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General government: Additional Opportunities to Improve Internal Revenue Service Enforcement of Tax Laws (2013-22)

The Internal Revenue Service can realize cost savings and increase revenue collections by billions of dollars by, among other things, using more rigorous analyses to better allocate enforcement and other resources.

Year Identified: 2013
Area Number: 22
Area Type: Cost Savings & Revenue Enhancement

7 Total Action(s)

Action 1
Addressed

The Commissioner of the Internal Revenue Service (IRS) should determine whether IRS has a basis for adjusting its allocation of enforcement resources each year.

Type
Executive Branch
Last Updated
March 31, 2021
Priority Rec.
Priority recommendations are those that GAO believes warrant priority attention from heads of key departments or agencies.
Progress:

IRS agreed to using ratios of direct revenue yield-to-cost to adjust its enforcement resource allocation, as GAO recommended in December 2012. In July 2020, IRS put in place a model that incorporates estimates of marginal revenues and costs for allocating correspondence exam workload across subdivisions in its Small Business and Self-Employed Division. It plans to expand the use of this model in other divisions of the service. The new model will position IRS to make more informed resource allocation decisions that could result in significant amounts of additional revenue.

Implementing Entity:
Internal Revenue Service
Action 2
Addressed

The Commissioner of the Internal Revenue Service (IRS) should ensure cost-effectiveness analyses are conducted for future significant initiatives/investments.

Type
Executive Branch
Last Updated
November 15, 2016
Progress:

For the fiscal year 2017 budget formulation process, IRS conducted an economic analysis on costs and alternative approaches for the enterprise electronic records management solution initiative, as GAO recommended in its June 2012 report. This analysis included obtaining and reviewing information on the cost and effectiveness of potential solutions to its record management challenges from an array of software vendors and integrators. IRS compared these proposed technology solutions to full implementation of its existing technologies. IRS identified and realized some cost, time, and compatibility advantages to implementing its existing technologies. For example, according to IRS, by maximizing current technologies, contractual relationships, and subject matter expertise, IRS is less likely to encounter procurement related delays or integration issues which could require lengthy study to fix before introduction to production.

Implementing Entity:
Internal Revenue Service
Action 3
Addressed

The Commissioner of the Internal Revenue Service (IRS) should develop a quantitative measure of scope, at a minimum, for its major information technology investments to have information on the performance of these investments.

Type
Executive Branch
Last Updated
March 21, 2018
Priority Rec.
Priority recommendations are those that GAO believes warrant priority attention from heads of key departments or agencies.
Progress:

IRS took several actions to develop a quantitative measure of scope for its major information technology (IT) investments, as GAO recommended in June 2012. Specifically, starting in December 2015, the agency included planned "scope elements" for the Return Review Program investment and identified the elements it had delivered to date in its quarterly report on IT to Congress. IRS further enhanced this report in December 2016 by including the percentage of planned scope delivered for selected investments. IRS also began implementing a tool to track the cost, schedule, and scope performance of its major investments using quantitative measures, including budgeted cost for work scheduled, actual costs of work performed, and budgeted cost for work performed (i.e., earned value). As of February 2018, IRS was using the tool for at least four of its IT investments. While IRS's actions are sufficient to close the recommendation. GAO nonetheless will continue to monitor the agency's efforts to improve its quantitative measure of scope for its major investments and expand it to other investments as part of annual reviews of IRS's major IT investments. IRS's efforts to develop a quantitative measure of scope will assist with providing the agency and key stakeholders complete information on the performance of major IT investments.

Implementing Entity:
Internal Revenue Service
Action 4
Addressed

The Commissioner of the Internal Revenue Service (IRS) should pilot more risk-based approaches for contacting taxpayers who have a balance due, which could include implementing its data analytics plan.

Type
Executive Branch
Last Updated
October 18, 2017
Progress:

IRS agreed with GAO's December 2012 recommendation to pilot more risk-based approaches for contacting taxpayers who have a balance due. IRS officials conducted an in-depth analysis of the model they used to identify potential cases that have balances that are currently considered to be not collectable. The model predicts less productive collection inventory; IRS then uses model results to either close the case or assign it to the appropriate work stream. IRS officials said IRS had implemented new models for scoring cases in its Automated Collection System as of July 2015. According to IRS, it can use scores from these models in its prioritization and case assignment processes and enable Field Collection to select and assign the most productive cases to revenue officers. IRS reported that it will evaluate its inventory delivery model, which will allow IRS to determine the effectiveness of new and prior currently not collectible model scores. IRS officials confirmed that they expect to realize savings from better selection in a few years, but the amount of savings is not yet known.

