll through
6 pages of items before finding the basic publication dealing with the
subject of the search.
We also noted the following navigation problems.
* The E-mail and comments sections of the Web site are difficult to
find. The links to pages for users to leave E-mail questions or to
provide IRS with comments on the site were not accessible through the
’Contact Us“ part of the site, where one might logically expect to go
to send an E-mail or comment to IRS, but rather through the ’Help“ part
of the site. In that regard, IRS officials responsible for answering E-
mail questions informed us that they believe the number of E-mail
questions received this year declined, as discussed in appendix V,
because individuals may have had trouble locating the E-mail section of
the Web site. According to IRS officials responsible for the Web site,
the
E-mail feature was not made easier to locate because IRS is still
considering whether it is best to answer taxpayer questions via the Web
site or the telephone.
* We had difficulty in May 2002 finding telephone numbers and other
information for local field assistance sites. For example, the page
entitled ’How to contact us in Virginia“ said to use local numbers if
they are not long distance, otherwise use the toll-free 800 number.
However, to obtain local numbers, we had to scroll through 11 other
topics, including information on where to file a return, TeleTax,
Braille materials, and volunteer and education programs. Since then,
IRS has taken steps to make this process less cumbersome.
* We found linkage problems in addition to the missing links noted
earlier. For example, when we accessed IRS‘s Web page for electronic
filing options and paying taxes electronically, we found several
references to more data that we could obtain. However, the link to
those data was www.irs.gov, where we already were, rather than the
appropriate areas of the site.
Content of Web Site:
We identified some problems with the content of IRS‘s Web site. First,
the site used document numbers as primary identifiers for publications,
instructions, and forms. Many taxpayers do not know the numbers of
forms and publications, which requires them to examine voluminous data
to find the specific information they are seeking. For example, if
taxpayers were looking for data on the earned income credit and did not
know that Publication 596 is the primary publication on that topic,
typing ’earned income credit“ in the form and publication search engine
would produce a list of about 1,600 publications that mention the
credit. Here again, as we noted earlier with respect to the general
search engine, a taxpayer would have to scroll through several pages of
the list to find Publication 596. IRS is aware of this problem with its
search engines and is working with contractors to identify solutions.
Second, we continued to find some incorrect and inconsistent data,
outdated material, and missing information, but not as much as last
year. For example, during our review of the Web site in 2002, we found
that the site had incorrect office hours and addresses for walk-in
assistance sites and obsolete data that pertained to 2001. In our
report on the 2000 filing season, we made recommendations to help
ensure that the Web site contained accurate and consistent
data.[Footnote 40] In response to our recommendations, according to IRS
officials, IRS awarded a site redesign contract, instituted an interim
process that required executives to approve all new data and
significant changes to existing data, and began implementing a content
management program that is expected to be fully operational around May
2003. Although these steps appear to have reduced the volume of
inaccurate and inconsistent data, a cognizant IRS official opined that
it would take about 2 years before all data on the Web site are made
current and consistent.
Two independent assessments tended to confirm our observations on IRS‘s
Web site. In that regard:
* Arthur Andersen‘s Office of Government Services Experience Design
Group concluded that the current version of the site is an improvement
over the previous version but still requires some fine-tuning to be
truly useful. They too noted that the search engines often result in a
very large number of items relating to the subject of the search making
it extremely difficult to locate the most useful/appropriate item.
* Brown University‘s Center for Public Policy evaluated how well
50 federal government Web sites would aid an average citizen logging
onto a public sector Web site. IRS‘s site received a score of 76 out of
100, making it the eighth highest rated Web site in the study.
Available Data Show Increase in Web Site Use in 2002:
IRS‘s two key measures for gauging the use of its Web site are ’hits“
and ’downloads.“ Both of those measures showed increased usage in
2002 compared with 2001. As of May 31, 2002, the site had recorded
about 2.2 billion hits compared with about 1.7 billion hits at the same
point in time in 2001, a 27-percent increase. As of August 31, 2002,
about
379 million forms, publications, and instructions had been downloaded
compared with about 279 million in 2001, a 36-percent
increase.[Footnote 41]
However, as we have reported before, hits is a flawed measure of use
because (1) every time a user accesses IRS‘s home page it counts for
about 16 hits and (2) a hit is counted every time the user moves to
another page of the site.[Footnote 42] Thus, an increase in the number
of hits may not necessarily be due to increased usage but could be
attributed to changes in the structure of the home page or problems
users are experiencing in finding what they want on the site. IRS
officials had informed us that the problem would be corrected by an
improved method for counting hits when a more sophisticated
comprehensive Web analytical program became operational in January
2002. Although the new analytical program is operational, the problem
remained. However, our concern about the hits measure could be
mitigated by the development of another Web site performance measure--
unique visitors. According to a cognizant IRS official, IRS is now able
to track unique visitors to the Web site and has begun the process to
formalize that measure.[Footnote 43]
Web Site‘s Availability
and Average Delivery
Time Improved in 2002:
Keynote, an independent Web site rater and a recognized authority on
Internet performance, reviewed the availability and average delivery
time of IRS‘s Web site and reported improved performance during the
2002 filing season. Keynote reported that its measure of IRS‘s Web
site‘s availability averaged close to 100 percent (99.8 to 100 percent)
during the entire 2002 filing season. This is a significant improvement
over the
2001 filing season when Keynote identified periods during which
availability was as low as 67 percent before rebounding to about
97 percent for the first 2 weeks of April. Keynote reported an average
delivery time in 2002 of 1 second or less for the entire filing season
compared with 2 seconds or more for most of the 2001 filing season.
Conclusions:
Generally, during the 2002 filing season, IRS processed returns and
issued refunds smoothly, and the quality of assistance provided to
taxpayers improved. In light of this performance, IRS should be
commended for the various efforts it took to prepare for and improve
performance during the filing season. IRS‘s filing season performance
matters because it impacts well over 100 million taxpayers.
IRS established performance measures to emphasize accountability and
improve service. IRS‘s improved performance can be traced to its use of
and emphasis on performance measures, illustrating the importance of
good measures that effectively assess performance and enable
improvements to be quantified. IRS has established some new measures
and has revised some existing measures, which should serve to further
enhance its performance assessments. However, we believe that some
decisions, specifically (1) the decision to stop using the ’assistor
response level“ and ’average speed of answer“ measures to assess
telephone service; (2) not reporting readily available Q-Matic
information showing the extent of customer wait-times; and (3) limiting
reviews of account accuracy to only some walk-in sites, will reduce
IRS‘s ability to gauge the level of service being provided to
customers. With respect to the latter, IRS‘s decision to use existing
data to measure return-preparation accuracy in lieu of having staff
visit walk-in sites to observe return preparation could free up the
resources needed to expand the reviews of account accuracy. IRS also
needs to ensure that changes to walk-in sites and staffing are
thoroughly analyzed and planned.
Recommendations for Executive Action:
We recommend that the Commissioner of Internal Revenue direct the
appropriate officials to do the following:
* Reinstate a telephone assistance caller wait-time measure, such as
assistor response level or average speed of answer, to assess this
important aspect of the customer experience.
