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General government > 17. Online Taxpayer Services

The Internal Revenue Service could potentially realize hundreds of millions of dollars in cost savings and increased revenues by enhancing its online services, which would improve service to taxpayers and encourage greater tax law compliance.

Why This Area Is Important

The Internal Revenue Service’s (IRS) website is a low-cost method for providing service to millions of taxpayers. Taxpayers visited IRS’s website over 375 million times during 2012 to obtain tax-related information, download forms, and check on the status of a refund, among other things. Further, taxpayers benefit from online services because they can research large amounts of tax guidance, access the services 24 hours a day, and avoid waiting in a queue to speak to a telephone representative. In addition, the Department of the Treasury has cited enhancing IRS.gov with additional online services as part of its plan to achieve its priority goals of improving service to taxpayers and increasing compliance with tax laws.

In December 2011, GAO reported that IRS could realize substantial savings by transferring taxpayers away from costly telephone interactions and recommended that IRS finalize a more comprehensive plan for its website. In its 2012 online strategy document, IRS also stated that investing in online services could produce benefits for the taxpayer and IRS. For example, IRS reported that operational efficiencies, such reducing telephone service, could result in savings of hundreds of millions of dollars.

What GAO Found

In April 2013, GAO found that static web pages such as general information and forms constituted the majority of www.IRS.gov, with over 110,000 web pages and downloadable documents. The website included some basic interactive tools, such as providing a locator for its sites staffed by volunteers and allowing taxpayers to order a transcript of a prior year return. These interactive tools allow users to perform routine tasks online and, in some cases, obtain personalized information.

IRS, however, does not offer dynamic account access, which is the ability for users to make account changes after confirming their identity online. Other federal and state taxing authorities provide a broader range of online services to their customers, including dynamic interactive account access.  For example, the Social Security Administration allows users to start or change direct deposit benefit payments online. The New York and California state tax agencies provide dynamic account access allowing taxpayers to view tax account balances and recent payments, to respond to notices, and to edit addresses. The IRS Oversight Board, National Taxpayer Advocate, and Electronic Tax Administration Advisory Committee have all recently made recommendations that IRS should provide taxpayers with online access to their accounts. 

To improve its website, IRS has been simultaneously focusing on multiple short-term projects to deliver additional basic interactive tools, as well as longer-term efforts to invest in infrastructure such as more secure internet portals for accessing information. However, IRS does not have a long-term strategy for enhancing its website that explains how its ongoing and new efforts fit together. Strategic plans should contain the goals and objectives of a program along with measures of performance so that an agency can be held accountable. Further, IRS is following some but not all fundamental elements for a website strategy as described on www.howto.gov—a federal website designed to be a resource to help improve how agencies communicate and interact with customers and use innovative tools and technologies to improve service—and in other guidance.  For example,

  • IRS reviews other organizations’ interactive tool designs, but has not used leading practices to inform its priorities for web enhancement.
  • IRS’s business cases that support the decisions to implement new interactive tools are missing key information, such as costs and benefits, and are not being used to set priorities. Further, IRS does not have overall cost estimates or enough detail on goals, deliverables, future online services, and time frames to be able to assess progress.
  • IRS is not consistently conducting security risk assessments when implementing interactive tools. Further, IRS’s investments in upgrading security and developing authentication capabilities are not linked to a long-term strategy.

While IRS’s efforts to date have already benefited taxpayers and hold the promise of additional benefits in the future, without a long-term strategy it will be difficult for Congress and other decision makers to understand the costs and the benefits associated with assisting customers using interactive online services. Further, because some of the costs being incurred today are for infrastructure to enhance security and authenticate taxpayers’ identities, it is even more important that a strategy explain the long-term benefits.

Actions Needed

GAO made multiple recommendations to improve interactive web services in a report issued in April 2013. Specifically, GAO recommended that the Acting Commissioner of the Internal Revenue Service should direct appropriate officials to take the following four actions:

  • Develop a long-term strategy to improve web services provided to taxpayers, in accordance with www.Howto.gov and other federal guidance outlined in GAO’s April 2013 report.
  • Study leading practices of other organizations to understand how web improvement strategies were developed and new services prioritized.
  •  Develop business cases for all new online services, describing the potential benefits and costs of the project, and use them to prioritize future projects.
  • Review risk mitigation plans for interactive tools to ensure all risks are addressed and link investments in security to the long-term plan.

In its 2012 online strategy document, IRS estimated that enhancing online services, such as providing taxpayers with the ability to access account information, will produce hundreds of millions of dollars through improved operational efficiencies. Improvements in all of these areas would help IRS develop a strategic plan that would provide the information that managers and Congress need for improving website services to taxpayers.

How GAO Conducted Its Work

The information contained in this analysis is based on findings from the products in the related GAO products section. GAO analyzed agency documents, including the IRS Online Strategy dated September 2012, business cases, and plans to authenticate taxpayer identities for new interactive tools. GAO also compared IRS’s documents with relevant guidance. GAO interviewed officials from IRS and other parties.

Agency Comments & GAO Contact

In commenting on GAO’s April 2013 report on which this analysis is based, IRS neither agreed nor disagreed with the recommendation to develop a long-term strategy in accordance with federal guidance. Rather, IRS stated it has a long-term strategy to improve online services and would make improvements to the plan as appropriate. As of February 2014, officials from IRS’s Office of Online Services told us that a long-term online strategy for improving web services will be completed in February 2015 and include the fundamental elements. IRS agreed with the recommendation to study leading practices of other organizations for website strategies. IRS partially agreed with the recommendation to develop business cases for all new online services. Specifically, IRS stated that it will continue to develop business cases, including potential benefits and costs, for all new online services and use them to help prioritize future projects. However, GAO maintains that the benefit and cost information in the business cases lacked enough information to be useful for setting priorities. Additionally, IRS agreed with the recommendation to review risk mitigation plans for interactive tools to ensure all risks are addressed and investments in security are in its long-term plan.

GAO provided a draft of this report section to IRS for review and comment.  IRS provided oral comments in response to GAO’s recommendations to improve interactive web services.  The IRS Director of the Office of Online Services agreed that improvements to its interactive web services could result in cost savings, increase revenue, and importantly, improved services to taxpayers.  The IRS Director of the Office of Online Services said the agency has made significant progress in implementing our recommendations, which will be integrated into its long-term strategy that is projected to be complete in February 2015. For example, IRS reported that it contracted with a third party to conduct an assessment of select IRS web services and compared them with industry best practices from multiple other organizations to understand how web improvement strategies were developed.

For additional information about this area, contact James R. White at (202) 512-9110 or whitej@gao.gov.

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