GAO: IRS' Tax Processing Performance has Generally Improved

Most taxpayers have their only contact with the Internal Revenue Service (IRS) during the filing season, with tens of millions filing their returns, getting refunds, and seeking assistance by calling or visiting IRS’s offices or Web site.

The Government Accountability Office (GAO) was asked to assess the IRS’s performance in 2004 relative to goals and prior years’ performance as well as initiatives or other factors that significantly affected performance for the following areas: (1) the processing of paper and electronic returns, (2) telephone service, (3) walk-in service, and (4) Web site service.

During the 2004 filing season, the IRS met many of its performance goals and continued a trend of improvement in recent years. However, they did not improve in all dimensions of its filing season services and lacks sufficient data to evaluate quality in others.

The IRS processed returns and issued refunds smoothly. The proportion of returns filed electronically is up to 47 percent. Despite this achievement and numerous initiatives to increase electronic filing, the IRS does not expect to reach its long-term goal of having 80 percent of all individual tax returns filed electronically by 2007. A higher percentage of taxpayers was able to reach the IRS assistors by telephone than last year and the accuracy rate for providing taxpayers with information about their accounts remained stable.

However, the accuracy rate for answering tax law questions declined to 2001 levels. Consistent with the IRS’s strategy, the number of taxpayers visiting the IRS walk-in sites declined, while the number having tax returns prepared at volunteer sites increased. Finally, although the IRS continued to expand its Web site services, the site’s feature for answering tax law questions raises some concerns.

Despite the 2004 improvements, the IRS has opportunities for further service improvements. For example, the IRS has limited data with which to assess the quality of key services at its walk-in sites and sites staffed by volunteers. Although it has initiatives under way to measure quality at both types of sites, the initiatives have been delayed and important details have not yet been determined, which may undermine efforts to improve services in this area. In the meantime, some of IRS’s quality data is likely to be biased.

Until the IRS fully implements its initiatives and gathers data on quality, it will have difficulty monitoring and improving performance at its walk-in sites and volunteer sites.

GAO recommends that the IRS: (1) recognize and disclose the limitations of the performance data that will be collected at walk-in sites in 2005, and ensure that initiatives to measure the quality of services at walk-in and volunteer sites are implemented timely; and (2) recognize that decisions about the prominence and staffing of the tax law Web site feature are related.

In comments, the IRS agreed with the recommendations about walk-in and volunteer site initiatives. Additionally, they agreed with the intent of the other two recommendations, but disagreed with our assessment of the extent of the problems. However, without stronger evidence, such as statistically valid data, our concerns remain.

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