* Revise bi-weekly wait-time reports to show the numbers and
percentages of customers in each of the wait-time intervals tracked by
Q-Matic.
* Explore the feasibility of including all walk-in sites, rather than
just sites equipped with Q-Matic, in the universe for the purpose of
conducting sample visits/reviews of the accuracy of account assistance.
* Ensure that field assistance officials do a comprehensive evaluation
of resource requirements (sites and staffing) after clarifying the
extent and timing of (1) expected field assistance and compliance
workloads and (2) expected walk-in site changes (additions and
closures).
Agency Comments and Our Evaluation:
We requested comments on a draft of this report from IRS. The Acting
Commissioner of Internal Revenue provided written comments in a
December 16, 2002, letter (see app. VI). The Acting Commissioner
appreciated our recognition of the many challenges that IRS
successfully faced during the planning and execution of the 2002 tax
filing season and noted that IRS‘s filing season readiness process
’served us well, especially in handling unanticipated challenges.“:
In response to our specific recommendations, the Acting Commissioner
said the following:
² IRS agrees that customer wait-time is an important aspect of toll-
free telephone service and will ’begin refining an appropriate wait
time measure“ for implementation in fiscal year 2004.
² In response to our recommendation that IRS revise its bi-weekly wait-
time reports, IRS said that it currently does not use wait-time as an
official measure of field assistance performance because past
experience has shown that employee reaction to timeliness measures
tends to increase the likelihood of inaccurate or incomplete answers.
We are aware of IRS‘s position on having an official wait-time measure
and discussed our disagreement with that position in our report on
IRS‘s filing season performance measures.[Footnote 44] Our
recommendation in this report is not directed at the existence or non-
existence of a wait-time performance measure. It is directed, instead,
at enhancing the information available to field assistance managers in
the bi-weekly wait-time reports. IRS did not speak to that issue in its
comments.
² Working with staff from IRS‘s Statistics of Income group, field
assistance has developed a statistically reliable sample of accounts
work. For fiscal year 2003, IRS said it plans to sample small, medium,
and large walk-in sites. These plans should provide for a more
representative assessment of the level of account assistance being
provided to walk-in customers and, as such, appear to be responsive to
our recommendation.
² In response to our recommendation that field assistance do a
comprehensive evaluation of resource requirements, IRS said that it is
doing a workload and staffing study that will provide detailed
information on the location of field assistance work and where IRS
should provide service and staffing. According to IRS, although it had
previously projected the need to add new sites, it is currently
projecting shortages in field assistance staffing for fiscal year 2004
that may cause it to reassess the number and location of walk-in sites.
The study described by IRS appears responsive to our recommendation.
The Acting Commissioner also commented on our use of TIGTA‘s reported
accuracy rate for tax law assistance provided by walk-in sites. We
addressed those comments earlier in the report where TIGTA‘s reported
accuracy rate is discussed.
We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate Committee on Finance and the House
Committee on Ways and Means and the Ranking Minority Member,
Subcommittee on Oversight, House Committee on Ways and Means. We are
also sending copies to the Secretary of the Treasury; the Commissioner
of Internal Revenue; the Director, Office of Management and Budget; and
other interested parties. We will also make copies available to others
on request. In addition, the report will be available at no charge on
the GAO Web site at http://www.gao.gov.
This report was prepared under the direction of David J. Attianese,
Assistant Director. Other major contributors are acknowledged in
appendix VII. If you have any questions about this report, contact me
on (202) 512-9110.
Sincerely yours,
James R. White
Director, Tax Issues:
[End of section]
Appendix I: Data on IRS‘s Processing Performance Relative to Fiscal
Year
2001 Performance and Fiscal Year 2002 Goals:
As shown in table 3, (1) the Internal Revenue Service‘s (IRS)
performance in 2002 improved relative to 2001 for five measures and (2)
IRS met its 2002 performance goals for four measures and missed its
goals for two measures. IRS‘s performance in 2002 could not be compared
with its performance in 2001 for three measures or with its goals for
2002 for two measures because IRS revised the way those measures were
computed.
Table 3: IRS‘s Processing Performance Relative to Fiscal Year 2001
Performance and Fiscal Year 2002 Goals as of September 2002:
Measure name: Deposit error rate[B]; Description: Percentage of
payments applied in error by, for example, reimbursing a taxpayer who
overpaid when the taxpayer wanted any overpayment credited to next
year‘s tax bill; Fiscal year 2001 actual[A]: 5.0%; Fiscal year 2002
goal: 3.4%; Fiscal
year
2002 actual: 4.8%; +/-0.3%; [Empty]; Revisions to measure: None known;
Comments: Performance improved, but performance goal not met;
According to IRS officials, the goal was too challenging and
performance was consistent with 2001.
Measure name: Deposit timeliness-paper; Description: Interest value of
money not deposited by the business day after receipt per $1 million in
deposits. Measure assumes an 8 percent interest rate; Fiscal year 2001
actual[A]: $748; Fiscal year 2002 goal: $751; Fiscal
year
2002 actual: $578; [Empty]; Revisions to measure: None known;
Comments: Performance improved, and performance goal met.
Measure name: Letter error rate[B]; Description: Percentage of letters
issued to taxpayers with errors, (includes systemic errors).[C]; Fiscal
year 2001 actual[A]: Not comparable because of revisions to the
measure; Fiscal year 2002 goal: 10.9%; Fiscal
year
2002 actual: 7.4%; +/-0.6%; [Empty]; Revisions to measure: Revised
measure to exclude errors that cause a letter to look unprofessional
but do not affect its accuracy; Comments: We cannot assess if 2002
performance goal was met due to the exclusion of professionalism
errors.
Measure name: Notice error rate[B]; Description: Percentage of
incorrect notices issued to taxpayers (includes systemic errors).[C];
Fiscal year 2001 actual[A]: Not comparable because of revisions to the
measure; Fiscal year 2002 goal: 15.2%; Fiscal
year
2002 actual: 18.7%; +/-2.7%; [Empty]; Revisions to measure: Revised
measure to (1) exclude errors that cause a notice to look
unprofessional but do not affect its accuracy and (2) include all
processing notices, some of which we reported were inadvertently
omitted in 2001 (see GAO-02-144); Comments: We cannot assess if 2002
performance goal was met due to the exclusion of professionalism
errors; According to IRS officials, employee confusion over new error
codes associated with the rate reduction credit led to more erroneous
notices, thereby increasing the notice error rate.
Measure name: Refund error rate - individual (paper)[B]; Description:
The percentage of refunds with IRS-caused errors in the entity
information (e.g., name or Social Security number) or refund amount;
includes systemic errors.[C]; Fiscal year 2001 actual[A]: 9.8%; Fiscal
year 2002 goal: 9.3%; Fiscal
year
2002 actual: 8.0%; +/-3.8%; [Empty]; Revisions to measure: Although
this measure was revised to exclude errors that cause a refund check to
look unprofessional, the revision did not require; establishment of a
new baseline; Comments: Performance improved, and performance goal
met.
