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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

December 2010: 

2010 Tax Filing Season: 

IRS's Performance Improved in Some Key Areas, but Efficiency Gains Are 
Possible in Others: 

GAO-11-111: 

GAO Highlights: 

Highlights of GAO-11-111, a report to congressional requesters. 

Why GAO Did This Study: 

The Internal Revenue Serviceís (IRS) filing season is an enormous 
undertaking that includes processing individual income tax returns, 
issuing refunds, and responding to taxpayers. GAO was asked to assess 
IRSís 2010 filing season performance in relation to its goals and 
prior yearsí performance processing individual tax returns, answering 
telephones, and delivering Web and face-to-face services. To conduct 
the analysis, GAO analyzed data and documents from IRS, interviewed 
IRS officials, observed IRS operations, and interviewed tax industry 
experts. 

What GAO Found: 

IRS dealt with a number of challenges this filing season, including 
significant tax law changes, such as the Making Work Pay credit, and 
corresponding changes in taxpayer behavior. IRS balanced its resources 
across its filing season activities with improvements in some areas 
but fluctuations in others. 

Return processing: Electronic filing, which reduces costs to IRS, 
increased about 3 percent, to 71 percent of all individual returns. 
However, IRS experienced delays in issuing millions of refunds, which 
IRS officials attributed primarily to correcting taxpayer errors 
associated with the Making Work Pay credit and conducting additional 
automated checks. 

Telephone service: Compared to 2009, the percentage of callers seeking 
live assistance who received it improved in 2010 and the accuracy of 
answers remained high, at over 90 percent. However, the average wait 
time increased. Further, IRSís annual goal for providing caller 
assistance was lower than any of the preceding 5 years. However, IRS 
lacks a standard for what constitutes good customer telephone service 
that could be compared to its annual goals. Such a standard would make 
the gap between the annual goals and the standard more transparent. 
IRS is using a tool called Contact Analytics to better understand the 
reasons why taxpayers call. However, IRS has not assessed the costs 
and benefits of storing recorded calls for longer than the current 45 
day period for use in Contact Analytics, and GAO identified gaps in 
the process IRS uses to solicit input on call topics from frontline 
IRS staff. Such input could be used to identify issues for further 
research using Contact Analytics. IRSís customer service staff also 
responds to taxpayer correspondence. IRS received about 20 million 
pieces of correspondence in 2010, but it does not have a performance 
measure that addresses the timeliness of taxpayer correspondence, a 
key agency objective. By not having such a performance measure, IRS 
managers may have a less informed basis for balancing resources across 
telephone and correspondence services. 

Table: IRS Telephone Service Goals and Performance, 2005 through 2010 
Filing Seasons: 

Percentage of callers seeking live assistance who received it: 

2005 Actual: 82%; 
2005 Goal: 82%. 

2006 Actual: 81%; 
2006 Goal: 82%. 

2007 Actual: 81%; 
2007 Goal: 82%. 

2008 Actual: 57%; 
2008 Goal: 82%. 

2009 Actual: 68%; 
2009 Goal: 77%. 

2010 Actual: 76%; 
2010 Goal: 71%. 

Average wait time (minutes): 

2005 Actual: 4.3; 
2005 Goal: 2.8. 

2006 Actual: 3.9; 
2006 Goal: 5.0. 

2007 Actual: 4.6; 
2007 Goal: 4.3. 

2008 Actual: 8.6; 
2008 Goal: 4.5. 

2009 Actual: 8.4; 
2009 Goal: 10.4. 

2010 Actual: 9.5; 
2010 Goal: 11.6. 

Source: GAO analysis of IRS data. 

[End of table] 

Web site: Visits to IRSís Web site increased and IRS is taking steps 
to improve content management before introducing a new Web site in 2012.
Face-to-face: In 2010, taxpayer visits to IRSís walk-in sites and 
sites operated by volunteers remained about the same as in 2009. IRSís 
program to provide refunds on debit cards at certain volunteer sites, 
targeting taxpayers without bank accounts, received little use in 
2010. IRSís evaluation of the program did not include taxpayers or 
volunteers. By not including these stakeholders, IRS risks not 
learning the real reasons for low participation. 

What GAO Recommends: 

GAOís five recommendations to IRS are to establish a customer service 
telephone standard, assess the costs and benefits of storing recorded 
calls beyond 45 days, solicit information on call trends from 
employees, develop a performance measure for the timeliness of 
taxpayer correspondence, and involve key stakeholders in its 
evaluation of its debit card program. 

IRS disagreed with developing a customer service standard, not wanting 
to revise its measurement of phone service. However, a standard would 
allow IRS to communicate to Congress what it believes constitutes good 
service. IRS also disagreed with assessing the costs and benefits of 
storing calls beyond 45 days. GAOís report suggests that further 
analysis could show whether the benefits of doing so currently exceed 
the costs. IRS generally agreed with the other three recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-11-111] or key 
components. For more information, contact James R. White at (202) 512-
9110 or whitej@gao.gov. 

[End of section] 

Contents: 

Letter: 

Scope and Methodology: 

Background: 

Electronic Processing Continued to Increase, but Some Refunds Were 
Delayed as a Result of IRS Correcting Millions of Taxpayer Errors: 

IRS Exceeded Some 2010 Telephone Service Goals, but Timeliness Is Not 
Included in Paper Correspondence Goals and IRS Could Do More to 
Improve Service: 

Visits to IRS's Web Site Increased and IRS Is Taking Steps to Improve 
Taxpayer Satisfaction: 

Accuracy at IRS's Walk-In Sites Improved, but IRS's Evaluation of the 
Debit Card Program at Volunteer Sites Is Missing Stakeholder Input: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Comments from the Internal Revenue Service: 

Appendix II: Selected Key Legislative Changes Affecting IRS's 2007 
through 2010 Filing Seasons: 

Appendix III: IRS Continues to Process More Returns through the Error 
Resolution System: 

Appendix IV: IRS's Processing Performance Relative to 2005 and 2010 
Goals: 

Appendix V: Weekly Toll-Free Calls and Percentage of Callers Seeking 
and Receiving Live Assistance: 

Appendix VI: Services Offered at Walk-In and Volunteer Sites: 

Appendix VII: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Individual Income Tax Returns Processed and Refunds Issued, 
2005 through 2010: 

Table 2: IRS Telephone Service Goals and Performance, 2005 through 
2010 Filing Seasons: 

Table 3: Calls to IRS by Call Type, 2005 through 2010: 

Table 4: IRS Telephone Assistor Accuracy Performance, 2005 through 
2010: 

Table 5: IRS Taxpayer Correspondence Performance, 2005 through 2010: 

Table 6: IRS Web Site Use, 2005 through 2010: 

Table 7: IRS Walk-in Site Accuracy, 2008 through 2010: 

Table 8: IRS Processing Performance, Fiscal Years 2005 through 2010: 

Table 9: Services Performed at IRS Walk-In and Volunteer Sites, 2008 
through 2010: 

Figures: 

Figure 1: Total Number of Returns in ERS, 2005 through 2010, and 
Inventory Due to Specific Credit(s) for 2009 through 2010: 

Figure 2: Weekly Toll-Free Calls and Percentage of Callers Seeking and 
Receiving Live Assistance from January 1 through June 30, 2010: 

Abbreviations: 

ARRA: American Recovery and Reinvestment Act: 

CADE: Customer Account Data Engine: 

E-file: electronic filing: 

ERS: Error Resolution System: 

FAQ: frequently asked questions: 

FTE: full-time equivalent: 

FTHBC: First-Time Homebuyer Credit: 

IMF: Individual Master File: 

IRS: Internal Revenue Service: 

LOS: Customer Service Representative Level of Service: 

MEA: math error authority: 

MeF: Modernized e-File: 

MWP: Making Work Pay: 

PDF: portable document format: 

PIN: personal identification number: 

TAB: Taxpayer Assistant Blueprint: 

TIGTA: Treasury Inspector General for Tax Administration: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

December 16, 2010: 

The Honorable Max Baucus: 
Chairman: 
The Honorable Charles E. Grassley: 
Ranking Member: 
Committee on Finance: 
United States Senate: 

The Honorable John Lewis: 
Chairman: 
The Honorable Charles W. Boustany, Jr. 
Ranking Member: 
Subcommittee on Oversight: 
Committee on Ways and Means: 
House of Representatives: 

Every tax filing season is a large-scale and critical undertaking 
during which the Internal Revenue Service (IRS) interacts with tens of 
millions of taxpayers by processing tax returns, correcting errors on 
returns, issuing refunds, answering telephone calls, and providing 
other services to taxpayers, both face-to-face and online. IRS has 
also administered complex tax law changes over the last few filing 
seasons--including the First-Time Homebuyer Credit (FTHBC) in 2009 and 
2010 and the Making Work Pay (MWP) tax credit in 2010.[Footnote 1] 
Earlier this year we reported on the challenges IRS faces in ensuring 
compliance with recent changes to the tax treatment of forgiven 
mortgage debt--an issue of particular importance in 2010 given recent 
trends in the housing market and the rise in foreclosures.[Footnote 2] 
We also reported on the use of the FTHBC by state and credit version--
Congress passed three separate versions of the FTHBC.[Footnote 3] 

In light of its importance, at your request, we assessed IRS's 2010 
filing season performance in comparison to 2010 goals and previous 
years in processing individual income tax returns, providing telephone 
service, delivering service through IRS's Web site, and responding to 
face-to-face contacts with taxpayers. Our analyses included 
identifying what efficiency gains, if any, IRS could implement that 
would enhance taxpayer service or compliance during the filing season. 

Scope and Methodology: 

To meet our objective we took the following steps: 

* Reviewed and analyzed IRS documents and data, including performance 
and workload data, reports, testimonies, budget submissions, and 
compared these to IRS's goals and past performance to identify trends 
and anomalies. 

* Reviewed various criteria, including industry standards, federal 
requirements, and best practices, to assess IRS's performance in key 
areas. 

* Reviewed information from other organizations that compile data 
pertinent to our objectives, such as the ForeSee Results IRS 
Satisfaction Insight Review, which evaluates customer satisfaction 
with Web site performance. 

* Interviewed IRS officials responsible for tax return processing, 
taxpayer services, and examination and compliance activities. 

* Interviewed external stakeholders who frequently interact with IRS 
on key aspects of the filing season, including representatives of a 
customer service trade organization, to identify customer service 
benchmarks and best practices, and representatives from major tax 
preparation firms and organizations. 

* Observed operations at IRS's Joint Operations Center (which manages 
telephone services) and listened to calls from taxpayers with 
telephone assistors. We also viewed operations at one of IRS's walk-in 
sites and Submission Processing Center in Atlanta, Ga. We selected 
these particular offices for a variety of reasons, including the 
location of key equipment and IRS managers. 

* Reviewed Treasury Inspector General for Tax Administration (TIGTA) 
reports and interviewed TIGTA officials about IRS's performance and 
initiatives. 

When data were available, we compared IRS's 2010 performance to its 
performance from fiscal years 2005 through 2009. IRS officials noted 
that tax law changes affected performance during fiscal years 2008 and 
2009 as compared to 2005 through 2007, when tax law changes were not 
as significant. 

This report discusses numerous filing season and performance measures 
and data covering the quality, accessibility, and timeliness of IRS's 
services. To the extent possible, we corroborated information from 
interviews with documentation and data and where not possible, we 
attribute the information to IRS officials. We reviewed IRS 
documentation, interviewed IRS officials about computer systems and 
data limitations, and compared those results to our standards of data 
reliability.[Footnote 4] Data limitations are discussed where 
appropriate. We consider the data presented in this report to be 
sufficiently reliable for our purposes. We conducted our work 
primarily at IRS headquarters in Washington, D.C. and at the Wage and 
Investment Division headquarters in Atlanta, Ga. as well as other 
sites mentioned earlier. 

We conducted this performance audit from February 2010 through 
December 2010 in accordance with generally accepted government 
auditing standards. Those standards require that we plan and perform 
the audit to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit 
objective. 

Background: 

Each year during the filing season IRS accepts individual income tax 
returns electronically and on paper, processes the returns, and 
validates key pieces of information. A growing majority of taxpayers 
file their individual tax returns electronically. 

IRS uses the legacy Individual Master File (IMF) and current Customer 
Account Data Engine (CADE) to process individual income tax returns. 
IRS plans to eventually shift all return processing to a new system 
called CADE 2, which is intended to facilitate faster refund 
processing and other benefits, such as providing IRS with more up-to-
date account information and more timely responses to taxpayer 
inquiries.[Footnote 5] 

IRS is also replacing its legacy electronic filing (e-file) system 
with the Modernized e-File (MeF) system. IRS cannot accept 
electronically filed returns directly from taxpayers. Rather, IRS-
authorized e-file providers transmit returns to IRS electronically. 
Return transmitters send electronic return data directly to IRS using 
either the MeF or the legacy e-file system.[Footnote 6] The MeF system 
is intended to accept or reject individual tax returns faster than the 
legacy system. In addition, if the return is rejected, the MeF system 
should provide better information regarding why the return was 
rejected.[Footnote 7] The MeF system is also intended to allow 
taxpayers to attach portable document format (PDF) files to their tax 
returns, which will be useful in instances where taxpayers are 
required to submit additional documentation, such as for the FTHBC. 
Finally, MeF serves as a single point of submission for federal and 
state tax return information. IRS is planning to fully implement the 
MeF system in time for the 2012 filing season, and retire the legacy e-
file system in October 2012. 

As in the last few filing seasons, in 2010, IRS administered complex 
tax law changes, including the MWP and Residential Energy Property 
Credits[Footnote 8]--part of the American Recovery and Reinvestment 
Act of 2009 (ARRA)--and the FTHBC. 

