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entitled 'Tax Administration: IRS's 2003 Filing Season Performance
Showed Improvements' which was released on October 31, 2003.
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Report to the Chairman, Subcommittee on Oversight, Committee on Ways
and Means, House of Representatives:
October 2003:
Tax Administration:
IRS's 2003 Filing Season Performance Showed Improvements:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-84] GAO-04-84:
GAO Highlights:
Highlights GAO-04-84, a report to Chairman, Subcommittee on Oversight,
Committee on Ways and Means, House of Representatives
Why GAO Did This Study:
During the tax filing season, millions of taxpayers file their returns
and seek assistance by calling or visiting IRS’s offices or Web site.
GAO was asked to assess IRS’s 2003 filing season performance in five
areas: processing returns, refunds and remittances; electronic filing;
telephone service; walk-in assistance, and Web site. We assessed for
each of those five areas (1) IRS’s performance in 2003, including any
factors that helped or impeded its efforts, (2) any new initiatives
that were intended to improve IRS’s performance in 2003, and (3) IRS’s
performance over past filing seasons.
What GAO Found:
Available data for each of five key filing season activities indicates
that IRS’s performance showed some improvements in 2003 compared to
2002 and IRS met or exceeded many of its 2003 performance goals. IRS
processed returns and issued refunds more timely and accurately and
increased the rate of electronic filing, although not at a rate that
would allow IRS to meet its long-term goal. While IRS provided
significantly more accessible telephone service, the accuracy rate of
IRS responses declined. The accuracy of tax law assistance provided at
walk-in sites improved, although the number of taxpayers assisted at
IRS’s walk-in sites declined, in part because taxpayers made greater
use of the return-preparation assistance offered by volunteer
organizations. In addition, IRS did not consolidate or disseminate
data on how long taxpayers waited for walk-in assistance, making it
difficult to balance quality and service. Finally, IRS’s Web site
performed well and was more user friendly than last year. IRS
attributes improved performance, in part, to (1) fewer tax law changes
that affected taxpayers and (2) continued emphasis on performance
measures, a key part of IRS’s strategy to improve its performance in
processing returns and providing taxpayer assistance.
IRS implemented initiatives in 2003 intended to improve filing season
performance. For example, IRS entered into an agreement with a
consortium of 17 tax preparation companies to offer free on-line tax
preparation, established new toll-free telephone numbers to better
target different taxpayers, and began certifying walk-in staff to
answer tax law questions.
Over a longer period of time, available data, although limited in some
areas, also show that IRS’s filing season performance has improved.
Since the mid-1990s, the growth of electronic filing has allowed IRS
to close one paper processing center and the accuracy and
accessibility of telephone assistance has improved. While the Congress
and taxpayers expect further progress, the improvements to date are a
payoff from IRS’s ongoing modernization.
What GAO Recommends:
GAO recommends that IRS consolidate and disseminate available wait-
time information to field managers.
In commenting on a draft of this report, IRS partially agreed with our
recommendation, stating that it will require walk-in sites equipped
with a system to report wait-time information quarterly and that this
information would provide valuable data for assessing overall trends
and relationships in timeliness and quality. However, IRS did not
agree to disseminate this consolidated wait-time information to field
managers, but without it, managers would have difficulty balancing
timeliness and quality.