Measure name: Refund interest paid; Description: Amount of refund
interest IRS paid per $1 million of refunds issued; Fiscal year 2001
actual[A]: $128.63; Fiscal year 2002 goal: $94.14; Fiscal
year
2002 actual: $62.55; [Empty]; Revisions to measure: None known;
Comments: Performance improved, and performance goal met; According to
officials,; IRS implemented strategies to address refund interest,
resulting in lower refund interest paid in 2002.
Measure name: Refund timeliness-individual (paper)[B]; Description:
Percentage of refunds issued in 40 days or less; Fiscal year 2001
actual[A]: 95.2%; Fiscal year 2002 goal: 98.4%; Fiscal
year
2002 actual: 98.2%; +/ - 2.3%; [Empty]; Revisions to measure: Measure
revised to reflect new start date procedures; 2001 performance data
converted to allow for comparison; Comments: Performance improved; We
consider IRS to have met the 2002 performance goal because a certain
degree of imprecision exists due to sampling and the reported result
differed from the goal by a statistically negligible amount.
Measure name: Productivity[D]; Description: Weighted volume of
documents processed per staff year expended at the processing centers;
Fiscal year 2001 actual[A]: Data being revised; Fiscal year 2002 goal:
29,836; Fiscal
year
2002 actual: 28,182; [Empty]; Revisions to measure: Measure revised to
reflect additional workload; 2001 performance data being converted to
allow for comparison; Comments: Performance goal not met; According
to IRS officials, productivity may have been lowered by (1) the
increased error-correction workload resulting from the rate reduction
credit and (2) changes associated with IRS‘s reorganization.
Source: IRS data.
[End of table]
[A] These figures may be different than what IRS previously provided
and we reported in GAO-03-143. IRS converted 2001 data to provide
comparability between fiscal years 2001 and 2002.
[B] We previously reported on potential reliability weaknesses
associated with these measures because data are collected manually and
evaluations of data are based on judgment. See U.S. General Accounting
Office, Tax Administration: IRS Needs to Further Refine Its Tax Filing
Season Performance Measures, GAO-03-143 (Washington D.C.: Nov. 22,
2002).
[C] Systemic errors are computer generated errors over which a
particular processing center would have no control.
[D] We reported concerns about the understandability and
appropriateness of this measure in
GAO-03-143 because the measure‘s definition is not clearly stated, unit
managers do not understand their unit‘s contribution to the formula,
and unit managers do not use the measure to assess performance.
[End of section]
Appendix II: Challenges Affecting the 2002 Filing Season and IRS‘s
Response:
The following significant challenges were unique to the 2002 filing
season:
* Passage of the Economic Growth and Tax Relief Reconciliation Act of
2001, specifically the provisions relating to advance tax refunds and
rate reduction credits.
* The September 11, 2001, attacks, which led to actions by IRS to
provide tax relief to affected taxpayers, and the subsequent anthrax
attacks perpetrated through the mail, which led to significant security
enhancements.
* IRS‘s shifting of computer files in conjunction with its
reorganization.
Advance Tax Refunds and the Rate Reduction Credit Led to Many Errors on
Filed Returns:
For tax years beginning after 2000, the Economic Growth and Tax Relief
Reconciliation Act of 2001, signed into law on June 7, 2001, applied a
new 10-percent income tax rate to a portion of an individual‘s income
that was previously taxed at 15 percent. To stimulate the economy more
rapidly than would be achieved if taxpayers had to wait until they
filed their tax year 2001 return to realize the full impact of this
rate reduction, the act provided for eligible taxpayers to receive an
advance tax refund in
2001. The amount of the refund was to be based on the filing status and
amount of taxable income on the taxpayer‘s 2000 return.
Taxpayers who were eligible to receive an advance tax refund in 2001
but who (1) did not receive a check because IRS did not have their
current address or (2) did not have enough taxable income in 2000 to
qualify for the maximum amount allowable, may have been entitled to a
rate reduction credit when filing their tax year 2001 returns.[Footnote
45] In addition, taxpayers who were not eligible for an advance tax
refund, such as those who did not have taxable income in 2000, may have
been entitled to a rate reduction credit provided they had taxable
income in 2001.
According to IRS, passage of the Economic Growth and Tax Relief
Reconciliation Act of 2001 required computer system programming changes
that were complicated by frequent revisions as the Congress and the
U.S. Treasury worked together to understand the legislative
requirements for the rate reduction credit. This resulted in concurrent
testing of those and other computer system changes. After the filing
season began and large numbers of returns were received with errors
related to the rate reduction credit, IRS made additional programming
changes until March 2002 to help manage the high number of errors and
assist tax examiners in correcting them.
As shown in table 4, as of September 27, 2002, IRS had identified over
8 million individual returns with rate reduction credit errors, which
represented 57 percent of the returns identified with errors and
6.5 percent of the total number of returns processed at that time.
Table 4: Processed Returns with Rate Reduction Credit Errors as of
September 27, 2002:
Returns prepared by: Taxpayers; Number of returns processed:
49,939,318; Number of returns with errors: 8,369,035; Percentage of
returns with errors: 16.8%; Number of returns with rate reduction
credit errors: 4,208,991; Percentage of returns with rate reduction
credit errors: 8.4%; Rate reduction credit errors as a percentage of
returns with errors: 50.3%.
Returns prepared by: Tax return practitioners; Number of returns
processed: 73,013,833; Number of returns with errors: 5,691,483;
Percentage of returns with errors: 7.8%; Number of returns with rate
reduction credit errors: 3,816,860; Percentage of returns with rate
reduction credit errors: 5.2%; Rate reduction credit errors as a
percentage of returns with errors: 67.1%.
Returns prepared by: Total; Number of returns processed: 122,953,151;
Number of returns with errors: 14,060,518; Percentage of returns with
errors: 11.4%; Number of returns with rate reduction credit errors:
8,025,851; Percentage of returns with rate reduction credit errors:
6.5%; Rate reduction credit errors as a percentage of returns with
errors: 57.1%.
Source: GAO‘s analysis of IRS‘s data.
Note: The number of returns processed does not include about 4.2
million returns that were filed via TeleFile.
[End of table]
Taxpayers and tax return practitioners made various types of errors
related to the rate reduction credit during the 2002 tax filing season.
For example,
* taxpayers and practitioners filed over 5 million returns in which
they failed to claim a credit even though the taxpayers were entitled
to one;
* about 2 million returns were filed in which a credit was claimed even
though the taxpayers had received the maximum advance tax refund in
2001 and thus were not entitled to a credit; and:
* almost 1 million returns were filed in which a credit was
appropriately claimed, but the credit amount was incorrectly computed.
Problems Related to the Rate Reduction Credit Were Identified Early in
the 2002 Filing Season:
The Treasury Inspector General for Tax Administration (TIGTA)
identified and IRS corrected two problems related to the rate reduction
credit. One problem involved the lack of advance tax refund data in the
National Accounts Profile (NAP) for certain taxpayers.[Footnote 46]
According to TIGTA, IRS corrected this problem by January 11, 2002,
thus preventing about
217,000 taxpayers from receiving up to $50 million in rate reduction
credits to which they were not entitled. The other problem, which TIGTA
attributed to a misinterpretation of programming requirements, involved
IRS‘s failure to add information in the NAP for some taxpayers who did
not receive an advance tax refund. According to TIGTA, it notified IRS
of this problem, which could have affected as many as 35 million
taxpayers, on January 8, 2002, and IRS made the necessary corrections
by January
15, 2002.