* The refundable MWP tax credit provides up to $400 for working 
individuals and up to $800 for married taxpayers filing joint returns. 
[Footnote 9] Individuals who received Social Security, Railroad 
Retirement, or Veteran's benefits received a $250 Economic Recovery 
Payment in 2009, which reduced the amount of the MWP credit they were 
eligible to receive. 

* The Residential Energy Property Credit increases the existing credit 
rate to 30 percent of cost up to a maximum credit of $1,500 for 
homeowners who make certain energy efficient improvements to existing 
homes. 

* As we have previously reported, since 2008, Congress has enacted 
three versions of the FTHBC to help stimulate the housing market by 
providing first-time homebuyers and some long-term homeowners with a 
refundable tax credit to assist with the purchase of a home.[Footnote 
10] 

* Appendix II summarizes key tax law changes that affected recent 
filing seasons. 

Part of IRS's filing season work involves correcting errors on tax 
returns, which can benefit both IRS and taxpayers. Correcting errors 
before issuing refunds allows IRS to avoid costly and burdensome 
audits and taxpayers may receive larger refunds or be made aware of 
additional taxes owed before being required to pay interest and 
penalties. 

For example, IRS used math error authority (MEA) to identify and 
correct errors with the FTHBC. MEA allows IRS to identify calculation 
errors and check for obvious noncompliance, such as claims above 
income and credit limits. These automated and relatively low-cost 
(compared to audits) math error checks increase the likelihood of IRS 
collecting the correct amount of tax owed. Congress must grant IRS 
specific authority to use MEA for purposes beyond computational 
errors. We previously recommended that Congress broaden IRS's MEA with 
appropriate safeguards to prevent its misuse.[Footnote 11] 

In addition to processing tax returns, IRS also provides tax law and 
account assistance, limited return preparation, tax forms and 
publications, and outreach and education, primarily through its 
telephone services, Web site, and, to a much lesser extent, through 
face-to-face assistance. For example, IRS staff provides assistance at 
401 walk-in sites where taxpayers can receive basic tax law 
assistance, receive assistance with their accounts, and have returns 
prepared by IRS if their annual income is $49,000 or less. IRS also 
has volunteer partners that staff over 12,000 volunteer sites, which 
help serve traditionally underserved taxpayer segments, including 
elderly, low-income, and taxpayers with limited English proficiency. 
Continued improvements to telephone service and IRS's Web site could 
help reduce the demand for taxpayer service at walk-in and volunteer 
sites. 

Electronic Processing Continued to Increase, but Some Refunds Were 
Delayed as a Result of IRS Correcting Millions of Taxpayer Errors: 

The number of tax returns IRS processed in 2010 declined by about 2 
percent from the prior year, as shown in table 1. However, 
electronically filed returns continued to increase, reaching 71 
percent of all returns. As we have previously reported, electronic 
filing is important because it allows taxpayers to receive refunds 
faster, is less prone to transcription and other errors, and provides 
IRS significant cost savings. For example, for fiscal year 2009, IRS 
reported that it costs 19 cents to process an e-filed return compared 
to $3.29 for a paper return. 

Table 1 also shows that IRS issued about 2 percent fewer refunds in 
2010 compared to 2009, with the average refund amount being about 
$2,915. In all, IRS issued about $312 billion in refunds during the 
2010 filing season. 

Table 1: Individual Income Tax Returns Processed and Refunds Issued, 
2005 through 2010: 

Returns processed: 
2005: 130 million; 
2006: 131 million; 
2007: 135 million; 
2008[A]: 151 million; 
2009: 139 million; 
2010: 137 million; 
Percentage change from 2009 to 2010[B]: -2%. 

Returns processed: Paper; 
2005: 62 million; 
2006: 59 million; 
2007: 56 million; 
2008[A]: 6 million2; 
2009: 45 million; 
2010: 40 million; 
Percentage change from 2009 to 2010[B]: -11%. 

Returns processed: Electronic; 
2005: 68 million; 
2006: 72 million; 
2007: 79 million; 
2008[A]: 89 million; 
2009: 94 million; 
2010: 97 million; 
Percentage change from 2009 to 2010[B]: 3%. 

Percent electronically filed: 
2005: 52%; 
2006: 55%; 
2007: 58%; 
2008[A]: 59%; 
2009: 67%; 
2010: 71%; 
Percentage change from 2009 to 2010[B]: NA. 

Refunds issued: 
2005: 99 million; 
2006: 99 million; 
2007: 103 million; 
2008[A]: 105 million; 
2009: 109 million; 
2010: 107 million; 
Percentage change from 2009 to 2010[B]: -2%. 

Dollar amount of refunds issued; 
2005: $210 billion; 
2006: $219 billion; 
2007: $234 billion; 
2008[A]: $248 billion; 
2009: $298 billion; 
2010: $312 billion; 
Percentage change from 2009 to 2010[B]: 5%. 

Average refund amount[C]; 
2005: $2,126; 
2006: $2,206; 
2007: $2,259; 
2008[A]: $2,350; 
2009: $2,725; 
2010: $2,915; 
Percentage change from 2009 to 2010[B]: 7%. 

Source: GAO analysis of IRS data. 

Notes: Data are from January 1 through September 30, 2005; September 
29, 2006; September 28, 2007; October 3, 2008; October 2, 2009; and 
October 1, 2010. NA stands for not applicable. 

[A] IRS experienced a significant processing increase in 2008 as a 
result of the economic stimulus payments. 

[B] Numbers in the table are rounded, but percentage change was 
calculated using exact values. 

[C] Actual dollar amount. 

[End of table] 

IRS processed about the same number of returns on current CADE as it 
did in 2009 (just over 41 million). In 2012, IRS plans to establish 
and use the new CADE 2 database in conjunction with their legacy 
system for daily processing of individual taxpayer accounts. Current 
CADE processes returns about 1 to 8 days faster than the legacy 
system, and at present, only taxpayers whose accounts have been moved 
to that system get this benefit (i.e., about 30 percent of all 
individual returns). Although IRS once intended for current CADE to 
replace the legacy system, this is no longer the case. Rather, 
beginning in the 2012 filing season, IRS plans to introduce daily 
processing for most returns using the legacy system and the new CADE 2 
database. At that time, IRS officials expect that the majority of 
individual taxpayers will receive the benefit of faster refunds in 
addition to other benefits. 

Although IRS began using MeF to accept individual returns for the 
first time in 2010, the system was underutilized.[Footnote 12] Return 
transmitters submitted about 7 percent of the total number of returns 
that IRS officials projected the MeF system could accept.[Footnote 13] 
IRS officials cited several reasons for lack of use of the MeF system, 
including that it is unproven compared to the current legacy e-file 
system. They also noted that the legacy e-file system had a lower 
rejection rate than MeF and return transmitters may have stopped using 
MeF after encountering performance problems. In interviews with GAO 
and in a survey conducted by the Electronic Tax Administration 
Advisory Committee, a group of stakeholders that offers suggestions 
about current or proposed electronic tax administration policies, 
industry stakeholders who are major users of electronic filing cited 
MeF system "instability" (system down-time, time-outs, slow servers, 
and delayed acknowledgments) as a major reason for low use of the MeF 
system. 

For the 2011 filing season, IRS officials expect that the MeF system 
will be capable of accepting up to about 85 million individual 
returns. However, IRS officials acknowledged that until IRS overcomes 
the performance and stability issues experienced in 2010, transmitters 
are likely to continue to send Form 1040 returns to the legacy 
electronic filing system. Transmitters may still be reluctant to 
switch to MeF until the system is proven to be stable, and their 
participation is still voluntary until the legacy system is turned off 
in 2012. To ensure that issues with the stability of the system do not 
persist in 2011, IRS officials are testing the MeF system in 
preparation for next year. IRS officials expect that by 2012, when the 
legacy system is scheduled to be turned off, MeF should be able to 
accept all individual returns filed electronically. 

IRS Corrected Millions of Taxpayer Errors, Resulting in More Taxpayers 
Experiencing Delays Receiving Refunds: 

IRS corrected a large number of taxpayer MWP errors and identified 
returns with residential energy credits using its Error Resolution 
System (ERS) this filing season.[Footnote 14] In addition, IRS applied 
filters for pre-refund examinations on certain FTHBC returns.[Footnote 
15] IRS officials said that the combined effect of these actions 
resulted in longer processing times in general--not just for returns 
with MWP errors or FTHBC claims. 

In total, about 26 million returns, or about 20 percent of all returns 
processed, went to ERS this year. IRS officials said it generally 
takes approximately one week to correct returns in ERS; however, 
between March and May of 2010, it took up to two weeks to process 
these returns. Appendix III describes in more detail the large number 
of returns sent to ERS this filing season. 

Correcting returns benefited either taxpayers or IRS. For example, IRS 
corrected millions of MWP errors in favor of taxpayers, meaning 
taxpayers received larger refunds (or had a lower balance due) than 
they anticipated when they filed their return. In addition, applying 
filters for pre-refund examinations allowed IRS to prevent millions of 
dollars from being issued for ineligible FTHBC claims. Although 
applying these filters often results in IRS identifying incorrect 
refunds, we have previously reported that in some cases the filters 
applied were not sufficient to stop incorrect refunds from being sent 
to taxpayers.[Footnote 16] 

In part due to these complications, IRS's timeliness in issuing 
refunds declined by 3 percentage points, marking its lowest level 
since at least 2005. According to our calculations, this translates to 
about 3.3 million more refunds being delayed through August 2010 
compared to last year. Delays in providing refunds adversely affect 
taxpayers because it takes longer for them to receive their refunds 
and contributes to taxpayer calls about the status of their refunds. 
In addition, IRS paid significantly more interest on those refunds 
than in previous years, which imposed additional costs to the federal 
government. For example, IRS paid about $12.6 million in refund 
interest through August 2010, about $8 million more than in 2009. 
[Footnote 17] On the other hand, rapid processing of refunds without 
proper checks can lead to erroneous refund payments which can be 
costly to the federal government. Recovering erroneous refunds also 
imposes additional burdens on taxpayers. 

Finally, although IRS missed its fiscal year goals for refund 
timeliness and refund interest paid, IRS met four key processing 
goals--correspondence error rate, deposit error rate, productivity, 
and refund error rate. Appendix IV defines and summarizes IRS's 
processing performance compared to goals from 2005 to 2010. 

IRS Exceeded Some 2010 Telephone Service Goals, but Timeliness Is Not 
Included in Paper Correspondence Goals and IRS Could Do More to 
Improve Service: 

The percentage of callers seeking live assistance who actually 
received it--referred to as IRS's Customer Service Representative 
Level of Service (LOS)--improved to 76 percent in 2010 as compared to 
the previous 2 years, as shown in table 2.[Footnote 18] However, 
taxpayers waited almost 10 minutes on average to speak with a phone 
assistor in 2010. This is the longest average wait time since at least 
2005, and IRS officials attribute it in part to an increase in the 
number of calls from taxpayers inquiring about their individual tax 
account.[Footnote 19] Taxpayers' access to phone assistors in 2010 was 
below the levels from 2005 through 2007 and, although IRS met its 
goals in 2010, the goals were lower than any previous year since 
before 2005. IRS's LOS goal for 2010 was 11 percentage points lower 
than from 2005 through 2008. 

Table 2: IRS Telephone Service Goals and Performance, 2005 through 
2010 Filing Seasons: 

Percentage of callers seeking live assistance who received it: Actual; 
2005: 82%; 
2006: 81%; 
2007: 81%; 
2008: 57%; 
2009: 68%; 
2010: 76%; 
Percentage change from 2009 to 2010[A]: 13%. 

Percentage of callers seeking live assistance who received it: Goal; 
2005: 82%; 
2006: 82%; 
2007: 82%; 
2008: 82%[B]; 
2009: 77%[C]; 
2010: 71%; 
Percentage change from 2009 to 2010[A]: -8%. 

Average wait time (minutes): Actual; 
2005: 4.3; 
2006: 3.9; 
2007: 4.6; 
2008: 8.6; 
2009: 8.4; 
2010: 9.5; 
Percentage change from 2009 to 2010[A]: 13%. 

Average wait time (minutes): Goal; 
2005: 2.8; 
2006: 5.0; 
2007: 4.3; 
2008: 4.5; 
2009: 10.4[D]; 
2010: 11.6; 
Percentage change from 2009 to 2010[A]: 12$. 

Source: GAO analysis of IRS data. 

Note: Actual data are from January 1 through June 30, while goals are 
for the entire fiscal year. We believe comparing performance during 
the filing season to fiscal year goals is appropriate as IRS's filing 
season performance is an indicator of its performance for the entire 
year. 

[A] Numbers in the table are rounded, but percentage change was 
calculated using exact values. 

[B] IRS revised its original fiscal year goal of 82 percent down to 74 
percent because of high call volume due to stimulus-related calls. 

[C] IRS revised its original fiscal year goal of 77 percent down to 70 
percent because of high call volume from taxpayers requesting 
electronic filing authentication information and asking stimulus- 
related questions. 

[D] IRS determines its wait time goal based on anticipated call volume 
and resource availability. IRS significantly raised its wait time goal 
for 2009 as compared to 2008 in light of anticipated increased call 
volume related to tax law changes. 

[End of table] 

As in 2008 and 2009, IRS continued to receive millions of calls 
related to tax law changes, including for the FTHBC and MWP. From 
February 8 through June 30, 2010, calls about these two credits 
accounted for 9 percent of IRS's telephone services.[Footnote 20] In 
response to MWP calls, in March 2010, IRS introduced an automated 
application to reduce the number of taxpayers needing to talk to a 
live assistor. 