Implementing Entity:
Internal Revenue Service
Action 5
Addressed

The Commissioner of the Internal Revenue Service (IRS) should use Small Employer Health Insurance Tax Credit examination results more efficiently by analyzing results from examinations of credit claimants and using those results to identify and address any errors through alternative approaches.

Type
Executive Branch
Last Updated
December 5, 2013
Progress:

IRS has addressed this action, which GAO recommended in May 2012. In July 2013, IRS documented its analysis of a statistical sample of IRS-examined 2010 tax returns that claimed the Small Employer Health Insurance Tax Credit. IRS's analysis identified common errors in claiming the credit as well as examination results. Compared with other types of examinations, the credit examinations had a significantly higher "no change" rate and generated significantly less revenue. As a result of this analysis, IRS is planning to address many of these common errors through an alternative approach known as math error authority during 2014. Additionally, IRS will continue to consider other alternative approaches to deal with the common errors without doing an examination, such as "soft notices" to inform taxpayers of possible errors and minimize the need for them to respond. By doing the analysis of examination results, IRS is more likely to better identify credit errors through any examinations as well as to identify alternative approaches to address credit errors.

Implementing Entity:
Internal Revenue Service
Action 6
Addressed

The Commissioner of the Internal Revenue Service (IRS) should complete a broad strategy, including a timeline and performance measures, for how IRS intends to use information collected based on the Foreign Account Tax Compliance Act requirements to improve tax compliance.

Type
Executive Branch
Last Updated
December 5, 2013
Progress:

IRS completed a strategy outlining its current and planned efforts to use information collected based on the Foreign Account Tax Compliance Act requirements to improve tax compliance, as GAO recommended in April 2012. IRS provided this strategy to GAO in July 2013. This strategy includes a timeline and discussion of using performance measures. By developing this strategy, IRS managers will be able to use this strategy to make more informed resource and program decisions.

Implementing Entity:
Internal Revenue Service
Action 7
Addressed

The Commissioner of the Internal Revenue Service (IRS) should develop a strategy that defines appropriate levels of telephone and correspondence service and wait time and lists specific steps to manage service based on an assessment of time frames, demand, capabilities, and resources.

Type
Executive Branch
Last Updated
March 31, 2021
Priority Rec.
Priority recommendations are those that GAO believes warrant priority attention from heads of key departments or agencies.
Progress:

IRS neither agreed nor disagreed with GAO's recommendation from December 2012, but as of February 2021 has taken multiple steps to develop and finalize a customer service strategy that defines appropriate levels of telephone and correspondence service and wait time, and includes specific steps to manage service.

First, in January 2017, IRS shared results of a benchmarking study that compared its telephone service, measures, and goals to comparable agencies and companies. The team that conducted the study recommended options for additional measures to indicate the level of access taxpayers have to service across service channels. Based on this study, IRS concluded that its ideal telephone level of service is between 70 and 80 percent, which optimizes a balance between telephone and correspondence service, including wait time and assistor availability.

In February 2021, IRS detailed its steps to manage telephone and correspondence service based on an assessment of time frames, demand, capabilities, and resource requirements. IRS defined appropriate levels of correspondence service as responding within 45 days of receipt. Further, because the same staff answer both the telephones and correspondence, IRS said that it balances its resources based on demand, which includes call volume and total inventory of correspondence. For example, IRS said that it prioritizes telephone calls during the filing season, and strives to maintain an ending inventory of about 500,000 pieces of correspondence throughout the year.

In January 2021, IRS released a customer service strategy as required by section 1101 of the Taxpayer First Act (Pub. L. No. 116-25, 133 Stat. 981). This strategy outlines proposals to improve service to taxpayers across all channels, including improving telephone and correspondence level of service and wait times. The strategy also introduces proposed digital communications, performance measures, and estimated costs for delivering these service improvements.

These efforts enable IRS to make a more informed request to Congress about resources needed to deliver specific levels of service and help ensure IRS is maximizing the benefit to taxpayers.

Implementing Entity:
Internal Revenue Service
GAO Contacts