Tax Administration:

IRS' 1998 Tax Filing Season

GGD-99-21: Published: Dec 31, 1998. Publicly Released: Dec 31, 1998.

Additional Materials:

Contact:

James R. White
(202) 512-5594
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a congressional request, GAO provided information on: (1) the Internal Revenue Service's (IRS) efforts to increase the use of electronic filing; (2) IRS' progress in addressing an issue discussed in GAO's reports on the 1996 and 1997 filing seasons involving the use of private banks to process some tax payments; (3) IRS' implementation of the 1997 tax law change dealing with capital gains; (4) the status of IRS' efforts to reduce Earned Income Credit (EIC) noncompliance; (5) the ability of taxpayers seeking assistance to reach IRS by telephone; and (6) other IRS efforts to provide information to taxpayers, such as its World Wide Web site on the Internet and TeleTax (an automated system that provides recorded information on a variety of tax topics).

GAO noted that: (1) IRS has several indicators that it uses to judge the success of a filing season; (2) for the 1998 filing season, those indicators showed that IRS generally met or exceeded its performance goals; (3) included in IRS' indicators are measures of the timeliness of its processing of refunds, the accessibility of its telephone service, the accuracy with which it processes returns, and the accuracy of assistance it provides over the telephone; (4) although millions of taxpayers used the services provided by IRS' walk-in sites during the 1998 filing season, IRS did not have meaningful nationwide data for assessing the performance of those sites; (5) although the overall number of individual income tax returns filed in 1998 increased by less than 2 percent from 1997, the number of returns filed electronically, including the number filed over the telephone, increased about 28 percent; (6) even with the 28 percent increase in electronic filing, about 98.5 million returns were filed on paper in 1998; (7) IRS uses private banks, known as lockboxes, to process some tax payments submitted with forms 1040; (8) the government pays the banks several million dollars to sort those returns and ship them to IRS for processing; (9) as GAO reported in 1997, IRS has inadequate evidence to justify the additional cost associated with having banks handle tax returns; (10) the return processing procedures that IRS adopted in implementing a legislative change relating to capital gains led to processing delays and increased taxpayer burden in 1998; (11) IRS plans to revise its procedures for the 1999 filing season; (12) the revisions, if effectively implemented, should alleviate some of the problems encountered in 1998; (13) IRS expanded its efforts to ensure that taxpayers filed correct EIC claims in 1998; (14) the measures that IRS uses to judge the accessibility of its telephone service showed substantial improvement; (15) use of IRS web site, as measured by the number of hits, increased by 187 percent, while the number of files downloaded from that site increased by 313 percent; (16) use of Teletax decreased about 15 percent during the 1998 filing season; (17) GAO also monitored IRS' test of a new system for processing returns and remittances; and (18) because of problems with the part of the system that processes remittances, IRS has decided to revise the system's implementation schedule and its contingency plan for 1999.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: IRS said that it had discontinued the TeleTax customer satisfaction survey that GAO had found inadequate. IRS said that the TeleTax system is scheduled to be replaced and that, in conjunction with that replacement, it plans to reinstate an improved customer satisfaction survey that will include additional questions and the ability to capture taxpayer comments.

    Recommendation: The Commissioner of Internal Revenue should direct the appropriate officials to expand future TeleTax customer satisfaction surveys to obtain information on why respondents are dissatisfied.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: IRS developed a separate source code for use starting in 1999.

    Recommendation: The Commissioner of Internal Revenue should direct the appropriate officials to provide a better measure of the extent to which taxpayers are using the Web site by using a separate code to identify forms that have been downloaded from the site.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: IRS said that it would add a cautionary statement to the tax year 1999 Schedule EIC. GAO saw an advance copy of the tax year 1999 Schedule EIC, and it included the cautionary statement.

    Recommendation: The Commissioner of Internal Revenue should direct the appropriate officials, in conjunction with IRS' decision to revise the instructions for Schedule EIC to advise taxpayers of the 2-year and 10-year sanctions, to add a brief, but prominent, cautionary statement to the Schedule EIC alerting taxpayers that they should read important information in the instructions before filing their returns. We realize that it is too late to make such a change to the Schedule EIC for tax year 1998 and that the first opportunity to make this change will be for tax year 1999.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Implemented

    Comments: In February 2000, IRS implemented an intranet-based alert system that breaks out alerts by areas of responsibility. Discussions with cognizant IRS staff about this system indicated that managers in each area regularly check the site to determine if there are any new alerts. In addition, the system is interactive so that managers can pose questions or ask for clarification. These questions/clarifications are visible to all 10 service centers. Service center personnel GAO talked to said that this system provides much greater levels of coordination between the National Office and the service centers, and that problems are resolved more quickly.

    Recommendation: The Commissioner of Internal Revenue should direct the appropriate officials to develop controls and standardized procedures to ensure that field locations are notified of procedural changes and implement the changes at the same time.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Closed - Implemented

    Comments: IRS contracted with a market research firm to do a customer satisfaction survey of users and nonusers of IRS' electronic filing programs, which included asking for specific reasons why taxpayers chose not to use TeleFile. According to IRS, based on the results of that survey, it does not believe that adding tax tables to the TeleFile package would increase TeleFile usage. IRS does not intend to conduct any test in that regard. IRS did a taxpayer satisfaction survey in May 1999, and the result indicated no significant benefits.

    Recommendation: The Commissioner of Internal Revenue should direct the appropriate officials to conduct a test to determine: (1) if adding the tax table to the TeleFile package would increase TeleFile use; and (2) whether the increased use would justify the additional cost of including the tax table in the package. The cost of such a test can be minimized if IRS includes the tax table only in the TeleFile packages sent to a representative sample of taxpayers and then compares their filing patterns to the filing patterns of taxpayers who received TeleFile packages without the tax table. If IRS determines, after designing the test, that its cost would be prohibitive, IRS should consider other options for dealing with the issue raised by the TeleFile nonusers.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  6. Status: Closed - Implemented

    Comments: IRS issued a contingency plan on March 1, 1999, that covered possible failure of the system's remittance processing function. It called for specific steps to be taken in the event of such a failure.

    Recommendation: The Commissioner of Internal Revenue should direct the appropriate officials to develop a contingency plan for Integrated Submission and Remittance Processing that provides for the possibility of a systemwide failure of the remittance processing function past 1999.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

Explore the full database of GAO's Open Recommendations »

Sep 13, 2016

Sep 6, 2016

Jul 29, 2016

Jul 7, 2016

Jun 27, 2016

Jun 23, 2016

Apr 19, 2016

Apr 13, 2016

Apr 7, 2016

Mar 28, 2016

Looking for more? Browse all our products here