IRS received 77 million telephone calls during the 2010 filing season, 
about the same as in 2009, as table 3 shows. IRS's automated phone 
system answered about 25 percent more calls compared to 2009, which is 
due in part to a new automated phone service which enables taxpayers 
to request their electronic filing personal identification number 
(PIN), as well as a 16 percent increase in the use of the refund 
automated application. IRS phone assistors answered about 24 million 
calls at a cost, according to IRS officials, of about $25 per call, or 
about $600 million from January 1 through June 30, 2010. IRS responded 
to these calls using 24 call centers with about 5,300 full-time 
equivalents (FTE).[Footnote 21] 

Table 3: Calls to IRS by Call Type, 2005 through 2010: 

Automated calls answered: 
2005: 23 million; 
2006: 22 million; 
2007: 21 million; 
2008[A]: 43 million; 
2009: 25 million; 
2010: 32 million; 
Percentage change from 2009 to 2010[B]: 25%. 

Assistor calls answered: 
2005: 22 million; 
2006: 21 million; 
2007: 22 million; 
2008[A]: 27 million; 
2009: 26 million; 
2010: 24 million; 
Percentage change from 2009 to 2010[B]: -6$. 

Abandoned calls: 
2005: 11 million; 
2006: 12 million; 
2007: 13 million; 
2008[A]: 34 million; 
2009: 21 million; 
2010: 21 million; 
Percentage change from 2009 to 2010[B]: -4%. 

Busies and IRS disconnects: 
2005: 1 million; 
2006: 2 million; 
2007: 1 million; 
2008[A]: 14 million; 
2009: 5 million; 
2010: 1 million; 
Percentage change from 2009 to 2010[B]: -78%. 

Total calls received: 
2005: 58 million; 
2006: 57 million; 
2007: 57 million; 
2008[A]: 118 million; 
2009: 78 million; 
2010: 77 million; 
Percentage change from 2009 to 2010[B]: 0. 

Source: GAO analysis of IRS data. 

Note: Data from January 1 through June 30. 

[A] IRS received an unprecedented number of calls in 2008 primarily 
related to economic stimulus package payments. The Economic Stimulus 
Act of 2008 (Pub. L. No. 110-185) mandated that IRS send stimulus 
payments to over 100 million households. 

[B] Numbers in the table are rounded, but percentage change was 
calculated using exact values. 

[End of table] 

The accuracy of IRS's telephone assistors' responses to tax law and 
account-related questions was about the same as last year and exceeded 
IRS's fiscal year 2010 goals, as shown in table 4. IRS officials 
attribute continued levels of accuracy to a number of factors, such as 
the use of automated assistance tools and targeted training of 
assistors. 

Table 4: IRS Telephone Assistor Accuracy Performance, 2005 through 
2010: 

Accuracy measure[A]: Tax law accuracy rate (in percent)[B]; 
2005 actual: 89.5%; +/-0.6; 
2006 actual: 90.6%; +/-0.6; 
2007 actual: 90.7%; +/-0.9; 
2008 actual: 90.3%; +/-0.9; 
2009 actual: 92.5%; +/-0.8; 
2010 actual: 92.4%; +/-0.8; 
Fiscal year 2010 goals: 91.2. 

Accuracy measure[A]: Accounts accuracy rate (in percent)[B]; 
2005 actual: 91.3%; +/-0.4; 
2006 actual: 93.3%; +/-0.3; 
2007 actual: 93.2%; +/-0.5; 
2008 actual: 93.5%; +/-0.4; 
2009 actual: 95.1%; +/-0.4; 
2010 actual: 95.6%; +/-0.4; 
Fiscal year 2010 goals: 93.7%. 

Source: IRS data. 

[A] Based on representative samples selected by IRS from January 1 
through June 30. 

[B] The percentage of calls in which telephone assistors provided 
accurate answers for the call type and took the appropriate actions, 
with a 90 percent confidence interval. 

[End of table] 

IRS Does Not Have a Customer Service Telephone Standard: 

The decline in IRS's live telephone assistance goal from 82 percent in 
2005 through 2008 to 71 percent in 2010 raises questions about what 
constitutes good customer service. Executive Order 12862 instructs 
federal agencies to establish and measure performance against customer 
service standards, which are to be equal to the quality of service 
offered by private organizations providing a comparable service. 
[Footnote 22] A related Presidential Memorandum introduced in 1995 and 
still in effect also notes that customer service standards should 
reflect customer views.[Footnote 23] In addition, we have reported 
that performance data should be used to identify and analyze the gap 
between an organization's actual performance and desired outcomes, 
including by setting performance benchmarks to compare an organization 
with private organizations that are thought to be the best in their 
field.[Footnote 24] 

IRS sets an annual goal for LOS performance based on resource 
availability, the expected number and complexity of calls, and 
anticipated volume of taxpayer correspondence, and subsequently 
determines weekly and other performance targets to achieve its annual 
goal.[Footnote 25] IRS's LOS goal would differ from a customer service 
standard in that it measures what IRS management determines is 
attainable given current resources and expected call volume, compared 
to defining standards based on the quality of service provided by 
comparable organizations and on what matters most to the customer--in 
this case, taxpayers. 

According to IRS officials, they would be able to determine a customer 
service telephone standard and could provide cost estimates to achieve 
the standard. Once set, however, IRS officials identified several 
challenges to meeting such a standard, including: 

* the potential need for additional resources; 

* the need to balance resources between telephone services, other 
taxpayer services, and enforcement activities; 

* unexpected changes in agency priorities which require the 
flexibility to shift resources to respond; and: 

* potentially significant fluctuations in call volume, including those 
resulting from tax law changes. 

IRS officials expressed concern that developing a customer service 
telephone standard could create the expectation that the agency would 
achieve that standard each year, even when resources, call volume, and 
other priorities may make the standard unattainable. This could be the 
case even if the annual goal is set at a level that is attainable. 
However, as noted above, a customer service standard is something to 
strive for and is different than an annual performance goal. Adding a 
customer service telephone standard would make the gap between the 
standard and annual performance goals transparent. Further, it could 
help IRS communicate its resource needs and help Congress make more 
informed decisions about IRS's budget. 

IRS's Frontline Telephone Staff Are Not Consistently Consulted to Help 
Identify Solutions for Taxpayer Services: 

According to senior IRS officials, IRS has a process that includes 
holding regular team meetings to solicit ideas from frontline phone 
assistors about how to improve service. For example, the meetings are 
intended to help managers identify trends in call topics that might 
benefit from further research about the source of taxpayer confusion 
that could lead to finding less costly ways to provide assistance. 
However, we identified several gaps in this process. Specifically: 

* Staff responsible for analyzing IRS's telephone calls using a 
research tool called Contact Analytics said determining appropriate 
search terms to effectively identify calls from taxpayers is one key 
challenge to using the system. This is something that could be 
improved by using frontline employees to identify search terms or 
trends in call topics. 

* Managers and frontline phone assistors with whom we met considered 
the process to be informal where phone managers would note some issues 
to more senior management.[Footnote 26] 

* According to IRS officials responsible for phone services, IRS did 
not consult with frontline phone assistors to obtain input on taxpayer 
call topics when reviewing call trends and adding an additional 
telephone service line for 2010. 

The telephone service industry considers holding regular meetings with 
experienced phone assistors to identify trends in call topics to be a 
key element in improving service. By not consistently using existing 
processes to solicit input from IRS's frontline employees to identify 
issues for further research, including contributing ideas for Contact 
Analytics, IRS may miss areas of importance to taxpayers which could 
improve taxpayer service. 

IRS Stores Calls for 45 Days, Which May Not Be Long Enough to Complete 
Data Analysis: 

Contact Analytics allows IRS to search recorded interactions between 
taxpayers and IRS assistors to enhance the taxpayer's experience by 
gaining a better understanding of the reasons taxpayers call IRS and 
identifying opportunities for cost savings or efficiency gains. 
However, Contact Analytics is not used to access phone calls older 
than 45 days. According to an IRS official, the current 45 day limit 
causes IRS's business units to use more time-consuming processes to 
analyze calls for proposed improvements to IRS's telephone operations. 
For example, as part of their planned review of refund inquiry calls 
received during the 2010 filing season, IRS officials explained they 
used an alternative system to listen to calls because they needed to 
review data for several months of the filing season, a period that 
extended beyond the 45 days available through Contact Analytics. 

According to officials with IRS's Contact Analytics office, IRS is 
only able to store recorded calls for 45 days because of the expense 
of storing the calls and limited storage space.[Footnote 27] 
Separately, IRS officials responsible for recording and storing calls 
explained that IRS developed its policy on the length of time to store 
data, including calls available for analysis through Contact Analytics 
several years ago. IRS officials acknowledged they have not surveyed 
the business units as to whether they need to store the recorded calls 
for a longer period or analyzed whether the benefits of storing the 
calls longer would exceed the costs. 

IRS Does Not Have Performance Measures to Assess the Timeliness of Its 
Taxpayer Correspondence Services: 

IRS's frontline assistor staff is trained to respond to both telephone 
inquiries and taxpayer correspondence. IRS shifts staff between these 
two areas based on the volume of work and resource availability. For 
fiscal year 2010, IRS dedicated about 5,800 FTEs to taxpayer 
correspondence and, as we noted earlier, about 9,400 FTEs to telephone 
service.[Footnote 28] IRS received about 20 million letters, forms, 
and other types of taxpayer correspondence in 2010, a slight increase 
as compared to 2009 and a 25 percent increase compared to 2007. 
[Footnote 29] Compared to earlier years, such as 2005, the average 
percentage of taxpayer correspondence overage has increased 
significantly, as shown in table 5, which IRS officials attribute to 
legislative tax law changes and a corresponding increase in the volume 
of amended returns.[Footnote 30] 

Amended returns make up a significant portion of IRS's taxpayer 
correspondence work and IRS has processed an increasing number of 
amended returns since 2005, due in part to taxpayers' taking advantage 
of tax law changes. Taxpayers are not able to file amended returns 
electronically, which leads to increased processing time for taxpayers 
and added expense for IRS.[Footnote 31] 

Table 5: IRS Taxpayer Correspondence Performance, 2005 through 2010: 

Taxpayer correspondence received[B]: 
FY 2005: 15 million; 
FY 2006: 15 million; 
FY 2007: 16 million; 
FY 2008: 18 million; 
FY 2009: 19 million; 
FY 2010: 20 million; 
Percentage change from 2009 to 2010[A]: 4%. 

Average percentage of taxpayer correspondence overage[C]; 
FY 2005: 12%; 
FY 2006: 17%; 
FY 2007: 17%; 
FY 2008: 23%; 
FY 2009: 25%; 
FY 2010: 27%; 
Percentage change from 2009 to 2010[A]: 7%. 

Source: GAO analysis of IRS data. 

Note: Aggregate data from Accounts Management and Submission 
Processing, which jointly respond to IRS's taxpayer correspondence. 

[A] Numbers in the table are rounded, but percentage change was 
calculated using exact values. 

[B] Data cover equivalent periods for each fiscal year with slight 
variation in the exact dates depending on the year and data source. 

[C] 2005 through 2008 data do not include overage data for 
correspondence processed by submission processing as submission 
processing began tracking overage data in 2009. 

[End of table] 

For many of its processes, IRS has established performance measures to 
make managers and frontline staff more accountable for improving 
performance. As we previously reported, performance measures should 
provide a clear link to organizational priorities to provide useful 
information for decision making.[Footnote 32] Since one measure may 
not encompass the entire performance of a program area, IRS's balanced 
measures include measures to assess employee satisfaction, customer 
satisfaction, and business results. The business results measures 
generally take into account both the quality and quantity, or 
productivity, of IRS's work. 

As we previously mentioned, IRS has a number of balanced performance 
measures to monitor the productivity of its business results for 
telephone service, including average wait time and the percentage of 
callers seeking live assistance who actually receive it. In all, IRS 
has five balanced performance measures that address the productivity 
of its telephone service. IRS has one taxpayer correspondence 
performance measure that addresses productivity--customer accounts 
resolved.[Footnote 33] However, this measure does not account for the 
timeliness of its correspondence services to taxpayers, which is one 
of IRS's organizational priorities.[Footnote 34] IRS currently 
measures the timeliness of the employee's work. However, this measure 
does not evaluate the time a taxpayer waits for a response. 

According to IRS officials, IRS uses a number of indicators to monitor 
its taxpayer correspondence workload, including size of inventory and 
weekly closures, and make workforce management decisions. In addition, 
a number of these indicators assess the timeliness of IRS's response 
to taxpayers. For example, IRS indicators show that for 2008 and 2009, 
on average, 23 to 25 percent of IRS's taxpayer correspondence 
portfolio has been overage, while in 2010 the percentage overage 
increased to 27 percent.[Footnote 35] IRS management uses the 
percentage overage indicator, among others, to make weekly workforce 
management decisions, including the allocation of staff between 
telephone service and paper correspondence. For example, IRS has a 
computer program that helps IRS officials balance telephone and paper 
inventories and allocate staff between those two areas. 

IRS recognizes that providing timely taxpayer correspondence service 
is its highest improvement opportunity for paper inventory. However, 
without elevating timeliness to taxpayers as part of its suite of 
balanced performance measures for taxpayer correspondence, IRS 
management risks prioritizing telephone or other services, for which 
such measures already exist, over providing timely taxpayer 
correspondence. Balanced performance measures are recognized agency 
priorities and are communicated as such to frontline staff. The lack 
of balanced performance measures addressing the timeliness of IRS's 
response to taxpayers may explain, in part, why such a large 
percentage of IRS's taxpayer correspondence is overage. This is 
particularly important as IRS makes trade-offs between providing 
telephone service and responding to taxpayer correspondence. 