www.gao.gov/cgi-bin/getrpt?GAO-04-84
To view the full product, including the scope and methodology, click
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[End of section]
Contents:
Letter:
Results in Brief:
Scope and Methodology:
Background:
IRS's Processing of Returns And Refunds Improved, and IRS Closed One
Paper Processing Center:
Electronic Filing Grew in 2003, but at Current Growth Rate IRS Will Not
Achieve Long-Term Goal:
Telephone Service Showed Improvement in Accessibility but Not Accuracy:
Quality of Walk-In Assistance Improved in 2003, but Assessing Long-Term
Improvements Is Difficult Because of Lack of Data:
IRS's Web Site Performance Showed Some Improvement:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Data on IRS's Processing Performance Relative to Fiscal
Year 2001-2003 Performance and Fiscal Year 2003 Goals:
Appendix II: Advance Payment of Child Tax Credit Had Minimal Impact on
2003 Filing Season:
Appendix III: Comments from the Internal Revenue Service:
Appendix IV: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: IRS Tax Filing Season Telephone Assistance Performance, 2000-
2003 Filing Seasons:
Table 2: IRS's 2001-2003 Tax Filing Season Processing Performance:
Figures:
Figure 1: IRS's Primary Activities During the 2003 Filing Season:
Figure 2: Growth Rate in the Number of Individual Tax Returns Filed
Electronically, 1996-2003:
Figure 3: Projected Percentage of Individual Tax Returns Filed
Electronically, 2004-2007:
Figure 4: Reasons Taxpayers Called for Telephone Assistance during the
2003 Filing Season:
Figure 5: How IRS Handled Calls for Telephone Assistance during 2003
Filing Season:
Figure 6: Assistance Provided by IRS Walk-in and Volunteer Sites, 2000-
2003 Filing Seasons:
Letter October 31, 2003:
The Honorable Amo Houghton:
Chairman, Subcommittee on Oversight:
Committee on Ways and Means:
House of Representatives:
Dear Mr. Chairman:
In response to your request, this report discusses the Internal Revenue
Service's (IRS) performance during the 2003 tax filing season.[Footnote
1] It is during the filing season that most taxpayers have their only
contact with IRS, filing their individual income tax returns, and if
needed, seeking assistance or resolving simple problems, such as
computational errors or missing Social Security numbers (SSN). Because
of the millions of income tax returns processed and refunds issued and
the crucial role that the filing season plays in the collection of
revenue that finances the federal government, IRS's performance during
the filing season is important to taxpayers and the Congress.
This report discusses IRS's performance in five key filing season
activities (1) processing individual income tax returns, refunds, and
remittances; (2) receiving returns electronically; (3) assisting
taxpayers over the telephone; (4) providing face-to-face assistance at
its walk-in locations; and (5) providing services via its Internet Web
site. For each of the five areas the report discusses (1) IRS's
performance in 2003 compared to 2002 and 2003 goals, including any
factors that significantly affected performance, (2) any new
initiatives that were intended to improve IRS's performance in 2003,
and (3) significant trends in IRS's performance over the past several
years resulting from modernization efforts.
Results in Brief:
Overall, IRS's performance during the 2003 filing season improved
compared to its performance in 2002 for each of the five filing season
activities we reviewed, and IRS met many of its 2003 performance goals.
However, the accuracy of telephone assistance declined, the growth of
electronic filing is slowing, and the timeliness of walk-in assistance
is unknown.
Processing--IRS's performance improved in 2003 relative to 2002 for
seven of the eight measures it uses to judge its performance in
processing individual income tax returns, refunds, and remittances, and
IRS exceeded most of its performance goals. Other evidence, such as
testimony from representatives of the tax practitioner community,
indicated IRS's processing performance was smooth and without
significant disruptions. IRS officials attributed improvements in
processing performance to efforts to build upon its largely successful
2002 filing season and the relatively small effect of tax law changes
on taxpayers filing during the 2003 filing season. The growth of
electronic filing and other improvements in processing returns,
refunds, and remittances over the past several filing seasons has
allowed IRS to eliminate paper processing at one location and reduce
staff devoted to paper processing.
Electronic Filing--The number of individual income tax returns that IRS
received electronically continued to grow, from about 47 million in
2002 to an estimated 53 million in 2003, and the percentage of returns
filed electronically reached an estimated 41 percent. However, the
current rate of growth of electronic filing is slowing and will not
allow IRS to achieve its long-term electronic filing goal of 80 percent
by 2007, despite a number of initiatives over the years to reduce
barriers and encourage more electronic filing. Electronic filing is
important because it allows IRS to shift resources out of paper
processing and improve customer service.