IRS field staff identified another problem in which IRS‘s computer
system was generating rate reduction credits for some taxpayers who had
already received the maximum advance tax refund. According to IRS
officials, this problem would have affected no more than about 15,000
taxpayers, who in a worst-case scenario may have received an additional
$300 credit, for a total of $4.5 million in potentially erroneous
credits. According to the officials, IRS will not attempt to recover
any erroneous payments resulting from this problem because recovery
would not be cost-effective.
IRS Handled the Extra Workload from the Rate Reduction Credit:
To help handle the additional error correction workload resulting from
the rate reduction credit workload, IRS, among other things, briefly
detailed individuals from other projects, hired retirees, and postponed
activities, such as technical training and performance reviews, that
were eventually completed later in the year.
The Rate Reduction Credit Affected Performance Relative to Two
Measures:
The rate reduction credit directly and adversely affected IRS‘s
performance relative to its notice error rate and productivity
performance measures. According to IRS officials, (1) employee
confusion over new error codes associated with the rate reduction
credit led to more erroneous notices, thereby increasing the notice
error rate, and (2) the new codes associated with the rate reduction
credit initially reduced processing efficiency and caused lower
productivity rates.
Many Taxpayers Received Corrected Rate Reduction Credits:
According to IRS officials, IRS sent corrected rate reduction credits
to about 1.6 million taxpayers. When IRS originally reviewed these
taxpayers‘ returns, it was determined that the taxpayers had
underclaimed the amount of their rate reduction credits. However, in
accordance with IRS policy about making corrections under certain
monetary thresholds, IRS did not initially correct the errors or give
the taxpayers the additional amounts. During its review of the 2002
filing season, TIGTA pointed out that the policy seemed inequitable
because the same kind of threshold was not used in determining the
amount of a taxpayer‘s advance tax refund--thus the amount taxpayers
received could vary depending on whether they received their money in
the form of an advance tax refund or a rate reduction credit. According
to IRS officials, these taxpayers‘ returns did not go to error
correction and, thus, are not included in the number of returns with
rate reduction credit errors in table 4--which IRS officials believe
contributed to their ability to handle the substantial error-correction
workload.
Terrorist Actions Required Tax Relief for Affected Taxpayers and
Security Enhancements:
The terrorist actions in 2001 created additional challenges to which
IRS responded. The September 11, 2001, terrorist actions created
challenges by causing additional workload and requiring concurrent
testing of the programming changes related to that workload with other
testing. For example, according to IRS officials, programmers modified
computer systems in order to suppress certain correspondences, such as
balance due notices, to taxpayers affected by the terrorist actions.
IRS officials also reported that where the correspondence was already
printed, processing centers held that correspondence until November.
IRS then generated new correspondence with revised balance due dates,
for example, and included leaflets with the correspondence that advised
taxpayers to contact IRS if they were unable to meet their tax
obligations due to the events of September 11.
Also, as reported by TIGTA in March 2002, IRS, in response to anthrax
attacks perpetrated through the mail, ’quickly implemented actions to
increase security and safety precautions during the filing
season.“[Footnote 47] Those actions included providing additional
security in areas where mail is handled, changing mail handling
procedures, and providing additional training and protective equipment
for employees.
IRS‘s Reorganization Required a Shifting of Computer Files and Affected
Processing Performance:
As part of its reorganization, IRS shifted computer files to match
taxpayer accounts with the operating division responsible for serving
the taxpayers. For example, computer files for individual taxpayers
were shifted to the computer systems for the Wage and Investment
Operating Division (W& I) processing centers and small business
accounts were shifted to the computer systems for the centers that now
specialize in small business processing and compliance activities. IRS
completed this work before the filing season began in spite of the
unanticipated challenges associated with the rate reduction credit and
terrorist actions.
According to processing officials, IRS‘s ongoing reorganization
affected submission processing‘s performance in other ways. It
contributed to lower overall productivity, in part by changing the
predictability of filing patterns. Also, the eight W&I centers no
longer process some of the easier business returns and are left with
processing the more complicated and time-consuming individual income
tax returns, such as those with Schedule Ds (Capital Gains and Losses).
Combined with the trend toward increased use of electronic filing by
those taxpayers who file simpler tax forms, such as the Form 1040 EZ,
IRS officials believe that these changes contributed to slower
processing and a corresponding lower productivity rate.
[End of section]
Appendix III: Changes to Third-Party Authorizations in 2002:
IRS offers taxpayers a variety of authorizations that allow IRS to
disclose or discuss tax return information with a third party. These
authorizations range from allowing IRS to discuss the processing of a
return, including the status of tax refunds (hereafter referred to as
the third-party checkbox authority), to authorizing a third party to
receive confidential tax return information. For the 2002 filing
season, IRS expanded the third-party checkbox authority to allow the
taxpayer to designate any third party, including friends or family
members (in 2001, only paid practitioners could be designated). In
response to a recommendation in our report on the
2001 filing season,[Footnote 48] IRS now has a system in place for
tracking how use of the third-party checkbox authority facilitated the
resolution of issues related to a return‘s processing. IRS also
introduced the Oral Disclosure Consent (ODC) and Oral Tax Information
Authorization (OTIA) to enable taxpayers to orally authorize IRS to
disclose tax return information to a third party.
Authority to Designate a Third Party Expanded:
For the 2002 filing season, IRS expanded the third-party checkbox
authority on individual income tax returns (Forms 1040, 1040A, and
1040EZ) to allow taxpayers to designate anyone, including a friend or
family member, to talk with IRS to resolve problems (such as math
errors and missing information) that come to light during IRS‘s
processing of a return and obtain answers to questions regarding
refunds or payments. When this authority was first used during the 2001
filing season, taxpayers were only allowed to authorize paid
practitioners to serve as their designees in resolving problems or
answering questions. According to IRS, the expansion of this authority
to any third party was intended to reach taxpayers who wanted to have a
family member or close associate assist with simple tax inquiries.
According to IRS, the third-party checkbox authority is part of IRS‘s
Taxpayer Treatment and Service Improvement Initiative on third-party
authorizations. IRS considers this initiative a way to reduce taxpayer
burden by reducing the number of notices sent to taxpayers and allowing
a designee to talk directly with IRS to resolve issues during a
return‘s processing. During a typical year, IRS sends out about 8
million notices regarding tax return processing issues. According to
IRS officials, the Commissioner of Internal Revenue forecasted that,
with this authority and other innovations, such as oral consent
authorizations, 90 percent of those situations might be resolved
through telephone discussions with designees.
According to IRS, taxpayers checked the box on about 32.4 million
returns as of October 7, 2002. When IRS first implemented this
authority in 2001, it lacked a system for tracking how use of the
authorization facilitated the resolution of return processing issues.
In response to our recommendation that IRS develop a plan for
evaluating the implementation and effectiveness of processing
initiatives, IRS implemented computer programming changes that now
enable it to know not only how many people used the checkbox option but
also how many inquiries were received and responded to by type of
return and notice.