Ensuring the timeliness of IRS's response to taxpayer correspondence 
directly reduces the volume of calls made to IRS's telephone services, 
which can represent significant annual cost savings as phones 
represent one of the most expensive forms of taxpayer services. 

Visits to IRS's Web Site Increased and IRS Is Taking Steps to Improve 
Taxpayer Satisfaction: 

Visits to IRS's Web site continue to increase, and in particular, the 
use of automated services like "Where's My Refund?" is substantially 
higher than in 2007, as table 6 shows. Specifically, IRS piloted four 
new automated Web services in 2010. According to IRS officials, these 
automated services are designed to reduce calls to phone assistors by 
providing alternative channels for taxpayers to access information: 

* the Did I Receive a 2009 Economic Recovery Payment? application, 
which determines whether the taxpayer received the $250 stimulus 
payment in 2009; 

* the Electronic Filing Personal Identification Number (PIN) 
application, which enables taxpayers to request their PIN to sign and 
file their return electronically;[Footnote 36] 

* Seven Interactive Tax Assistant topics, which use interactive 
question-and-response processes, similar to what is used by phone 
assistors, to answer taxpayer questions about common tax law issues 
such as filing status, standard deduction, and eligibility for the 
Child Tax Credit; and: 

* a state-by-state partial list of volunteer tax preparation sites 
with contact and availability information.[Footnote 37] 

Table 6: IRS Web Site Use, 2005 through 2010: 

Total visits: 
2005: 140 million; 
2006: 152 million; 
2007: 168 million; 
2008: 292 million; 
2009: 235 million; 
2010: 239 million; 
Percentage change from 2009 to 2010[A]: 2%. 

Downloads: 
2005: 117 million; 
2006: 160 million; 
2007: 121 million; 
2008: 136 million; 
2009: 137 million; 
2010: 157 million; 
Percentage change from 2009 to 2010[A]: 14%. 

Searches[B]: 
2005: 69 million; 
2006: 93 million; 
2007: 106 million; 
2008: 125 million; 
2009: 263 million; 
2010: 277 million; 
Percentage change from 2009 to 2010[A]: 5%. 

Where's My Refund? (completions): 
2005: 21 million; 
2006: 24 million; 
2007: 31 million; 
2008: 38 million; 
2009: 53 million; 
2010: 64 million; 
Percentage change from 2009 to 2010[A]: 22%. 

"Did I Receive a 2009 Economic Recovery Payment"[C] (completions): 
2005: NA; 
2006: NA; 
2007: NA; 
2008: NA; 
2009: NA; 
2010: 6 million; 
Percentage change from 2009 to 2010[A]: NA. 

Electronic Filing Pin Request (completions)[D]: 
2005: NA; 
2006: NA; 
2007: NA; 
2008: NA; 
2009: NA; 
2010: 5 million; 
Percentage change from 2009 to 2010[A]: NA. 

Online Payment Agreement (completions): 
2005: NA; 
2006: NA; 
2007: 13,000; 
2008: 19,000; 
2009: 34,000; 
2010: 43,000; 
Percentage change from 2009 to 2010[A]: 26%. 

Interactive Tax Assistant Tools[E]: 
2005: NA; 
2006: NA; 
2007: NA; 
2008: NA; 
2009: NA; 
2010: 42,000; 
Percentage change from 2009 to 2010[A]: NA. 

Volunteer site list[F]: 
2005: NA; 
2006: NA; 
2007: NA; 
2008: NA; 
2009: NA; 
2010: 48,000; 
Percentage change from 2009 to 2010[A]: NA. 

Source: IRS data. 

Notes: Data are from January 1 through July 31; NA means not 
applicable. 

[A] Numbers in the table are rounded, but percentage change was 
calculated using exact values. 

[B] Page views; includes both successful search results and search 
results not found. 

[C] Data are from March 8 through July 31, 2010. 

[D] In March 2010, we recommended that IRS move the location of the 
automated application on its Web site to make it more accessible. IRS 
subsequently moved the application. 

[E] Data are from March 7 through July 31, 2010. 

[F] Page views; data are for February 12 through July 31, 2010. 

[End of table] 

In the Taxpayer Assistant Blueprint (TAB), IRS's 5-year strategic plan 
for improving service to taxpayers, IRS identified five Web site 
management control gaps and corresponding improvements that would 
allow IRS to maximize the opportunities to provide taxpayer service 
through its Web site.[Footnote 38] IRS has taken action to address 
some of these gaps. However, other gaps including those related to 
content management and usability reviews have not been fully 
addressed. We previously identified management controls as necessary 
to ensuring the effectiveness and efficiency of operations and the use 
of resources.[Footnote 39] IRS officials said that IRS is taking 
actions to address elements of these management control gaps such as 
development of new Web content management guidance and usability 
review guidance, which are expected to be in place by January 2011. 

Ensuring effective management control for its Web site is especially 
important in light of IRS's planned improvements. From January 1 
through April 15, 2010, IRS's 2010 taxpayer satisfaction survey 
results found that 73 percent of surveyed visitors to [hyperlink, 
http://www.irs.gov] reported that they obtained the information or 
services they were seeking, the same level as in 2009, but a 5 percent 
decrease compared to 2007.[Footnote 40] In response, IRS is taking 
steps to improve its Web site, including investing $320 million over 
10 years to introduce a new site by the 2013 filing season. This $320 
million is being used for Web operations, including a Web site help 
desk, development of interactive Web applications, and program 
management of IRS's Web site and registered user and employee sites. 
According to IRS officials, the new Web site should provide IRS with a 
strengthened technical infrastructure that would allow for easier 
updates on the site and new automated features. 

Accuracy at IRS's Walk-In Sites Improved, but IRS's Evaluation of the 
Debit Card Program at Volunteer Sites Is Missing Stakeholder Input: 

Through April 30, 2010, IRS received 2.8 million taxpayer contacts at 
its 401 IRS walk-in sites, about the same as last year.[Footnote 41] 
To increase taxpayer access to assistance, IRS piloted extended 
Saturday and evening hours in 16 IRS walk-in sites, held five Saturday 
open house events during the fiscal year, and expanded a pilot project 
to place IRS walk-in site employees in volunteer tax preparation sites 
to provide assistance with accounts and tax law questions. From 
January 1 through April 15, 2010, IRS employees worked with 
approximately 5,300 taxpayers at 27 volunteer sites.[Footnote 42] 
According to IRS officials, they plan to continue the programs in 2011. 

As of April 30, 2010, the accuracy of accounts and tax law assistance 
provided at IRS walk-in sites continued to improve, as table 7 shows. 
IRS officials attribute this increased accuracy to the continued use 
of the Interactive Tax Law Assistant which guides assistors through a 
series of questions to provide accurate and consistent responses to 
taxpayers' questions. Further, IRS introduced a new return preparation 
assistance accuracy measure, which assesses the extent to which IRS 
staff prepares accurate returns. 

Table 7: IRS Walk-in Site Accuracy, 2008 through 2010: 

Accounts assistance: 
2008 actual: 85%; +/-2.30; 
2009 actual: 86%; +/-1.93; 
2010 actual: 91%; +/-1.66; 
Fiscal year 2010 goals: 88%. 

Tax law assistance: 
2008 actual: 66%; +/-2.73; 
2009 actual: 76%; +/-1.97; 
2010 actual: 81%; +/-1.83; 
Fiscal year 2010 goals: 77%. 

Return preparation assistance: 
2008 actual: NA; 
2009 actual: NA; 
2010 actual: 82%; +/-3.82; 
Fiscal year 2010 goals: NA. 

Source: GAO analysis of IRS data. 

Note: Actual data are from January 1 through April 30 and NA stands 
for not applicable. IRS does not have comparable accuracy data 
available for the years prior to 2008. 

[End of table] 

According to IRS officials, IRS partnered with community-based 
organizations that ran 12,326 volunteer sites, staffed with 87,602 
volunteers in 2010. Through April 25, 2010, volunteers prepared 2.9 
million tax returns, about the same as last year. Return preparation 
accuracy by volunteers increased compared to 2009. For 2010, 
volunteers achieved an 85 percent accuracy rate for return preparation 
compared to 78 percent last year. According to IRS officials, this 
increase resulted from IRS's new requirement that volunteers use an 
IRS-approved intake sheet, expanded training of volunteers, and 
increased IRS monitoring visits. For more detail on the number of 
contacts at walk-in and volunteer sites, see appendix VI. 

IRS is expanding its program to support its volunteer partners as they 
work with taxpayers to promote financial education and asset building. 
[Footnote 43] One initiative of this program is to assist taxpayers 
who may not have an account at a bank, savings and loan, credit union, 
or other financial institution, to receive their refund through direct 
deposit on a debit card issued by one of IRS's national bank partners. 
[Footnote 44] IRS anticipates that these efforts may result in reduced 
taxpayer use of refund anticipation loans by providing taxpayers with 
a low-cost or no-cost refund option for receiving refunds quickly. 
[Footnote 45] In 2010, the program, which already had a low 
participation rate, drew far fewer taxpayers than in 2009, despite 
increasing the number of sites offering the cards from 15 in 2009 to 
20 in 2010. Less than 3 percent of taxpayers eligible for the program 
elected to receive their refund on a debit card compared to 2009 when 
8 percent of eligible taxpayers participated in the program. 

According to IRS officials, poor program participation is in part due 
to the challenge of appropriately marketing the program to taxpayers. 
However, other factors may have contributed, including having a 
limited number of volunteers available to administer the program at 
volunteer sites and additional training requirements for volunteers 
distributing the cards. IRS included its partner bank institutions in 
its evaluation of the program's 2010 performance, but the evaluation 
did not include other key stakeholders, such as taxpayers or partners 
from volunteer sites where the program was implemented. By not 
including these other key stakeholders, IRS may not have fully 
identified the causes of the program's poor participation rate. As we 
have previously reported, according to the American Evaluation 
Association's Guiding Principles for Evaluators, evaluations should 
include relevant perspectives and interests of the full range of 
stakeholders.[Footnote 46] IRS plans to continue to facilitate the 
program and is carrying out a study and pilot test to improve 
marketing of the debit card at volunteer sites.[Footnote 47] However, 
without an understanding informed by multiple stakeholder perspectives 
on reasons why taxpayer participation in the program was low, 
including reasons outside of the manner in which the program was 
marketed, IRS risks missing opportunities to increase participation. 

Conclusions: 

The filing season is a large-scale, complex effort that requires IRS 
to balance resources across processing returns (including some pre-
refund compliance verification) and providing assistance to taxpayers 
via telephones, mail, walk-in sites and IRS's Web site. Although IRS 
dealt with a number of challenges this filing season, its performance 
improved in some areas and IRS met some goals. Efficiency gains 
realized from continued growth in electronic filing contributed to 
IRS's performance. 

However, the combined effects of recent tax law changes and changes in 
taxpayer behavior can be seen in the fluctuations in IRS's 
performance--not just this year, but in previous years as well. During 
2010, IRS's performance in issuing timely refunds decreased--a result, 
in part, of correcting millions of taxpayer errors to the benefit of 
taxpayers and the federal government. In addition, telephone service, 
although better than last year, remained below 2005 through 2007 
levels and IRS continues to have a significant amount of overage 
taxpayer correspondence. IRS management faces trade-offs in 
determining how to best allocate resources among these priorities. For 
example, when IRS dedicates more resources to providing quality 
telephone service, fewer resources are available to respond to paper 
correspondence and vice versa. 

Opportunities exist for IRS to improve the information available to 
make decisions between competing priorities and to gain efficiencies. 
Establishing a customer service standard for telephone service would 
provide Congress with better information on the resources needed for 
IRS to deliver better telephone service. Further leveraging the use of 
powerful tools already in IRS's arsenal--namely its own staff and data 
contained in Contact Analytics--should help IRS gain efficiencies. For 
example, assessing the costs and benefits of storing recorded calls 
for longer than the current 45 day period could help IRS use Contact 
Analytics to better determine why taxpayers call. Further, 
establishing a performance measure for the timeliness of its taxpayer 
correspondence should help IRS better manage its full range of 
interactions with taxpayers. Involving all key stakeholders in reviews 
of important initiatives, such as expanding the effort to provide 
refunds on debit cards, will lead to a more complete understanding of 
why such initiatives are or are not working. 

Recommendations for Executive Action: 

To gain efficiencies and improve taxpayer service, the Commissioner of 
Internal Revenue should direct the appropriate officials to: 

1. Based on the quality of service provided by comparable 
organizations and on what matters most to the customer, determine a 
customer service telephone standard, and the resources required to 
achieve this standard based on input from Congress and other 
stakeholders; 

2. Use the existing process of regular team meetings with frontline 
telephone assistors to solicit information on call trends and other 
potential improvements to phone service and to supplement issues 
identified using Contact Analytics; 

3. Assess business units' needs for holding Contact Analytics calls 
beyond 45 days and store calls for this period or document that the 
costs of doing so exceed the benefits; 

4. Establish a performance measure for taxpayer correspondence that 
includes providing timely service to taxpayers; and: 

5. Establish an evaluation plan for the 2011 filing season debit card 
program that includes taxpayers, volunteer site partners, and other 
stakeholders and assesses the full range of reasons for program 
participation rates. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Commissioner of Internal 
Revenue. We received written comments from the Deputy Commissioner for 
Services and Enforcement, which are reprinted in appendix I. IRS also 
suggested technical changes to the report, which we incorporated where 
appropriate. 

In response to our draft report, the Deputy Commissioner expressed 
appreciation to GAO for recognizing IRS's significant achievements in 
delivering the 2010 filing season despite the challenges presented by 
several complex tax law changes. 

Of the five recommendations, the Deputy Commissioner agreed with two 
and, although he did not explicitly agree, he described steps IRS is 
taking to address a third recommendation. He disagreed with two 
recommendations. 