Telephone Service--IRS performance data showed that it provided more
accessible telephone service in 2003 and exceeded its 2003 performance
goal for providing service to taxpayers trying to reach a Customer
Service Representative (CSR). However, various measures show that IRS's
performance in providing accurate responses to taxpayer questions
declined, and IRS did not achieve most of its 2003 performance goals
for accuracy. IRS implemented several initiatives in 2003--including
the establishment of new toll-free telephone numbers targeting
different types of taxpayers--that likely contributed to improved
accessibility. Since the mid-1990s, IRS has significantly improved its
telephone service. Although telephone service is not yet at the level
desired by taxpayers and the Congress, the improvements to date
represent a payoff from IRS's modernization efforts.
Walk-in Assistance--The quality of services IRS provides at its walk-in
sites showed some improvement in 2003, and IRS met some of its 2003
performance goals. For example, the accuracy of tax law assistance
provided at walk-in sites improved from 2002 to 2003. In addition, IRS
continued its initiative to shift return preparation work to its
community-based coalitions and other volunteer organizations,
contributing to a decline in the number of taxpayers assisted at IRS's
walk-in sites. With respect to accessibility, IRS did not consolidate
or disseminate available data to managers on how long taxpayers waited
for assistance in 2003. Without such data, managers may not be able to
balance the attention given to accuracy and accessibility. Over the
last several years, IRS has made efforts to standardize and improve its
walk-in assistance, but a lack of historical performance data makes it
impossible for IRS and us to quantify improvements.
Internet Web Site--Overall Web site usage increased in 2003, and the
site performed well in terms of availability and average delivery time,
according to an independent Web site rater. However, IRS's performance
in responding to questions received via the Internet from taxpayers
declined in 2003. IRS did resolve one of our key concerns from prior
years about the search functions on the Web site, enabling taxpayers to
find references to publications more easily. Also, in a major
initiative in 2003, IRS provided the capability for taxpayers to check
the status of their refunds on-line for the first time, and 11 million
taxpayers did so. Over the past several filing seasons, usage of IRS's
Web site and the number of services provided have increased. The
increases are another example of payoffs from IRS's ongoing
modernization effort.
We are making a recommendation to the Commissioner of Internal Revenue
that IRS consolidate and disseminate wait-time information to field
managers on the basis of information from walk-in sites equipped with
an automated system that can capture wait-time data in order to assess
this important aspect of quality. In commenting on a draft of this
report (see app. III), the Commissioner of Internal Revenue partially
agreed with our recommendation, stating that IRS will require walk-in
sites equipped with Q-Matic to report wait-time information quarterly.
However, the Commissioner did not agree to disseminate this
consolidated wait-time information to field managers. For years, as we
report, IRS has contended that past experience has shown that employee
reaction to timeliness measures adversely affected quality. At the same
time, the Commissioner noted that some monitoring of wait time occurs
by local managers for walk-in sites equipped with the automated
reporting system. However, routine monitoring does not provide overall
performance data, and data is only available to some managers whose
walk-in sites have the automated system. In our view, there needs to be
a balance between measuring quality and timeliness, and too much focus
on either could create inappropriate incentives for IRS's walk-in
staff. As noted in our report, timeliness is part of IRS's suite of
balanced measures for telephone performance. We agree that too much
focus on timeliness could create inappropriate incentives for IRS's
walk-in staff, but without consolidated timeliness information, field
managers would have a difficult time balancing quality and timeliness.
We discuss the Commissioner's comments in the "Agency Comments and Our
Evaluation" section of the report.
Scope and Methodology:
Our assessment of IRS's 2003 filing season performance was based on
analyses of IRS data and data obtained from sources outside IRS,
interviews with IRS officials and private sector tax preparers, and
observations of IRS operations. We testified before the Subcommittee on
Oversight on the interim results of our assessment in April
2003.[Footnote 2] Our assessment of filing season performance over a
longer period of time was based, in part, on our past filing season
reports.