IRS officials estimated, based on their tracking, that the 32.4 million
returns with marked checkboxes translated to about 4 million fewer
pieces of correspondence. In addition, IRS responded to about 4 million
inquiries from persons whom taxpayers had identified as their designees
using the checkbox authority.
Oral Authorizations Offered:
A taxpayer can now orally authorize IRS to disclose tax return
information to a third party. Both ODC and OTIA allow a taxpayer to
contact IRS and establish disclosure authority for all types of tax
accounts. The oral authorizations, however, differ in the range of
authorities given to the third party.
The oral authorizations were made possible by the Taxpayer Bill of
Rights II,[Footnote 49] which removed the requirement that all requests
of or disclosures to a third party be in writing. The new disclosure
regulations[Footnote 50] authorize IRS employees to accept a taxpayer‘s
verbal request or consent to disclose return information to third
parties to assist the taxpayer in resolving account issues. When oral
authorizations are used, IRS must verify the taxpayer‘s identity and
the identity of the third party as well as confirm the specific tax
matter.
To establish an ODC, the taxpayer must have received a notice from IRS
and have open account issues. The taxpayer may call IRS and designate a
third party to resolve issues relative to the information indicated on
the notice. Once an ODC has been established, the taxpayer does not
have to be physically present or on the telephone when IRS discloses
the tax information to the third party nor does the third party need an
authorization number. The ODC does not authorize a third party to
receive notices or other written taxpayer information. The authority is
valid until the tax related issues are resolved. If the taxpayer
receives subsequent notices from IRS, he or she must call or visit IRS
and establish another ODC even if it is for the same third party and
tax matter.
An OTIA allows taxpayers to designate third parties to represent them
by telephone or in person and to receive notices or account transcripts
on open account issues. The taxpayer does not have to receive a notice
from IRS before calling to establish an OTIA. Similar to the ODC, the
taxpayer does not have to be physically present or on the telephone
when IRS discloses tax information to the third party. However, to
confirm their identify, the third party must have an authorization
number given by IRS, which must be on file, and the third party must
provide this number to the taxpayer. This authority expires upon
written request by either the taxpayer or representative.
Table 5 provides comparative information on the various authorizations
discussed in this appendix.
Table 5: Third-Party Authorizations:
Effective date; Third-party checkbox (2001): Available for the 2001
filing season; Third-party checkbox (2002): Available for the 2002
filing season; Oral disclosure consent: Available for the 2002 filing
season; Oral tax information authorization: Available for the 2002
filing season.
Purpose; Third-party checkbox (2001): Allows a paid practitioner to
discuss return processing and refund issues; Third-party checkbox
(2002): Allows a practitioner, friend, or family member to discuss
return processing and refund issues; Oral disclosure consent: Allows
IRS to disclose information orally, but not written information, to a
third party on issues related to a notice; Oral tax information
authorization: Allows a third party who has an authorization number
given by IRS to receive information orally and some written taxpayer
information.
Who can exercise this authority; Third-party checkbox (2001):
Taxpayer; Third-party checkbox (2002): Taxpayer; Oral disclosure
consent: Taxpayer; Oral tax information authorization: Taxpayer.
How is authority granted; Third-party checkbox (2001): Taxpayers check
a box on individual income tax forms; Third-party checkbox (2002):
Taxpayers check a box on individual income tax forms and some business
forms; Oral disclosure consent: Orally; Oral tax information
authorization: Orally.
Expiration of authority; Third-party checkbox (2001): April 15 of the
year following the year the checkbox election was made, through the
life of the first notice, or until the account is resolved; Third-
party checkbox (2002): April 15 of the year following the year the
checkbox election was made, through the life of the first notice, or
until the account is resolved; Oral disclosure consent: Until the tax
related issue is resolved or when a new oral consent is entered on the
account; Oral tax information authorization: By written request of
taxpayer or representative.
Processing timeframes; Third-party checkbox (2001): 4 to 6 weeks;
Third-party checkbox (2002): 4 to 6 weeks; Oral disclosure consent:
Within minutes; Oral tax information authorization: Within minutes.
Must taxpayer have received a notice; Third-party checkbox (2001): No;
Third-party checkbox (2002): No; Oral disclosure consent: Yes; Oral
tax information authorization: No.
Source: IRS data.
[End of table]
[End of section]
Appendix IV: Results of Surveys of Taxpayers and Tax Practitioners Who
Prepared Returns on a Computer but Filed on Paper:
In 2002, IRS surveyed taxpayers and tax practitioners who prepared
their returns on computer but filed on paper. We had recommended such
surveys in our report on the 2001filing season in response to the fact
that about 40 million computer-prepared individual income tax returns
were filed on paper in 2001.[Footnote 51] The surveys involved (1)
taxpayers who prepared their own tax return on a computer but filed a
paper return, (2) taxpayers who used paid practitioners who prepared
their returns on computer but filed on paper, and (3) practitioners who
prepared returns on a computer but filed on paper. Table 6 shows, for
each category of respondent,
(1) factors that influenced them not to file electronically and (2)
incentives that could encourage them to file electronically.
Table 6: Factors That Influence Preparers of Returns on a Computer Not
to File Electronically and Incentives That Could Influence Them to File
Electronically:
Category of respondent: Taxpayers who prepare their own returns;
Factors that influenced them not to file electronically: * Cost (51%);
* Security and technology concerns (32%); * Like seeing return,
signing it, and putting it in the mail (30%); Incentives that could
influence them to file electronically: * Free electronic filing (71%);
* Tax credit to cover cost of electronic filing (46%); * Electronic
refund in 3 to 5 days (36%); * Ability to file electronically on IRS‘s
Web site (34%).
Category of respondent: Taxpayers who used paid practitioners; Factors
that influenced them not to file electronically: * Taxpayer always
filed on paper (34%); * Practitioner did not mention or recommend it
(33%); * Taxpayer did not want to pay cost to file electronically
(28%); Incentives that could influence them to file electronically: *
Free electronic filing (60%); * Tax credit to cover cost of electronic
filing (42%); * Electronic refund in 3 to 5 days (40%).
Category of respondent: Paid practitioners; Factors that influenced
them not to file electronically: * Taxpayers do not request it (66%);
* Practitioners do not like the need for a paper signature document
(51%); * Software cost is too high (51%); * Electronic filing is too
time-consuming (51%); Incentives that could influence them to file
electronically: * IRS paying $3 for each electronically filed return
(63%); * IRS offering free transmission of return (52%); * Electronic
refund in 3 to 5 days (51%); * Free software (48%); * Lower
transmission costs (47%).
Source: IRS reports on the results of its surveys.
[End of table]
[End of section]
Note: The percentages in this table represent the percent of
respondents who cited the factor or incentive as having a strong
influence.
[End of section]
Appendix V: IRS Received Fewer E-Mail Questions Via Its Web Site and
Did
a Worse Job Responding to the Questions:
One aspect of IRS‘s Web site where available data indicated worse
performance in 2002 than in 2001 was the feature that allows taxpayers
to ask IRS tax law and procedural questions via E-mail. For the 2002
filing season, IRS received fewer E-mail questions and did a worse job
responding to those questions than in 2001. Also, the E-mail function
of the site received mixed reviews by users who responded to the
customer satisfaction survey.
