Tax Administration

GAO makes several points about the 2000 tax filing season. The Internal Revenue Service (IRS) made several important changes to its tax-processing systems before the 2000 filing season, and those systems have not experienced significant problems. The use of electronic filing continues to grow, and telephone service has improved, although it has yet to reach the level of service achieved in 1998. IRS has requested $8.9 billion for fiscal year 2001, a nine-percent increase over the agency's operating level for fiscal year 2000. IRS has also requested a supplemental appropriation of $39.8 million to increase staffing levels in several of the agency's programs. Although many aspects of the initiative seem appropriate, GAO is concerned (1) about IRS' ability to implement the initiative given its past history of being unable to fill enforcement positions funded by Congress and (2) that the initiative would increase staffing for IRS' toll-free telephone assistance program. Congress should consider withholding approval of the requested increase for telephone service until IRS provides a more realistic level of the service that it expects to provide in fiscal year 2001. IRS' request included $1.58 billion for its information systems appropriation and $494 million for its multiyear capital account. The $494 million request is not adequately justified, and Congress should consider denying the request and directing IRS to develop a credible and verifiable budget request for the capital account. Finally, GAO is concerned that IRS' budget request does not provide clear links between the resources being requested and expected results.

GAO noted that: (1) IRS made several important changes to its tax processing systems before the 2000 filing season, and those systems have operated without significant problems; (2) the use of electronic filing continues to grow, which is partly attributable to various IRS initiatives to make electronic filing paperless and to better promote the program; (3) compared to last year, when IRS experienced serious problems, telephone service has improved, but it has yet to reach the level of service achieved in 1998; (4) IRS is requesting about $8.986 billion for FY 2001, an increase of 9 percent over IRS' proposed operating level for FY 2000; (5) IRS is also requesting: (a) a supplemental appropriation of $39.8 million for FY 2000, which is included in the proposed operating level for that year; and (b) an advance appropriation for FY 2002 for its multiyear capital account; (6) IRS' request includes $1.58 billion for its Information Systems appropriation and $494 million for its multiyear capital account, $375 million of which would be an advance appropriation for FY 2002; (7) because the $494 million request is not adequately justified, Congress should consider denying the request and directing the IRS to develop a credible and verifiable FY 2001 budget request for the capital account that it can use in seeking, if necessary, a supplemental appropriation; (8) IRS includes $182 million to cover expenses associated with its reorganization; (9) IRS' budget request does not provide clear links between the resources being requested and expected results; and (10) as IRS proceeds with its reorganization and its efforts to develop new performance measures, it has an opportunity to make future budget requests more useful to Congress.