Tax Administration:

IRS Needs to Improve Certain Measures of Service Center Quality

GGD-91-66: Published: Mar 20, 1991. Publicly Released: Mar 20, 1991.

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Pursuant to a congressional request, GAO reviewed steps the Internal Revenue Service (IRS) took to monitor and improve the quality of its service center activities, focusing on the: (1) quality of correspondence with taxpayers regarding their accounts; (2) extent to which IRS erred in processing tax returns; and (3) accuracy of notices sent to taxpayers informing them about return changes.

GAO found that: (1) IRS improved its correspondence quality; (2) between February 1989 and August 1990, IRS statistics indicated that its percentage of letters with critical errors decreased from 38 percent to 14 percent; (3) IRS planned to expand its monitoring of other types of service center correspondence in 1991; (4) it could not determine IRS progress in improving tax return processing accuracy; (5) IRS data indicated that the error rate in processing decreased from 23 percent in 1988 to 18 percent in 1990, but the percentage was not a valid indicator of IRS processing quality, since it included taxpayer errors and incorrect error counts; (6) service centers' recurring errors hindered IRS progress in improving the quality of its processing performance; (7) IRS began studying ways to reduce such recurring errors, and anticipated solutions for the 1991 filing season; (8) IRS lacked an effective measure for monitoring the accuracy of its notices; (9) while output review units reviewed notices having a high probability of an error and helped to target limited resources toward the most error-prone notices, such reviews did not provide IRS with a valid measure of accuracy; and (10) two centers' output review units did not follow IRS directions to report identified errors to the unit managers that originated the notices.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: As recommended, IRS has started reporting the extent to which processing errors are made by service center staff.

    Recommendation: To better assess its returns processing performance, IRS should use an indicator to measure returns processing quality that identifies the extent to which returns are being sent to error resolution specifically because of errors made by service center staff in processing returns.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: IRS has developed accuracy and timeliness baselines based on a sample of all returns processing notices. Starting in fiscal year 1993, IRS will measure against those baselines.

    Recommendation: To better assess its returns processing performance, IRS should measure the overall quality of returns processing notices rather than just those that are referred to output review. To help fund the development of such indicators, IRS should reconsider how it spends the money currently available for service center quality control efforts and assess how the quality data it now collects might be used to help build the needed indicators.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: IRS says it redesigned the notice disposition reporting system and finished implementing it in July 1992. It remains to be seen how the information system will be used, but that's no basis for keeping this recommendation open.

    Recommendation: IRS should: (1) compile data on output review results in a way that enables management to identify specific problems that need to be addressed; and (2) ensure that the results are so used.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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