As of May 31, 2002, IRS received about 109,000 E-mail questions
compared with about 160,000 for the same time period in 2001--a 32-
percent decrease. IRS officials we talked with did not know why the
number of E-mail questions had decreased but speculated that redesign
of the Web site might have made it difficult for taxpayers to locate
the link for submitting questions. As noted earlier, the link for
submitting questions was accessible not through the ’Contact Us“ part
of the site but through the ’Help“ part of the site.
IRS‘s goal is to respond to E-mail questions within 2 business days.
However, according to IRS data, IRS took 2.4 business days on average
to respond to taxpayer‘s E-mail questions in 2002, compared with
0.8 business days in 2001. The IRS data indicated that timeliness was a
problem in January and February (4.2 and 2.4 business days,
respectively) but improved substantially in March and April (1.2 and
0.8 business days, respectively). According to responsible IRS
officials, the increase in time to respond to E-mail questions was
caused by several factors:
* The most significant factor was a decision to concentrate on E-mail
questions received in the work period just before the start of the
2002 filing season.
* IRS consolidated the responsibility for responding to all E-mail
questions in one site, and there was an inadequate alignment of
employees‘ skills with the new workload.
* IRS believed that far more complex questions were received in
2002 than in 2001 because the expanded ’frequently asked questions“
section of the Web site was being used by taxpayers to get answers to
more common, less complex questions.
IRS informed us that, for the 2003 filing season, it will be conducting
more training and adding another site to answer E-mail questions. The
site being added answered E-mail questions in 2001.
In 2002, IRS did not meet its 78-percent accuracy goal and, on a
percentage basis, answered fewer questions accurately, despite
receiving 32 percent fewer E-mail questions than in 2001. IRS data for
January 1 to April
20, 2002, showed that IRS responded accurately to 76 percent of the E-
mail questions in 2002. That compares with a 78-percent accuracy rate
for a similar time frame in 2001. Some of the same factors cited as
possible reasons for the timeliness problems (i.e., an inadequate match
of employee skills with workload and the receipt of more complex
questions) could also help explain the decrease in accuracy.
IRS provides all E-mail customers an opportunity to respond to a
customer satisfaction survey, and about 2,200 did so between January 1
and April
30, 2002. The customers who responded to the survey in 2002 provided
mixed reviews of the E-mail service.
* 91 percent of the respondents said that they were satisfied with the
time it took to get a response, compared with 96 percent in 2001--a
decline that may reflect the increase in average response times
discussed earlier.
* 92 percent of the respondents said that they would use the E-mail
service again, compared with 91 percent in 2001.
* 79 percent of the respondents said that IRS‘s response answered their
question, compared with 75 percent in 2001.
[End of section]
Appendix VI: Comments from the Internal Revenue Service:
An IRS official told us that the figures cited for Web site hits and
downloads are for the full fiscal year (October 1 through September
30).
DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE WASHINGTON. D.C.
20224:
COMMISSIONER:
December 16, 2002:
Mr. James R. White, Director, Tax Issues, U.S. General Accounting
Office
441 G Street, N.W. Washington, D.C. 20548:
Dear Mr. White:
I appreciate your recognition of the many challenges we successfully
faced during the planning and execution of the 2002 tax filing season.
Our Filing Season Readiness process served us well, especially in
handling unanticipated challenges. As you reported, we have greatly
expanded electronic services to taxpayers and the quality and level of
service our field assistance centers provide.
Your report referenced the Treasury Inspector General for Tax
Administration (TIGTA) reviews on Field Assistance Quality. Using the
TIGTA accuracy rates is inappropriate. In the Fiscal Year (FY) 2001 and
2002 results, the TIGTA included referrals to publications in computing
the accuracy rate. I do not agree that referring taxpayers to IRS tax
publications is the same as providing incorrect answers to questions.
While we do not want employees to improperly refer questions, those
referrals should not be counted as incorrect answers and should be
excluded from the calculation. The use of TIGTA‘s calculation of 50
percent is not a true reflection of our performance. By excluding these
referrals as errors, the true cumulative accuracy rate is 66 percent
through June 2002. We do agree, however, that we still must improve.
Some of our other significant improvements this filing season include:
Customer Accounts Management:
Accuracy of toll-free telephone service tax law and tax account answers
improved substantially. Through October 31, 2002, the quality of tax
law answers improved 8 percentage points to 81 percent. The quality of
tax account answers improved 7 percentage points from the prior year to
74 percent. These quality measures include adherence to procedures as
well as the accuracy of the response. When measured for accuracy alone,
the tax law correct response rate was over 84 percent and the account
correct response rate was over 90 percent.
We exceeded our toll-free telephone Customer Service Representative
(CSR) Level of Service (LOS) goal of 71.5 percent for 9 of the 15 weeks
in the filing season. We were less than 2.7 percentage points below our
goal in three of the missed weeks. As of October 31, 2002, cumulative
CSR level of service was over 85 percent, a 106 percent increase over
the prior year.
*Our Submission Processing Centers processed almost 131 million returns
and generated almost 196 billion in tax refunds, while successfully
dealing with the additional workload generated by the Rate Reduction
Credit.
Taxpayer Face to Face Services:
*We have taken a number of steps to improve the accuracy of assistance
in our Taxpayer Assistance Centers (TAC), such as providing
standardized services and better training, and refining the process for
referring complex tax law questions that are outside the scope of
services provided by Field Assistance employees.
*To address employee training needs, we require all TAC technical
employees to complete 1 hour of uninterrupted self-directed learning
each week.
*Beginning in July 2002, managers interviewed taxpayers as they left
the TAC to determine the level of service they received. Managers also
conducted anonymous ’shopping visits“ at TACs other than their own to
determine the scope of the accuracy problem. We used the results of
these visits and similar reviews conducted by TIGTA to identify error
trends and training needs to improve quality.
During FY 2003 Continuing Professional Education (CPE) classes,
employees will receive job aids to guide them through the publication
method. The publication method is a technique employees use to ’walk“ a
taxpayer through a publication as they respond to a tax law question.
It helps employees ask appropriate probing questions so they can
correctly answer customers‘ questions.
*Field Assistance is installing a networked queuing management system
(QMatic) in 28 TACs in California. This will enable IRS to test Q-Matic
networking and summary reporting capabilities. These sites are
scheduled to be operational in January 2003.
Electronic Filing and Internet Services:
*As of October 31, 2002, nearly 46.9 million taxpayers filed
electronically, surpassing the 40.2 million for the prior year. Nearly
105,000 electronic return originators, 15,000 more than last year,
participated in e-file resulting in more accurate and faster refunds.
*Home computer e-filing increased as taxpayers filed more than 9.4
million returns from their home computers, a 38 percent increase over
last year.
*Electronic payments are up. Taxpayers made over 768,000 e-payments, an
increase of 8.5 percent over the same time last year. This includes
313,385 credit card payments.
*More than 24.8 million taxpayers signed their returns electronically
by using one of the two Personal Identification Number options.
