Tax Administration: IRS' Fiscal Year 1996 Budget Request and the 1995 Filing Season

GAO discussed the Internal Revenue Service's (IRS) fiscal year (FY) 1996 budget request and the status of the 1995 filing season. GAO noted that: (1) IRS has increased its FY 1996 budget request to $8.2 billion and 114,885 staff; (2) the increase is mainly for its Tax Systems Modernization Program (TSM), refund fraud prevention, and taxpayer telephone communication operations; (3) TSM has provided only marginal improvements in tax administration because IRS has not improved its business practices; (4) because IRS needs to improve its TSM efforts, it may not effectively use all TSM funding requested for FY 1996; (5) IRS has taken several steps to prevent refund fraud and, as a result, is delaying refunds to taxpayers who have Earned Income Credit (EIC) eligibility problems or have used invalid social security numbers; (6) IRS needs to improve the EIC program because of fraud and concerns that not all eligible taxpayers are receiving the credit; (7) IRS has requested more staff to answer telephones because of taxpayers' problems in reaching IRS by telephone; (8) IRS needs to adopt some of the practices of other large telephone assistance programs; and (9) other budget issues include program underfunding, the proposed restriction on the use of tax law enforcement appropriations, and a funding shortfall if the 1996 federal employee pay raises are greater than the budgeted 2.4 percent.