The Deputy Commissioner agreed with the recommendation to use the 
existing process of regular team meetings with frontline telephone 
assistors to solicit information on call trends and other potential 
improvements to phone service and Contact Analytics. He also agreed 
with the recommendation to develop a performance measure for taxpayer 
correspondence that includes providing timely service to taxpayers. 
Further, in response to the recommendation that IRS establish an 
evaluation plan for the debit card program that includes taxpayers, 
volunteer site partners, and other stakeholders and assesses the 
reasons for program participation rates, he described steps IRS plans 
to take to assess the debit card program participation rates. 

The Deputy Commissioner disagreed with the recommendation that IRS 
develop a customer service telephone standard, stating that he does 
not believe that IRS needs to revise its current process to measure 
telephone service at this time as it currently develops its telephone 
plans after consideration of many factors. Such factors include 
historical call demand and the types and anticipated lengths of calls. 
However, a customer service telephone standard would serve as a means 
of communicating to Congress and others what IRS believes would 
constitute good customer service. Having such a standard would make 
the gap between the standard and annual performance goals more 
transparent. We recognize that IRS may not be able to achieve the 
standard because of factors such as unexpected call volume and 
competing resources. The intent is to highlight for Congress and 
others the gap between good service and what IRS is able to attain. In 
addition, developing such a standard would put IRS in compliance with 
Office of Management and Budget guidance that requires agencies to 
develop customer service standards. Accordingly, we believe this 
recommendation remains valid. 

Finally, the Deputy Commissioner disagreed with the recommendation 
that IRS assess its business units' needs for holding Contact 
Analytics calls beyond 45 days and store calls for this period or 
document that the costs of doing so exceed the benefits. He stressed 
that IRS's Contact Recording System is used to store calls and the 
Contact Analytics system is used to analyze some calls, noting that 
IRS is confident that storing calls beyond 45 days would not be a low-
cost effort. However, IRS officials responsible for recording and 
storing calls told us that IRS developed its policy on how long to 
store data, including calls available through Contact Analytics, 
several years ago. As we note in our report, IRS officials 
acknowledged that they have not surveyed business units as to whether 
they need to store the calls for a longer period or analyzed whether 
the benefits of doing so would exceed the costs. Further, we 
identified an example during our review in which IRS needed to use 
more time-consuming processes to analyze calls because the calls were 
not available beyond 45 days for use by Contact Analytics. Contact 
Analytics should allow IRS to better understand the reasons taxpayers 
call. Because further analysis could demonstrate whether the benefits 
of storing calls for a longer period currently exceed the costs, we 
believe this recommendation remains valid. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to the 
Chairmen and Ranking Members of other Senate and House committees and 
subcommittees that have appropriation, authorization, and oversight 
responsibilities for IRS. We will also send copies to the Commissioner 
of Internal Revenue, the Secretary of the Treasury, the Chairman of 
the IRS Oversight Board, and the Director of the Office of Management 
and Budget. The report also will be available at no charge on the GAO 
Web site at [hyperlink, http://www.gao.gov]. If you or your staff have 
any questions or wish to discuss the material in this report further, 
please contact me at (202) 512-9110 or at whitej@gao.gov. 

Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this report. GAO staff who 
made key contributions to this report are listed in appendix VII. 

Signed by: 

James R. White: 
Director, Tax Issues Strategic Issues: 

[End of section] 

Appendix I: Comments from the Internal Revenue Service: 

Department Of The Treasury: 
Internal Revenue Service: 
Deputy Commissioner: 
Washington, D.C. 20224: 
	
December 10, 2010: 

Mr. James R. White: 
Director, Tax Issues: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. White: 

I have reviewed your draft report entitled 2010 Tax Filing Season: 
IRS's Performance Improved in Some Key Areas, But Efficiency Gains Are 
Possible in Others. I appreciate your recognition of our significant 
achievements in successfully delivering the 2010 filing season despite 
the challenges of several complex tax law changes. 

Processing: We again had an outstanding filing season in 2010, 
successfully implementing significant and sometimes extremely late tax 
law changes, including the American Reinvestment and Recovery Act of 
2009 (known as the Recovery Act) and the Worker, Homeownership, and 
Business Assistance Act of 2009 (WHBAA). We did experience higher than 
usual error inventories as noted in your report. This additional error 
inventory resulted primarily from our proactive efforts to identify, 
verify eligibility, and provide the Making Work Pay Credit to over 4.6 
million eligible taxpayers, through October 2, 2010, who failed to 
claim this credit on their original tax return. In addition, during 
this same period, IRS timely processed over 137 million individual 
income tax returns and issued over 107 million refunds, totaling 
approximately $312 billion. For the first time, 14,246 of these 
refunds were issued as U.S. Savings Bonds, totaling almost $8 million. 

As you reported, electronic filing increased by 3 percent over last 
year, with over 96.8 million individual taxpayers (70.4 percent) 
filing electronically, including over 767,000 submitted through the 
Modernized e-File system. The remaining 40.6 million returns were 
filed on paper. 

The most significant increase in e-File occurred in the number of 
taxpayers who filed from their home computer. Nearly 35 million 
returns were filed from home computers, an 8 percent increase from the 
prior year. Over 2.9 million of these taxpayers took advantage of the 
free online filing services offered by the Free File Alliance, 
available through IRS.gov. 

Successful implementation of the Customer Account Data Engine (CADE) 
continued during 2010, with Release 5.2 being successfully deployed 
within cost estimates on January 19, 2010. The functionality added in 
Release 5.2 included Criminal Investigation Refund Hold capability, 
Credit Elect processing, Entity related processing, and filing season 
changes. As of October 2, 2010, CADE posted a total of 41.2 million 
returns and disbursed over 35.8 million refunds, totaling more than 
$66.5 billion. In addition, CADE processed 7.1 million payments, 
totaling over $8.9 billion dollars; and issued 8,121 refunds, in the 
form of U.S. Saving Bonds totaling almost $3.1 million. Release 6.2 is 
on schedule for January 18, 2011. The CADE 2 Transition State 1, which 
includes a relational database and daily processing, is scheduled for 
implementation in January 2012. 

Telephone Performance: We delivered an extremely successful filing 
season in addition to meeting the many challenges resulting from 
providing approximately 3.6 million services[Footnote 1] to taxpayers 
that called to obtain information on new credits available through the 
WHBAA and the Recovery Act. We accurately projected the impact of this 
legislation on telephone demand using historical information and data-
driven assumptions. Actions taken to address this additional telephone 
demand included: 

* Utilizing workforce management software to incorporate current 
demand trends into our planning assumptions. 

* Employing a Paper/Phone Optimization tool to maximum productivity 
and assist in making informed decisions concerning weekly tactical 
staffing decisions for management of telephone demand and 
correspondence inventory. 

The IRS also created both telephone and web self-service applications 
to provide automated responses to 14 million taxpayers seeking prior 
year Adjusted Gross Income information needed to electronically sign 
their e-filed tax return, eliminating the need for IRS assistors to 
answer these calls as they had in the past. 

As a result, more than 41.4 million taxpayers were assisted in the 
three and one half months (January 1 to April 15) of the core filing 
season, including 26.1 million taxpayers assisted through automated 
telephone applications, and 15.3 million taxpayers assisted by 
Customer Service Representatives (CSRs). Customer Accuracy and 
Customer Satisfaction also remained high during the filing season. 
Customer Accuracy for Toll-Free services, including Tax Law and 
Accounts, was 95.3 percent, while Customer Satisfaction for the filing 
season was 93 percent for customers using the Toll-Free service. 

The CSR Level of Service for the Fiscal Year (FY) was 74 percent 
compared to 72 percent for the same period in the prior year. This FY, 
Assistor Calls Answered, 36.6 million, exceeded the goal of 32.7 
million, and Assistor Services Provided, 42.5 million, exceeded the 
goal of 38.5 million. Caller Wait Time was less than planned by 48 
seconds (650 seconds vs. 698 seconds). Considering all channels 
(telephones, paper correspondence, and web), Customer Contacts 
Resolved per Staff Year (10,744) was 114 percent of plan, and the Self 
Service Participation (64 percent) was 105 percent of plan. 

Walk-In Assistance: During the FY 2010 filing season, the IRS 
continued to provide services at all 401 Taxpayer Assistance Centers 
(TACs), assisting nearly 2.8 million taxpayers. Once again, we also 
exceeded our Accounts and Tax Law Accuracy goals, providing superior 
customer service. For 2010, we also established a baseline for Return 
Preparation and Correspondence Adjustments quality. Quality data 
obtained from the Field Assistance Contact Recording system was used 
to identify areas for improvement and training. This filing season, 
the TACs achieved a 91 percent Accounts Accuracy rate, exceeding the 
goal of 88 percent, and a Tax Law Accuracy Rate of 81 percent, 
exceeding the goal of 77 percent. We expect continued improvement in 
the accuracy of responses provided by TAC employees. In FY 2011, we 
will be targeting improvement efforts on high volume topics, enhancing 
managerial review skills, and aligning training materials with topics 
that generated the most errors. 

Also, during FY 2010, the IRS increased State return preparation in 
our TACs from 20 to 27 states. We increased our presence in the 
communities by locating TAC employees at 27 Volunteer Income Tax 
Assistance (VITA) sites, up from nine sites in 2009. These employees 
provide IRS account assistance on-site as a supplement to the free tax 
return preparation services provided by VITA volunteers. Overall 
feedback from taxpayers, volunteers, and partners continues to be 
extremely positive. 

The IRS conducted many special events to assist customers during the 
2010 filing season. These included supporting Earned Income Tax Credit 
awareness by offering special Earned Income Tax Credit Saturdays and 
special Open House events to help taxpayers affected by the economic 
downturn with account and other unresolved tax issues. We also 
expanded hours of service at 16 of our largest and busiest TACs, in 
which we successfully tested a variety of extended hours of operation 
during the week and on Saturdays. 

Volunteer Assistance: During the FY 2010 filing season, 87,602 
volunteers prepared nearly 3.1 million Federal tax returns and more 
than 2.2 million State tax returns at over 12,000 VITA and Tax 
Counseling for the Elderly (TCE) sites. These returns were primarily 
prepared for low income, elderly, disabled, and limited English-
proficient taxpayers. This represents a 1.2 percent increase over last 
year's accomplishments. 

The IRS awarded $13.54 million in grant funds in support of the VITA 
($7.44M) and TCE ($6.1M) programs in FY 2010. For the filing season, 
171 grants were awarded to organizations to provide service in all 50 
states and the District of Columbia. These organizations collectively 
prepared more than 880,000 returns at 3,271 sites, supported through 
these grant funds. 

We also continued to build on our Quality Review process during the FY 
2010 filing season. Since 2004, the Treasury Inspector General for Tax 
Administration determined the accuracy of returns prepared by our 
volunteers based on a judgmental sample of a small number of VITA/TCE 
sites, involving less than 50 tax returns. For the 2010 filing season, 
we established an IRS Quality Assurance Office to perform return 
reviews of a statistically valid sample of VITA/TCE sites. A 
centralized review cadre, known as the Quality Statistical Sample 
reviewers, visited the selected sites and reviewed a sample of tax 
returns. The data collected from these reviews was used to calculate a 
statistically valid accuracy rate for all tax returns produced by the 
Volunteer Assistance Program with a 90 percent level of confidence. 
During the 2010 filing season, the 745 returns reviewed resulted in an 
84.7 percent accuracy rate, up 7.9 percent from the prior year. 

Website: The IRS website, IRS.gov, is consistently one of the most 
heavily used government websites. As of November 13, 2010, the website 
was visited more than 284 million times, resulting in more than 1.5 
billion page views. This was up from 278 million visits and remained 
steady with 1.5 billion page views during the same period last year. 
An increase in visits but not in page views indicates site visitors 
may have had success finding the information they needed with fewer 
clicks on the site. Visits are the measurement of actions beginning 
when a visitor views their first web page on IRS.gov and ends when the 
visitor leaves the website. Taxpayers and Practitioners also 
downloaded more than 190 million forms, publications, instructions, 
and other documents. 

Responses to your specific recommendations are enclosed. I appreciate 
your observations on the successful filing season for 2010. If you 
have any questions, please contact me, or a member of your staff can 
contact Robin L. Canady, Director, Strategy and Finance, Wage and 
Investment Division, at (404) 338-8801. 

Sincerely, 

Signed by: 

Steven T. Miller: 
Deputy Commissioner for Services and Enforcement: 

Enclosure: 

[End of letter] 

Enclosure: 

To gain efficiencies and improve taxpayer service, the Commissioner of 
Internal Revenue should direct the appropriate officials to: 

Recommendation 1: 

Based on the quality of service provided by comparable organizations 
and on what matters most to the customer, determine a customer service 
telephone standard, and the resources required to achieve this 
standard based on input from Congress and other stakeholders. 

Comment: 

We believe that our current process to measure telephone service does 
not need to be revised at this time. IRS telephone plans are developed 
after consideration of many factors, including: historical demand 
adjusted for known anomalies; the types and anticipated lengths of 
calls we expect to receive; assumptions concerning upcoming events, 
such as known or pending legislation or trends in customer behavior; 
and the availability of existing or new automated and other 
alternative services. These plans are then matched with available or 
anticipated resources to determine the level of service that can be 
provided to generate the telephone program goals. These goals are only 
finalized after sharing our projections with oversight functions, 
including the IRS Oversight Board, the Office of Management and 
Budget, and Treasury, and after consideration of the President's 
budget request by the House and Senate Appropriations Committees and 
congressional enactment of the Treasury budget. Additionally, during 
this process we routinely receive questions about what it would take 
to deliver alternate levels of service. The results of these scenarios 
are worked closely with the oversight functions. Further complicating 
this process is that the factors used to develop telephone plans do 
not remain static or readily predictable from year to year. An example 
of this was the economic stimulus legislation passed in February 2008, 
well after all telephone plans had been established for the year. 
Prior to passage of the legislation, IRS was on target to meet or 
exceed all fiscal year goals for telephone service. The unprecedented 
high call volumes and ensuing drop in performance that resulted from 
the legislation's passage could not have been anticipated. 