*The IRS website, www.irs.gov, is one of the most used government
sites. During the tax season we had 3.1 billion hits, a 15 percent
increase from last year. In addition, the number of files downloaded
last year topped 437 million, an increase from 317 million the year
before.
For the FY 2003 filing season, we are taking steps to improve service
by encouraging Internet filing with free tax preparation software,
adding seven new e-file formats, and increasing services to electronic
return preparers.
My responses to your recommendations for Executive Action follow:
Recommendation:
Reinstate a telephone assistance caller wait time measure, such as
assistor response level or average speed of answer, to assess this
important aspect of the customer experience.
Response:
We agree that measuring customer wait time is an important indicator of
the service we are providing to our customers, and we have consistently
tracked and used this information to manage telephone operations.
Although we removed this as a Balanced Measure in FY 2002, we recognize
that speed of service is important to our customers. We continue to
closely monitor and report our wait time performance to all of our
stakeholders. Wait time is a primary factor for real time call
management and call:
routing actions taken by the Joint Operation Center. Minimizing
customer wait time is also a key consideration when we plan workload
and schedule staffing. The fact that we eliminated wait time measures
from the Balanced Measures has not diminished its importance to us. We
agree with your recommendation and will begin refining an appropriate
wait time measure for our FY 2004 -2005 Strategy and Program Plan.
Recommendation:
Revise biweekly wait time reports to show the numbers and percentages
of customers in each of the wait time intervals tracked by Q-Matic.
Response:
Wait time at TACs is not currently a measure because we concluded that
this measure tended to adversely affect the thoroughness and quality of
answers. Unlike toll-free telephone operations, where wait time is a
function of call management and systemic call routing, our past
experiences in the walk-in environment have shown that employee
reaction to timeliness measures tend to increase the likelihood of
inaccurate or incomplete answers. Our current focus is devoted to
improving the accuracy of answers to tax law questions and the quality
of other work.
Recommendation:
Explore the feasibility of including all walk-in sites, rather than
just sites equipped with Q-Matic, for the purpose of conducting sample
visits/reviews of the accuracy of account assistance.
Response:
We worked with Statistics of Income (SOI) to develop a national
statistically reliable sample of accounts work within the TACs. We then
reviewed account accuracy in the largest TACs equipped with Q-Matic as
a means of developing goals. These baseline goals will be used to
measure account accuracy in all TACs.
For FY 2003, we worked with SOI and developed an Area statistically
reliable sample of accounts work. Large, medium and small TACs will be
sampled with every workgroup within Field Assistance being sampled
during the year. We will assess accounts accuracy in conjunction with
the tax law accuracy review. Our Quality Assurance Team will review a
representative sample of accounts work in the TAC being reviewed, and
account accuracy will be based on whether all of the taxpayer‘s
concerns were resolved.
Recommendation:
Ensure that Field Assistance officials do a comprehensive evaluation of
resource requirements (sites and staffing) after clarifying the extent
and timing of (1) expected field assistance and compliance workloads,
and (2) expected walk-in site changes (additions and closures).
Response:
We are doing a workload and staffing study that will provide detailed
information on the location of work and where we should provide service
and staffing. This study will include inventory driven work, such as
office examinations and collection queue work, and the more traditional
demand driven work such as accounts and notices. During the design
stage for this program, we included new assistance sites in our
projections. However, we now project shortages in Field Assistance
staffing for FY 2004. As a result, we may have to reassess the number
and location of TAC sites.
Again, I appreciate your observations and recommendations. If you have
questions or comments, please call Floyd Williams, Director,
Legislative Affairs, at (202) 622-3720.
Sincerely,
Bob Wenzel
Acting Commissioner
Signed by Bob Wenzel
[End of section]
Appendix VII: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
James White (202) 512-9110
Dave Attianese (202) 512-9110:
Acknowledgments:
In addition to those named above, Bob Arcenia, Heather Bothwell,
Grace Coleman, Ron Heisterkamp, Ronald W. Jones, John Lesser,
Tina Smith, and Joanna Stamatiades made key contributions to this
report.
FOOTNOTES
[1] Most taxpayers file their returns between January 1 and April 15,
which is the deadline for filing individual income tax returns.
However, millions of taxpayers get extensions from IRS that allow them
to delay filing until as late as October 15.
[2] U.S. General Accounting Office, Internal Revenue Service:
Assessment of Budget Request for Fiscal Year 2003 and Interim Results
of 2002 Tax Filing Season, GAO-02-580T (Washington, D.C.: Apr. 9,
2002).
[3] As part of a reorganization that took effect in October 2000, IRS
established four operating divisions that serve specific groups of
taxpayers. The four divisions are (1) W&I, (2) Small Business and Self-
Employed, (3) Large and Mid-Size Businesses, and (4) Tax Exempt and
Government Entities. Our review focused on W&I, which generally serves
taxpayers whose income is from wages and investments and which, as part
of that service, processes individual income tax returns and provides
assistance to taxpayers who call on the telephone or walk into an IRS
office.
[4] U.S. General Accounting Office, Tax Administration: IRS Needs to
Further Refine Its Tax Filing Season Performance Measures, GAO-03-143
(Washington, D.C.: Nov. 22, 2002).
[5] The Joint Operations Center is the organization responsible for
managing IRS‘s telephone operations.
[6] P.L. 107-16.
[7] The terms ’advance tax refund“ and ’rate reduction credit“ are not
synonymous. Taxpayers who were eligible to receive an advance tax
refund in 2001 but who did not receive a check may have been entitled
to a rate reduction credit when filing their tax year 2001 returns. A
rate reduction credit would reduce a taxpayer‘s 2001 tax liability and
could have resulted in a tax refund once the 2001 return was filed.
[8] P.L. 105-206.
[9] The Government Performance and Results Act (P.L. 103-62) was
enacted to hold federal agencies accountable for achieving program
results. IRS‘s balanced measurement system is consistent with the
intent of the act.
[10] Of the 131 million individual income tax returns, about 84 million
were filed on paper and about 47 million were filed electronically.
This section of the report focuses on IRS‘s processing of paper;
electronic filing is discussed later.
[11] The National Association of Enrolled Agents is a national
association of over 10,000 independent, licensed tax professionals
called enrolled agents. Enrolled agents are licensed by the federal
government and are authorized to appear in place of the taxpayer at
IRS.
[12] Although the 2002 Filing Season Was Completed Timely, Customer
Service Can Be Improved During Error Processing, TIGTA, Reference No.
2002-40-200, Sept. 26, 2002.
[13] According to TIGTA, although employees worked overtime, the amount
of overtime paid employees in the eight W&I processing centers in 2002
did not increase compared with the amount paid in 2001.
[14] We also could not compare IRS‘s performance in 2002 and 2001
relative to the productivity measure because IRS was revising its data
for 2001 at the time we completed our audit work.
[15] Although this change also applied to the refund error rate-
individual (paper) measure, a new baseline for refund error rate-
individual (paper) was not warranted because, according to IRS
officials and supporting data provided by IRS, the policy change did
not affect this measure to the extent it affected the other two.
[16] The Internal Revenue Service Certifies Its Readiness to Process
Individual Income Tax Returns in 2002, TIGTA, Reference No. 2002-40-
080, Mar. 29, 2002.