Recommendation 2: 

Use the existing process of regular team meetings with front-line 
telephone assistors to solicit information on call trends and other 
potential improvements to phone service and to supplement issues 
identified using Contact Analytics. 

Comment: 

We agree with this recommendation. As stated in your report, the IRS 
has existing processes to solicit ideas and identify call trends from 
frontline employees, including sharing and receiving information on 
emerging filing season trends. This is a valued communication process 
serving both employee and customer satisfaction. In addition, here are 
other formal avenues to gather employee feedback, such as from the 
Servicewide Electronic Research Program (SERP). The SERP is a database 
in which employees can input direct comments and/or recommendations on 
emerging issues to be elevated for consideration. The IRS also uses 
local employee and headquarters personnel focus group interviews to 
identify gaps in services and procedures. We agree that with the 
introduction of Contact Analytics (CA) there are new opportunities to 
expand the use of feedback from frontline employees, and we will 
include the CA Center of Excellence in the various feedback processes 
to improve the CA queries and research capabilities. 

Recommendation 3: 

Assess business units' needs for holding Contact Analytics calls 
beyond 45 days and store calls for this period or document that the 
costs of doing so exceed the benefits. 

Comment: 

We do not agree with this recommendation. The IRS would like to 
reinforce the distinction between Contact Recording (CR) and CA. Calls 
are stored via CR, and CA is a tool used for analyzing recorded call 
data. The 45 day retention period for recorded calls resides with CR 
and was determined after careful analysis of the costs and benefits 
during the development and deployment of the CR system. Based on that 
analysis and recent feedback from the Modernization and Information 
Technology Services organization, we are confident that increasing 
recorded call storage beyond 45 days would not be a low cost effort. 
Extensive analysis and resource expenditure would be required to 
determine a firm costing estimate and potential return on investment. 
This enhancement would then compete for funding with other high 
visibility and high priority projects that have already been 
identified but remain unfunded. In light of these considerations, we 
do not agree to pursue this recommendation at this time. 

Recommendation 4: 

Establish a performance measure for taxpayer correspondence that 
includes providing timely service to taxpayers. 

Comment: 

We agree with this recommendation. Although there is currently an 
extensive suite of correspondence metrics in place which effectively 
track volume, timeliness, and case priority, the IRS is constantly 
striving to improve the customer experience. For several years, the 
IRS has used the Correspondence Imaging System inventory report to 
monitor weekly overage work and priority inventory, and track closed 
cases compared to the overall inventory. We also utilize the Embedded 
Quality Review System timeliness measure to evaluate whether 
caseworkers took timely case action. For Fiscal Year (FY) 2011, the 
IRS has implemented a new Site Level Indicators and Measures Report, 
which includes the tracking of cycle time and average days to close 
correspondence at the site, as well as the aggregate levels, enabling 
the IRS to monitor timely service to the taxpayer. The IRS places high 
importance on customer service and will continue to review, update, 
and augment the current suite of metrics for the correspondence 
program, as needed. 

Recommendation 5: 

Establish an evaluation plan for the 2011 filing season debit card 
program which includes taxpayers, volunteer site partners, and other 
stakeholders and assesses the full range of reasons for program 
participation rates. 

Comment: 

We plan to conduct a social marketing research study during the FY 
2011 filing season to increase the uptake of the prepaid debit card 
refund option. Our study will evaluate the best approach to market the 
card to taxpayers, volunteer site partners, and stakeholders. We will 
use the results of this study to develop an evaluation plan for the FY 
2012 filing season debit card program. This plan will include 
assessing the full range of reasons for program participation rates. 

Appendix I Footnote: 

[1] The IRS tracks the number of services provided on each call 
received. A service is a telephone interaction between an assistor and 
a customer. A customer can receive multiple services on a single call. 

[End of section] 

Appendix II: Selected Key Legislative Changes Affecting IRS's 2007 
through 2010 Filing Seasons: 

2007 filing season: 

Provision: Tax Relief and Health Care Act of 2006 (Pub. L. 109-432); 
Description of legislation's effect on filing season: Extended many 
existing tax deduction provisions by 2 years. Late passage of the bill 
caused IRS delays in processing some returns. 

Provision: Telephone Excise Tax Refund; 
Description of legislation's effect on filing season: One-time refund 
on the federal income tax return that can be requested by all 
individuals and entities that paid the telephone excise tax, 
regardless of whether they have an obligation to file a tax return. 

2008 filing season: 

Provision: Economic Stimulus Act of 2008 (Pub. L. 110-185); 
Description of legislation's effect on filing season: Mandated that 
IRS send stimulus payments to over 100 million households based on 
taxpayers who filed a 2007 return. Taxpayers filing as single 
generally received $600 and married couples received $1,200. Many 
parents received an additional $300 for each qualifying child born 
after December 31, 1990. 

Provision: Mortgage Forgiveness Debt Relief Act of 2007; (Pub. L. 110- 
142; ); (Expanded by the Emergency Economic Stabilization Act of 2008 
Pub. L. 110-343); 
Description of legislation's effect on filing season: Allowed 
taxpayers to generally exclude from taxable income forgiven mortgage 
debt used to buy, build, or substantially improve a principal 
residence. In 2008 it was extended to qualifying indebtedness 
discharged by January 1, 2013. 

2009 filing season: 

Provision: Build America Bonds; (Provision of the American Recovery 
and Reinvestment Act of 2009, Pub. L. 111-5); 
Description of legislation's effect on filing season: Taxable 
government bonds that are issued with federal subsidies for a portion 
of the borrowing costs delivered through (1) nonrefundable tax credits 
provided to the holders, or (2) refundable tax credits paid to state 
and local government issuers of the bonds. 

Provision: First-Time Homebuyer Credit (FTHBC); 1. (Provision of the 
Housing and Economic Recovery Act of 2008, Pub. L. 110-289); 2. 
(Provision of the American Recovery and Reinvestment Act of 2009, Pub. 
L. 111-5); 
Description of legislation's effect on filing season: 1. Provided 
taxpayers a tax credit equal to 10 percent of the purchase of a home 
up to a maximum of $7,500. Taxpayers must repay the credit over 15 
years beginning in the 2011 filing season[A]; 2. Provided taxpayers a 
refundable tax credit equal to 10 percent of a home's purchase price 
up to $8,000. Taxpayers are still required to repay the credit if the 
home is resold or ceases to be the primary residence of the taxpayer 
within 3 years[B]. 

Provision: Net Operating Loss Carryback; (Provision of the American 
Recovery and Reinvestment Act of 2009, Pub. L. 111-5); 
Description of legislation's effect on filing season: Allows eligible 
small businesses to apply certain losses experienced in 2008 against 
tax liability incurred in up to 5 previous years. 

Provision: Recovery Rebate Credit; (Provision of the Economic Stimulus 
Act of 2008, Pub. L. 110-185); 
Description of legislation's effect on filing season: Allowed for 
taxpayers that did not receive their full stimulus payment in 2007 to 
receive the unpaid portion of the credit on their 2008 return. 

2010 filing season: 

Provision: FTHBC; (Provision of the Worker, Homeownership, and 
Business Assistance Act of 2009 Pub. L. 111-92); 
Description of legislation's effect on filing season: Extended the 
FTHBC from November 30, 2009, to April 30, 2010. Also allowed certain 
long time homeowners purchasing new homes to claim a tax credit up to 
$6,500. 

Provision: Making Work Pay Tax Credit; (Provision of the American 
Recovery and Reinvestment Act of 2009, Pub. L. 111-5); 
Description of legislation's effect on filing season: Refundable tax 
credit providing up to $400 and $800, respectively, to working 
individuals and married couples filing joint returns. 

Provision: Non-business Energy Property Credit; (Provision of the 
American Recovery and Reinvestment Act of 2009, Pub. L. 111-5); 
Description of legislation's effect on filing season: Increases the 
existing percentage of costs that can be claimed and maximum allowable 
credit available to homeowners who make certain energy efficient 
improvements to existing homes through December 2010. 

Source: GAO. 

[A] From the taxpayer's perspective, the Housing Act subsidy is an 
interest-free loan, and the value of the subsidy is the reduced 
interest cost relative to what would have been paid with alternative 
financing. From the federal government's perspective, the cost of the 
subsidy is the interest cost on the loans at the Treasury bond 
interest rate along with some losses from taxpayers failing to comply 
with the repayment provision. 

[B] The recapture provision is limited to the amount of gain on the 
sale, so a taxpayer could sell within 3 years and still not owe 
repayment. 

[End of table] 

[End of section] 

Appendix III: IRS Continues to Process More Returns through the Error 
Resolution System: 

Figure 1 below shows that for the third consecutive year, the number 
of returns in the Internal Revenue Service's (IRS) Error Resolution 
System (ERS) steadily increased. In 2008, IRS corrected many returns 
due to the economic stimulus package and telephone excise tax 
refund.[Footnote 48] Last year IRS corrected many returns due to the 
Recovery Rebate Credit and IRS said this year's high inventory was due 
to Making Work Pay (MWP) errors and using ERS to identify returns on 
which taxpayers claimed certain credits, including the residential 
energy credit. 

Figure 1: Total Number of Returns in ERS, 2005 through 2010, and 
Inventory Due to Specific Credit(s) for 2009 through 2010: 

[Refer to PDF for image: combination stacked vertical bar and line 
graph] 

Year: 2005; 
Total number of errors: 16.1 million. 

Year: 2006; 
Total number of errors: 16.3 million. 

Year: 2007; 
Total number of errors: 15.5 million. 

Year: 2008; 
Total number of errors: 19.2 million. 

Year: 2009; 
Total number of errors: 25.1 million; 
Recovery Rebate Credit: 10.7 million; 
Number of errors not related to one of the above credits: 14.4 million. 

Year: 2010; 
Total number of errors: 26.1 million; 
Making Work Pay: 7.7 million; 
Residential Energy Credit[A]: 6.7 million; 
Number of errors not related to one of the above credits: 11.7 million. 

Source: GAO analysis of IRS data. 

Notes: Total error inventory represents the total number of documents 
sent to ERS each year. For each year, total inventory from January 1 
through September 30, 2005, September 29, 2006, September 28, 2007, 
October 3, 2008, October 2, 2009, October 1, 2010. Recovery Rebate 
credit data through October 1, 2009, Making Work Pay and Residential 
Energy Credit data through September 30, 2010. 

[A] Residential Energy Credit data includes about 124,000 returns 
claiming a credit on either Form 8396, Mortgage Interest Credit, and 
Form 8839, Qualified Adoption Expenses, which were all combined on 
Form 1040, line 52. 

[End of figure] 

Through September 30, IRS had corrected about 7.7 million errors 
associated with MWP, which represents about one-third of all returns 
that went to ERS.[Footnote 49] Approximately 4.6 million of these 
taxpayers, or 60 percent, did not claim MWP and IRS computed the 
credit for them, according to IRS data through October 1. The 
remainder of these taxpayers made an error calculating the credit. 

IRS officials took several actions this filing season which they 
believe helped reduce the ERS inventory, but a key automated tool was 
not ready when IRS processed most of the returns. Beginning in June 
2009, IRS started developing an Integrated Automation Technology tool 
specifically to correct frequently recurring MWP errors. However, IRS 
had difficulties developing the tool and it was not available at all 
processing sites until June 18, 2010. By that time, IRS had already 
corrected approximately 5.6 million, or about 75 percent, of all MWP 
errors. In addition to creating the tool, IRS staff worked overtime, 
shifted resources among various submission processing functions, and 
hired and trained additional employees. 

IRS also placed a large volume of returns in ERS from taxpayers 
claiming residential energy credits. However, these returns did not 
necessarily contain errors. Rather, IRS used ERS to transcribe 
information to identify the number of taxpayers claiming residential 
energy credits and the dollar amount.[Footnote 50] For the 2011 filing 
season, IRS officials told us the Residential Energy Credit will 
appear by itself on Form 1040, line 52 and the combined credits from 
Form 8396, Mortgage Interest Credit, Form 8839, Qualified Adoption 
Expenses, Form 3800, General Business Credit, and Form 8801, Credit 
for Prior-Year Minimum Tax, will be reported on line 53. IRS officials 
said the credits from Form 3800 and Form 8801 will be transcribed 
separately in the Integrated Submission and Remittance Processing 
system, eliminating the need for ERS to transcribe them. IRS officials 
said this system is faster and less expensive than ERS, but there was 
not enough time during the 2010 filing season to program the system 
for this purpose. To prevent sending as many returns to ERS next 
filing season, IRS officials told us they are updating forms and other 
materials using lessons learned from this filing season. 

[End of section] 

Appendix IV: IRS's Processing Performance Relative to 2005 and 2010 
Goals: 

As shown below in table 8, the Internal Revenue Service (IRS) met half 
of its performance goals, the fewest number of goals met since at 
least 2005.[Footnote 51] IRS met the fiscal year 2010 goals for 
correspondence error rate, deposit error rate, productivity, and 
refund error rate. The fiscal year goal for four measures were not 
met--refund interest paid, refund timeliness, deposit timeliness, and 
efficiency. 

Table 8: IRS Processing Performance, Fiscal Years 2005 through 2010: 

Measure name: Deposit error rate; 
Definition: Percentage of payments applied in error by, for example, 
reimbursing a taxpayer who overpaid when the taxpayer wanted the 
overpayment credited to next year's tax bill; 
Fiscal year 2005 actual: 2.2%; (+/-0.26%); 
Fiscal year 2006 actual: 1.6%; (+/-0.24%); 
Fiscal year 2007 actual: 1.3%; (+/-0.22%); 
Fiscal year 2008 actual: 1.1%; (+/-0.27%); 
Fiscal year 2009 actual: 0.7%; (+/-0.20%); 
Fiscal year 2010 actual: 0.4%; (+/-.18%); 
Fiscal year 2010 goal: 1.0%. 

Measure name: Deposit timeliness--paper--individual master file (IMF); 
Definition: Interest foregone by not depositing monies the business 
day after receipt, per $1 million in deposits. Measure assumes an 8 
percent interest rate; 
Fiscal year 2005 actual: $390; 
Fiscal year 2006 actual: $354; 
Fiscal year 2007 actual: $331; 
Fiscal year 2008 actual: $290; 
Fiscal year 2009 actual: $204; 
Fiscal year 2010 actual: $213; 
Fiscal year 2010 goal: $204. 

Measure name: Correspondence error rate[A] (includes system errors)[M] 
IMF; 
Definition: The percentage of incorrect Submission Processing 
Masterfile notices and letters issued to taxpayers by the processing 
sites; 
Fiscal year 2005 actual: NA; 
Fiscal year 2006 actual: NA; 
Fiscal year 2007 actual: 4.3%; (+/-0.38%); 
Fiscal year 2008 actual: 3.8%; (+/-0.36%); 
Fiscal year 2009 actual: 5.4%; (+/-0.53%); 
Fiscal year 2010 actual: 5.4%; (+/-0.45%); 
Fiscal year 2010 goal: 5.4%. 

Measure name: Refund error rate--individual (paper) (includes systemic 
errors); 
Definition: Percentage of refunds with IRS-caused errors in the entity 
information (e.g., incorrect name, Social Security number, or refund 
amount); includes systemic errors[B]; 
Fiscal year 2005 actual: 5.0%; (+/-0.48%); 
Fiscal year 2006 actual: 4.5%; (+/-0.46%); 
Fiscal year 2007 actual: 2.8%; (+/-0.36%); 
Fiscal year 2008 actual: 3.4%; (+/-0.52%); 
Fiscal year 2009 actual: 2.0%; (+/-0.33%); 
Fiscal year 2010 actual: 1.4%; (+/-0.28%); 
Fiscal year 2010 goal: 3.2%. 

Measure name: Refund interest paid; 
Definition: Amount of refund interest IRS paid per $1 million of 
refunds issued; 
Fiscal year 2005 actual: $29.21; 
Fiscal year 2006 actual: $30.12; 
Fiscal year 2007 actual: $39.60; 
Fiscal year 2008 actual: $24.16; 
Fiscal year 2009 actual: $15.36; 
Fiscal year 2010 actual: $44.12; 
Fiscal year 2010 goal: $16.00. 

Measure name: Refund timeliness--individual (paper); 
Definition: Percentage of refunds issued within 40 days or less; 
Fiscal year 2005 actual: 99.2%; (+/-0.18); 
Fiscal year 2006 actual: 99.3%; (+/-0.13); 
Fiscal year 2007 actual: 98.9%; (+/-0.19%); 
Fiscal year 2008 actual: 99.1%; (+/-0.19%); 
Fiscal year 2009 actual: 99.2%; (+/-0.18%); 
Fiscal year 2010 actual: 96.1%; (+/-0.44%); 
Fiscal year 2010 goal: 98.4%. 

Measure name: Productivity; 
Definition: Weighted volume of documents processed per staff year 
expended at the processing centers; 
Fiscal year 2005 actual: 31,444; 
Fiscal year 2006 actual: 33,237; 
Fiscal year 2007 actual: 34,313; 
Fiscal year 2008 actual: 37,624; 
Fiscal year 2009 actual: 47,259; 
Fiscal year 2010 actual: 47,208; 
Fiscal year 2010 goal: 46,348. 

Measure name: IMF efficiency; 
Definition: Measure of Individual Master File returns processed per 
staff year expended; 
Fiscal year 2005 actual: 14,965; 
Fiscal year 2006 actual: 16,124; 
Fiscal year 2007 actual: 22,031; 
Fiscal year 2008 actual: 23,834; 
Fiscal year 2009 actual: 22,758; 
Fiscal year 2010 actual: 24,800; 
Fiscal year 2010 goal: 25,114. 

Source: GAO analysis of IRS data. 

Note: Percentages are rounded to the nearest tenth. 

[A] The reported Correspondence Error Rate result is a weighted 
combination of the results of the Letter and Notice Error Rate 
measures. The weights are based on the actual volumes of letters and 
notices (as reported in letter and notice weighted reports). 

[B] Systemic errors are computer-generated errors over which a 
particular processing center would have no control. 

[End of table] 

As noted earlier in the report, IRS officials attribute the combined 
effect of correcting millions of taxpayer errors and conducting 
targeted pre-refund compliance checks to missing goals for refund 
timeliness and refund interest paid. However, IRS also narrowly missed 
its goals for deposit timeliness and efficiency. IRS officials 
attributed missing deposit timeliness to an increased number of 
payments which generally had smaller dollar amounts. IRS officials 
attributed missing the efficiency measure goal to processing fewer 
information return Schedule K-1 documents than projected, and using 
more staff resources to process returns in ERS. 

[End of section] 

Appendix V: Weekly Toll-Free Calls and Percentage of Callers Seeking 
and Receiving Live Assistance: 

During the 2010 filing season, the Internal Revenue Service (IRS) 
received most of its calls in the period leading up to and including 
the April 15th filing deadline, with the heaviest volume of calls at 
the end of January and beginning of February and during the week of 
the filing deadline (see fig. 2 below). IRS saw relatively fewer busy 
signals or IRS initiated disconnect of taxpayers as compared with 2008 
and 2009. 

Figure 2: Weekly Toll-Free Calls and Percentage of Callers Seeking and 
Receiving Live Assistance from January 1 through June 30, 2010: 

[Refer to PDF for image: combination line and stacked vertical bar 
graph] 

Weekly calls on IRS's tax law and account assistance lines, in 
millions: 

Report date: January 1; 
Caller abandons: 0; 
IRS disconnects or busies: 0; 
Automated calls answered: 0.01; 
Assistor calls answered: 0; 
Percentage of callers seeking and receiving live assistance: 0. 

Report date: January 9; 
Caller abandons: 0.44; 
IRS disconnects or busies: 0.04; 
Automated calls answered: 0.11; 
Assistor calls answered: 0.59; 
Percentage of callers seeking and receiving live assistance: 69%. 

Report date: January 16; 
Caller abandons: 0.47; 
IRS disconnects or busies: 0.02; 
Automated calls answered: 0.2; 
Assistor calls answered: 0.62; 
Percentage of callers seeking and receiving live assistance: 74%. 

Report date: January 23; 
Caller abandons: 0.7; 
IRS disconnects or busies: 0.05; 
Automated calls answered: 1.26; 
Assistor calls answered: 0.76; 
Percentage of callers seeking and receiving live assistance: 75%. 

Report date: January 30; 
Caller abandons: 1.29; 
IRS disconnects or busies: 0.06; 
Automated calls answered: 2.62; 
Assistor calls answered: 1.12; 
Percentage of callers seeking and receiving live assistance: 72%. 

Report date: February 6; 
Caller abandons: 1.37; 
IRS disconnects or busies: 0.15; 
Automated calls answered: 3.25; 
Assistor calls answered: 1.21; 
Percentage of callers seeking and receiving live assistance: 75%. 

Report date: February 13; 
Caller abandons: 1.29; 
IRS disconnects or busies: 0.07; 
Automated calls answered: 3.04; 
Assistor calls answered: 1.1; 
Percentage of callers seeking and receiving live assistance: 74%. 

Report date: February 20; 
Caller abandons: 1.16; 
IRS disconnects or busies: 0.19; 
Automated calls answered: 2.48v
Assistor calls answered: 1.08; 
Percentage of callers seeking and receiving live assistance: 70%. 

Report date: February 27; 	
Caller abandons: 1.06; 
IRS disconnects or busies: 0.04; 
Automated calls answered: 2; 
Assistor calls answered: 1.12; 
Percentage of callers seeking and receiving live assistance: 77%. 

Report date: March 6; 	
Caller abandons: 0.94; 
IRS disconnects or busies: 0.04; 
Automated calls answered: 1.74; 
Assistor calls answered: 1.05; 
Percentage of callers seeking and receiving live assistance: 78%. 

Report date: March 13; 
Caller abandons: 0.9; 
IRS disconnects or busies: 0.04; 
Automated calls answered: 1.6; 
Assistor calls answered: 0.99; 
Percentage of callers seeking and receiving live assistance: 77%. 

Report date: March 20; 
Caller abandons: 0.9; 
IRS disconnects or busies: 0.04; 
Automated calls answered: 2.04; 
Assistor calls answered: 0.95; 
Percentage of callers seeking and receiving live assistance: 76%. 

Report date: March 27; 
Caller abandons: 0.89; 
IRS disconnects or busies: 0.03; 
Automated calls answered: 1.45; 
Assistor calls answered: 1.03; 
Percentage of callers seeking and receiving live assistance: 77%. 

Report date: April 3; 
Caller abandons: 0.8; 
IRS disconnects or busies: 0.03; 
Automated calls answered: 1.25; 
Assistor calls answered: 1; 
Percentage of callers seeking and receiving live assistance: 79%. 

Report date: April 10; 
Caller abandons: 0.79; 
IRS disconnects or busies: 0.03; 
Automated calls answered: 1.23; 
Assistor calls answered: 1.19; 
Percentage of callers seeking and receiving live assistance: 85%. 

Report date: April 17; 
Caller abandons: 1.42; 
IRS disconnects or busies: 0.11; 
Automated calls answered: 1.87; 
Assistor calls answered: 1.44; 
Percentage of callers seeking and receiving live assistance: 72%. 

Report date: April 24; 
Caller abandons: 0.65; 
IRS disconnects or busies: 0.02; 
Automated calls answered: 0.86; 
Assistor calls answered: 0.93; 
Percentage of callers seeking and receiving live assistance: 80%. 

Report date: May 1; 
Caller abandons: 0.61; 
IRS disconnects or busies: 0.02; 
Automated calls answered: 0.74; 
Assistor calls answered: 0.92; 
Percentage of callers seeking and receiving live assistance: 81%. 

Report date: May 8; 
Caller abandons: 0.56; 
IRS disconnects or busies: 0.02; 
Automated calls answered: 0.65; 
Assistor calls answered: 0.85; 
Percentage of callers seeking and receiving live assistance: 80%. 

Report date: May 15; 
Caller abandons: 0.67; 
IRS disconnects or busies: 0.02; 
Automated calls answered: 0.57; 
Assistor calls answered: 0.83; 
Percentage of callers seeking and receiving live assistance: 73%. 

Report date: May 22; 
Caller abandons: 0.54; 
IRS disconnects or busies: 0.03; 
Automated calls answered: 0.51; 
Assistor calls answered: 0.86; 
Percentage of callers seeking and receiving live assistance: 80%. 

Report date: May 29; 
Caller abandons: 0.53	
IRS disconnects or busies: 0.02; 
Automated calls answered: 0.47; 
Assistor calls answered: 0.81; 
Percentage of callers seeking and receiving live assistance: 80%. 

Report date: June 5; 
Caller abandons: 0.63; 
IRS disconnects or busies: 0.05; 
Automated calls answered: 0.49; 
Assistor calls answered: 0.74; 
Percentage of callers seeking and receiving live assistance: 72%. 

Report date: June 12; 
Caller abandons: 0.53; 
IRS disconnects or busies: 0.02; 
Automated calls answered: 0.38; 
Assistor calls answered: 0.84; 
Percentage of callers seeking and receiving live assistance: 80%. 

Report date: June 19; 
Caller abandons: 0.53; 
IRS disconnects or busies: 0.02; 
Automated calls answered: 0.33; 
Assistor calls answered: 0.82; 
Percentage of callers seeking and receiving live assistance: 79%. 

Report date: June 26; 
Caller abandons: 0.52; 
IRS disconnects or busies: 0.02; 
Automated calls answered: 0.3v
Assistor calls answered: 0.75; 
Percentage of callers seeking and receiving live assistance: 77%. 

Report date: June 30; 
Caller abandons: 0.31; 
IRS disconnects or busies: 0.01; 
Automated calls answered: 0.16; 
Assistor calls answered: 0.48; 
Percentage of callers seeking and receiving live assistance: 80%. 

Source: GAO analysis of IRS data. 

Note: Weekly calls are those seeking tax law and account information 
assistance and do not include calls to IRS's compliance division. 

[End of figure] 

IRS's Level of Service (LOS), or the percentage of callers seeking and 
receiving live assistance, takes into account a number of factors, 
such as the number of assistor calls answered, informational message 
calls answered, calculated busy signals, courtesy disconnects, and 
taxpayer hang-ups after being routed to a response line. According to 
IRS officials, other telephone call centers wait a certain period of 
time before counting callers who hang-up against their performance 
measures, whereas IRS counts these hang-ups, referred to as "secondary 
abandons" immediately. 

[End of section] 

Appendix VI: Services Offered at Walk-In and Volunteer Sites: 

The total number of contacts at walk-in sites, taxpayer assistance 
centers staffed by Internal Revenue Service (IRS) employees, and 
volunteer sites, where volunteers prepare tax returns, are about the 
same in 2010 as in 2009, but lower compared to 2008. As IRS expands 
automated taxpayer services online and over the telephone, the demand 
for face-to-face service is likely to decline. However, face-to-face 
services remain an important component of IRS's efforts to serve many 
taxpayers as some taxpayers, particularly those with low incomes or 
limited proficiency in English, still require face-to-face assistance. 