[17] This section discusses the measures that IRS uses to evaluate
electronic filing performance compared to past performance, 2002 goals,
and IRS‘s long-term goal for individual income tax returns. The report
we issued on IRS‘s filing season performance measures (GAO-03-143)
includes many performance measures related to electronic filing that
are not discussed in this report because those measures relate to other
returns, such as those from businesses.
[18] The IRS Restructuring and Reform Act of 1998 mandated that the
Secretary of the Treasury convene an electronic commerce advisory group
to ensure that the Secretary receives input from the private sector on
IRS‘s plan to increase electronic filing. ETAAC was created in 1998 in
response to that mandate and, among other things, is required to report
to the Congress annually on IRS‘s progress towards meeting the
electronic filing goals set in the act.
[19] U.S. General Accounting Office, Tax Administration: Assessment of
IRS‘ 2001 Tax Filing Season, GAO-02-144 (Washington D.C.: Dec. 21,
2001).
[20] To electronically file, taxpayers must generally either pay a tax
practitioner to prepare and submit their tax return, pay a transmitter
to transmit their tax return, or purchase a software package and file
their tax return on-line through an on-line intermediary using a
personal computer.
[21] IRS determines which callers were attempting to reach an assistor
based on how they responded to menu prompts. For callers who received
busy signals and, therefore, did not get a chance to respond to the
menu, IRS estimates how many were attempting to reach an assistor based
on the percentage of calls that were served by assistors that week.
IRS‘s estimate of the callers who attempted to reach an assistor does
not reflect callers who did not get a busy signal but yet hung up
before completing the menu responses necessary to determine the type of
assistance (assistor or automation) that would have handled their
calls.
[22] IRS has other measures that we are not reporting on because they
do not provide adequate information to make conclusions about the ease
with which taxpayers reached IRS or the accuracy of the responses they
received after reaching IRS.
[23] In GAO-03-143, we recommended that IRS establish measures for its
automated telephone services.
[24] According to IRS officials, the filing season for telephone
assistance generally begins January 1 and ends around July 15 each
year. Although the tax return filing deadline is April 15, the demand
for telephone assistance continues past the deadline as taxpayers call
to, among other things, inquire about the status of their refunds or
respond to notices they received from IRS about their filed returns.
[25] U.S. General Accounting Office, Advance Tax Refund Program Was a
Major Accomplishment, but Not Problem Free, GAO-02-827 (Washington,
D.C.: Aug. 2, 2002).
[26] U.S. General Accounting Office, Customer Service: Human Capital
Management at Selected Public and Private Call Centers, GAO/GGD-00-161
(Washington, D.C.: Aug. 22, 2000).
[27] ’Services provided“ counts the number of times callers reached
assistors. ’Handle time“ measures the total time an assistor spent
talking to a taxpayer, keeping the taxpayer on hold, and finishing the
call--up to the time the assistor indicated his or her readiness to
receive another call.
[28] GAO-02-212.
[29] U.S. General Accounting Office, IRS Telephone Assistance:
Opportunities to Improve Human Capital Management, GAO-01-144
(Washington, D.C.: Jan. 30, 2001).
[30] In general, taxpayers who visit IRS walk-in locations can obtain
(1) tax forms and publications; (2) answers to questions about the tax
law; (3) assistance with their tax accounts; (4) limited return-
preparation assistance; and (5) various other types of assistance, such
as help getting a taxpayer identification number.
[31] The 50-percent accuracy rate represents the cumulative rate from
visits done from January through April 2002; the true accuracy rate
will not be known until TIGTA completes its reviews in fiscal year
2003. TIGTA reviewers considered responses correct when they were
answered accurately and in enough detail to avert filing errors.
Conversely, they considered responses incorrect when walk-in staff did
not answer accurately or in enough detail, referred reviewers to a
publication without walking them through it to get the right answer as
required by field assistance procedures, or denied assistance by
failing to either answer their question or refer them to someone who
could.
[32] Beginning with fiscal year 2001, IRS discontinued wait-time as an
official measure of field assistance performance because, according to
field assistance officials, employees felt pressured to hurry
assistance to customers, which could diminish other aspects of quality,
such as accuracy. Nevertheless, realizing that timeliness is an
important aspect of quality, IRS has continued to track and report
wait-time.
[33] Q-Matic is an automated system that keeps track of such things as
customer wait-times, assistance provided, and staff time used.
[34] In general, Q-Matic records the number of customers whose wait-
times fell into each
15-minute interval, ranging from less than 15 minutes to less than 2.5
hours, as well as the number that waited longer than 2.5 hours.
[35] GAO-02-144.
[36] Although the numbers may vary during the year, in 2002 IRS
provided walk-in assistance through approximately 420 walk-in sites
that generally provide the full range of assistance on a year-round
basis, 50 alternate sites (such as at libraries and shopping malls) and
7 vans or mobile units that are set up mainly to provide return-
preparation assistance only during the filing season, and 15 self-
service computer/printer stations (i.e., kiosks) that print tax forms
and provide answers to frequently asked tax law questions.
[37] Field assistance officials estimated that return-preparation
assistance accounted for only about 10 percent of their walk-in
contacts but consumed about 25 percent of walk-in staff years.
[38] IRS reported having 83 one-person sites during the 2002 filing
season.
[39] According to a cognizant IRS official, a tool that helps eliminate
broken links was not added to the site in 2002 as IRS had originally
intended; implementation is now planned for 2003.
[40] U.S. General Accounting Office, Tax Administration: Assessment of
IRS‘ 2000 Tax Filing Season, GAO-01-158 (Washington, D.C.: Dec. 22,
2000).
[41] IRS updated this information as of September 30, 2002, in its
written comments on a draft of this report (see app. VI).
[42] GAO-02-144 and GAO-03-143.
[43] If someone accesses IRS‘s site and moves around the site, the
unique visitor measure would count that as one visit, no matter how
many hits the person accumulates while navigating the site. If the
person leaves the site and returns again after at least 1 hour has
elapsed since exiting the site, the person will be counted as a new
unique visitor.
[44] GAO-03-143.
[45] A rate reduction credit would reduce a taxpayer‘s 2001 tax
liability and could result in a tax refund once the 2001 return was
filed.
[46] NAP is an IRS database with information on taxpayers‘ names,
addresses, and SSNs. To help determine whether taxpayers were correctly
claiming the rate reduction credit on their 2001 tax returns, IRS
included information on advance tax refunds in NAP.
[47] The Internal Revenue Service Certifies Its Readiness to Process
Individual Income Tax Returns in 2002, TIGTA, Reference No. 2002-40-
080, Mar. 29, 2002.
[48] U.S. General Accounting Office, Tax Administration: Assessment of
IRS‘ 2001 Tax Filing Season, GAO-02-144 (Washington D.C.: Dec. 21,
2001).
[49] P.L. 104-168
[50] Temp. Treas. Reg. § 301.6103(c)-IT (2001).
[51] U.S. General Accounting Office, Tax Administration: Assessment of
IRS‘ 2001 Tax Filing Season, GAO-02-144 (Washington D.C.: Dec. 21,
2001).
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