Table 9: Services Performed at IRS Walk-In and Volunteer Sites, 2008 
through 2010: 

Walk-in sites: Total contacts; 
2008: 3,204,851; 
2009: 2,810,292; 
2010: 2,777,478. 

Walk-in sites: Return preparation; 
2008: 361,635; 
2009: 227,196; 
2010: 222,624. 

Walk-in sites: Tax law questions; 
2008: 337,880; 
2009: 202,813; 
2010: 177,002. 

Walk-in sites: Account notices; 
2008: 1,049,852; 
2009: 1,130,454; 
2010: 1,217,383. 

Walk-in sites: Forms; 
2008: 723,856; 
2009: 535,507; 
2010: 440,417. 

Walk-in sites: Other[A]; 
2008: 731,628; 
2009: 714,322; 
2010: 720,052. 

Volunteer sites: Return preparation; 
2008: 3,213,068; 
2009: 2,895,853; 
2010: 2,927,003. 

Volunteer sites: Percent of returns e-filed; 
2008: 89%; 
2009: 96%; 
2010: 94%. 

Source: IRS. 

Notes: Data for Taxpayer Assistance Centers are from January 1 through 
April 30 and data on return preparation at volunteer sites is from 
January 1 through the end of April. 2008 data on percent of returns e- 
filed at volunteer sites is from January 1 through the end of April; 
2009 and 2010 data is for the fiscal year from October 1 through the 
end of April. 

[A] Other contacts include responding to correspondence, scheduling 
appointments, and providing facilitated self-assistance services, 
which do not fall into the defined categories. 

[End of table] 

[End of section] 

Appendix VII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

James R. White, (202) 512-9110, whitej@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Joanna Stamatiades, Assistant 
Director; Amy Bowser; James Cook; Tom Gilbert; Mark Kehoe; Kirsten 
Lauber; Blake Luna; Patricia MacWilliams; Sabrina Streagle; Jeff 
Wojcik; Jennifer Wong; and Benjamin Wories made key contributions to 
this report. 

[End of section] 

Footnotes: 

[1] Pub. L. No. 110-289, ß 3011, 122 Stat. 2654 (2008), Pub. L. No. 
111-5, div. B, tit. I, ß 1006, 123 Stat. 115, 316 (2009), and Pub. L. 
No. 111-92, ß 11, 123 Stat. 2984, 2989 (2009) enacted three versions 
of the First-Time Homebuyer Credit and Pub. L. No. 111-5, div. B., 
tit. I ß 1001, 123 Stat. 115, 309 (2009) enacted the Making Work Pay 
Credit. 

[2] GAO, Tax Administration: Expanded Information Reporting Could Help 
IRS Address Compliance Challenges with Forgiven Mortgage Debt, 
[hyperlink, http://www.gao.gov/products/GAO-10-997] (Washington, D.C.: 
Aug. 31, 2010). 

[3] GAO, Tax Administration: Usage and Selected Analyses of the First- 
Time Homebuyer Credit, [hyperlink, 
http://www.gao.gov/products/GAO-10-1025R] (Washington, D.C.: Sept. 2, 
2010). 

[4] GAO, Assessing the Reliability of Computer-Processed Data, 
[hyperlink, http://www.gao.gov/products/GAO-09-680G] (Washington, 
D.C.: July 2009). 

[5] We are preparing a report on CADE 2, including a review of its 
anticipated benefits, for the House Committee on Appropriations' 
Subcommittee on Financial Services and General Government. We 
anticipate releasing this to the committee in the early part of 2011. 

[6] Transmitters are one type of IRS Authorized e-file Provider. IRS 
Publication 3112, IRS e-file Application and Participation, describes 
rules for businesses and organizations to participate in IRS e-filing. 

[7] We previously recommended that IRS provide paid preparers and 
software providers with clearer descriptions of why returns are 
rejected. See GAO, Tax Administration: Opportunities Exist for IRS to 
Enhance Taxpayer Service and Enforcement for the 2010 Filing Season, 
[hyperlink, http://www.gao.gov/products/GAO-09-1026] (Washington, 
D.C.: Sept. 23, 2009). 

[8] Pub. L. No. 111-5, div. B ß 1121, 123 Stat. 115, 322 (2009). 

[9] For refundable tax credits, taxpayers receive payments even in 
cases when there is no tax liability. 

[10] [hyperlink, http://www.gao.gov/products/GAO-10-1025R]. 

[11] GAO, Recovery Act: IRS Quickly Implemented Tax Provisions, but 
Reporting and Enforcement Improvements Are Needed, [hyperlink, 
http://www.gao.gov/products/GAO-10-349] (Washington, D.C.: Feb. 10, 
2010). 

[12] This year MeF could accept Form 1040 and 22 related forms and 
schedules. 

[13] IRS officials estimated that the MeF system could accept nearly 
11 million returns through April 15; however, the MeF system had 
accepted only 764,000 returns through September 26, representing less 
than 1 percent of all individual returns received. 

[14] Returns on which taxpayers claimed residential energy credits 
that went to ERS did not necessarily contain errors. Rather, IRS used 
ERS to identify how frequently taxpayers claimed these credits. Using 
ERS to count these credits contributed to delays in distributing 
refunds. 

[15] To ensure taxpayers were eligible for the FTHBC, IRS initially 
withheld the amount until it could determine eligibility using MEA and 
other automated audit filters. Once IRS determined the credit should 
be paid, it was released, but, in some cases IRS had to pay interest 
as the pre-audit compliance check resulted in the return being 
processed beyond 45 days of receipt. 

[16] GAO, Financial Audit: IRS's Fiscal Years 2009 and 2010 Financial 
Statements, [hyperlink, http://www.gao.gov/products/GAO-11-142] 
(Washington, D.C.: Nov. 10, 2010). 

[17] This goal is not inclusive of all types of refund interest paid 
by IRS. It represents the amount of refund interest IRS paid for 
current year returns that were processed and the refund issued during 
the same time period. IRS's refund interest paid goal is based on the 
dollar amount of interest paid per $1 million of refunds. Overall, IRS 
paid about $2.2 billion in interest during fiscal year 2010. 

[18] IRS's LOS takes into account a number of factors, which are 
described in greater detail in appendix V. 

[19] IRS's telephone assistor services are critical as taxpayers can 
only obtain information on their individual tax accounts by calling 
IRS's toll-free telephone line, visiting an IRS walk-in site, or 
writing IRS. From January 1 through June 30, 2010, IRS provided 
approximately 19 million individual tax account services through its 
toll-free telephone line. For this period, these services were 66 
percent of IRS's total phone services provided while tax law services 
were 17 percent, business account services were 9 percent, and other 
services were 7 percent. 

[20] IRS tracks the number of services provided on each call received, 
meaning that a taxpayer can receive multiple services on a single call. 

[21] Full-time equivalent (FTE) is a measure of staff hours equal to 
those of an employee who works 40 hours per week in 1 year. For the 
full fiscal year, IRS used about 9,400 FTEs to answer toll-free 
telephone calls. 

[22] Executive Order 12862, "Setting Customer Service Standards," 58 
FR 48257 (Sept. 11, 1993). 

[23] White House Office of the Press Secretary. Presidential 
Memorandum, Improving Customer Service, March 23, 1995. 

[24] GAO, Executive Guide: Effectively Implementing the Government 
Performance and Results Act, [hyperlink, 
http://www.gao.gov/products/GAO/GGD-96-118] (Washington, D.C.: June 
1996). 

[25] IRS divides the fiscal year into three planning periods, which it 
uses for setting performance targets and monitoring progress. 

[26] During our review, we met with one group of experienced phone 
assistors and managers at one of IRS's 24 telephone call centers. 

[27] IRS records 100 percent of calls to its toll-free telephone 
service using its Contact Recording system. IRS's Contact Analytics 
system then takes a representative sample of these calls which is 
equivalent to approximately 15 percent of calls received daily for 
analysis. 

[28] In addition, IRS's Submission Processing staff responds to some 
amended returns and three types of notices. 

[29] We define taxpayer correspondence as written communication from 
taxpayers as well as work internally generated by IRS employees. This 
includes amended returns, carry back claims, employer identification 
numbers, identity theft, and refund check problems. We do not include 
correspondence between taxpayers and IRS's compliance and Automated 
Underreporter offices as this relates to ongoing work. Notably, 
taxpayers can only receive some services by contacting IRS by mail. 
TIGTA is carrying out an audit of IRS's processing of taxpayer 
correspondence with the objective to determine if IRS is meeting its 
policy requirement to respond within 30 days or provide an update on 
the status of the response. 

[30] A majority of correspondence is overage 45 days after it is 
received by IRS. However, some correspondence, such as correspondence 
related to natural disasters and individual taxpayer identification 
numbers, are overage after longer periods, reflecting the complexity 
of the work involved, while other less-complex correspondence is 
overage after a shorter period. 

[31] We are preparing a report on IRS's implementation of its 
electronic filing mandate, including a review of returns that are 
currently not accepted (e.g., amended returns) into the electronic 
filing system. We anticipate reporting to the Senate Appropriations, 
Financial Services and General Government Subcommittee. 

[32] GAO, Tax Administration: IRS Needs to Further Refine Its Tax 
Filing Season Performance Measures, [hyperlink, 
http://www.gao.gov/products/GAO-03-143] (Washington, D.C.: Nov. 22, 
2002). 

[33] IRS has six taxpayer correspondence performance measures, four of 
which address business results--employee timeliness, employee 
accuracy, employee professionalism, and customer accounts resolved. 
IRS also measures customer satisfaction and dissatisfaction. In 
addition, taxpayer correspondence is one element in its customer 
contact resolved per staff year performance measure and employees 
working on taxpayer correspondence are included in IRS's employee 
satisfaction measure. 

[34] IRS's strategic plan includes the objective to "expedite and 
improve issue resolution across all interactions with taxpayers, 
making it easier to navigate the IRS." 

[35] IRS calculates the percentage of its taxpayer correspondence 
overage each week and the weekly percentage overage varies. 

[36] As we previously reported, IRS experienced heavy call volume in 
2009 from taxpayers calling telephone assistors to request their prior 
year's adjusted gross income or personal identification number (PIN) 
to authenticate their identity and file electronically, see GAO-10-225. 

[37] We previously recommended that IRS develop a low-cost automated 
method for providing volunteer site locations and hours of operations 
to taxpayers, see [hyperlink, http://www.gao.gov/products/GAO-09-1026]. 

[38] IRS's 2007 TAB set an objective to enhance electronic services by 
maximizing the value of irs.gov and making it the first choice of 
taxpayers and partners to receive information and service they need to 
comply with their tax obligation. Web site management control gaps in 
the TAB are: (1) Web site management, (2) content management, (3) end- 
to-end portal and application monitoring, (4) Web site design and 
usability, and (5) frequently asked questions (FAQ). 

[39] GAO, Internal Control: Standards for Internal Control in the 
Federal Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.: 
Nov. 1999). 

[40] Data reflects the percentage of taxpayers who responded yes to 
the survey question "Were you able to satisfy your primary reason for 
using irs.gov on this current visit to the Web site?" Overall customer 
satisfaction with the Web site was 73 points in 2010, one point higher 
than in 2009 and one point lower than in 2008 and 2007. 

[41] For fiscal year 2010, taxpayer contacts at IRS's walk-in sites 
increased by 3 percent as compared to 2009. 

[42] Thirty-six percent of the taxpayer contacts provided by IRS 
employees at volunteer sites were for accounts work and notices, 35 
percent were for non-technical services, 26 percent were for tax-law- 
related questions, and 3 percent for other questions. 

[43] According to IRS, the goal of this program is for IRS to 
collaborate with partners to provide taxpayers with the information, 
knowledge, and skills to evaluate financial options and identify those 
that best suit the taxpayers' needs and circumstances. 

[44] IRS's role with the debit card program is to facilitate a 
relationship between national bank partners, with whom IRS has 
established a memorandum of understanding for the initiative, and 
volunteer site partners interested in offering the debit cards at 
their sites. According to IRS officials, once the relationship between 
the national bank partners and volunteer sites is established, IRS 
does not have a direct role in promoting or facilitating the 
distribution of debit cards at sites. 

[45] We previously reported that fees associated with refund 
anticipation loans and refund anticipation checks may amount to an 
annual percentage interest rate of over 500 percent. GAO, Refund 
Anticipation Loans, [hyperlink, 
http://www.gao.gov/products/GAO-08-800R] (Washington, D.C.: June 5, 
2008). 

[46] GAO, Disaster Assistance: Greater Coordination and an Evaluation 
of Programs' Outcomes Could Improve Disaster Case Management, 
[hyperlink, http://www.gao.gov/products/GAO-09-561] (Washington, D.C.: 
July 8, 2009). 

[47] According to IRS officials, IRS plans to conduct its pilot test 
at 60 volunteer sites. 

[48] IRS officials could not break down the total number of errors it 
corrected in 2008 for either of these reasons because it did not 
designate specific error codes for either of these reasons. 

[49] In addition to correcting MWP errors, IRS also rejected about 2.5 
million taxpayer returns submitted electronically due to a MWP error 
through October 1, 2010. Most of these rejections were because 
taxpayers did not report an ERP they had received, which affected the 
amount of MWP they could receive. 

[50] IRS processes returns in ERS using a 'first in-first out' 
approach, so IRS cannot quantify how much time returns with a 
particular issue were in ERS, given that the complexity of preceding 
returns affects how long a return remains in inventory. 

[51] As previously noted, we limited our review of IRS's performance 
to the period beginning with fiscal year 2005. 

[End of section] 

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