To assess IRS's performance in the five key filing season activities
covered by this report, we:
* reviewed and analyzed IRS documents and data, including workload data
and data from IRS's current suite of balanced performance measures,
which we used to assess performance this year and relative to 2003
goals;[Footnote 3]
* reviewed historical data that preceded the current performance
measures to assess longer term improvements and performance;
* interviewed IRS officials about current operations, performance
relative to the past filing season and 2003 performance goals, and
significant factors and initiatives that affected performance;
* observed operations at two of the eight processing centers operated
by IRS's Wage and Investment Operating Division (W&I) and three of
IRS's walk-in locations;
* observed operations at three sites that offer free return preparation
as part of IRS's Volunteer Income Tax Assistance (VITA) and Tax
Counseling for the Elderly (TCE) programs;
* analyzed information posted to IRS's Internet Web site, specifically
assessing the ease of finding information on the site (i.e.,
navigation) and the accuracy and currency of data on the site (i.e.,
content) based on our work reviewing IRS's Web site for years and as
experienced Internet Web users;
* reviewed information from a recognized authority on Internet
performance that assessed various aspects of IRS's Web site;
* interviewed representatives of various large private organizations
that prepare tax returns and trade organizations that represent both
individual preparers and tax preparation companies;
* reviewed staff year data for the paper processing, telephone
assistance, and walk-in assistance activities; and:
* reviewed related congressional testimony and work performed by the
Treasury Inspector General for Tax Administration (TIGTA).
This report discusses performance measures that reflect the continuing
interest of the Subcommittee--including the quality, accessibility, and
timeliness of IRS's performance during the filing season. In November
2002, we assessed the methodologies IRS used for computing its current
suite of performance measures and the appropriateness of the
performance goals.[Footnote 4] At that time, we reported that some of
the performance measures that IRS and we use to assess various aspects
of IRS's filing season performance had attributes of successful
performance measures including objectivity and reliability, although in
some cases, the measures could be further refined. Even recognizing the
limitation of these measures, we have determined that the data we are
reporting are sufficiently reliable and useful for assessing IRS's
filing season performance.
We did our work at IRS headquarters in Washington, D.C; W&I
headquarters and the Joint Operations Center in Atlanta, Ga;[Footnote
5] and W&I processing centers in Atlanta, Ga, and Holtsville, N.Y; and
walk-in and volunteer locations in Georgia and Louisiana. We selected
these offices for a variety of reasons, including the location of key
IRS managers and operations. We also selected the Brookhaven Submission
Processing Center to visit because IRS was phasing out processing
operations at that center, which represents a significant initiative
related to both paper processing and electronic filing. We performed
our work from January through September 2003 in accordance with
generally accepted government auditing standards.
Background:
IRS's filing season is an enormous and critical undertaking that
includes two key activities--returns processing and taxpayer
assistance. As figure 1 shows, during the 2003 filing season, IRS
processed an estimated 77 million individual income tax returns filed
on paper, an estimated 53 million returns filed electronically, and
issued an estimated 99 million refunds to taxpayers. At the same time,
IRS provided extensive assistance to millions of taxpayers via phone,
walk-in contact, and over its Web site.
Figure 1: IRS's Primary Activities During the 2003 Filing Season:
[See PDF for image]
Note: GAO analysis of IRS data. The number of paper and electronic
returns and refunds are estimated for the time period January 1, 2003,
to October 24, 2003; toll-free calls for the time period January 1,
2003, to July 12, 2003; walk-in contacts, which include returns
prepared at volunteer sites, for the time period January 1, 2003, to
April 19, 2003; and Internet downloads for the time period January 1,
2003, to July 31, 2003. We use different dates for the various areas
because those dates best reflect IRS's filing season workload in that
area.
[End of figure]
To process individual returns in 2003, IRS had eight geographically
dispersed W&I submission processing centers that were responsible for
processing returns filed on paper, three of which were also responsible
for processing tax returns filed electronically; correcting errors made
on tax returns; and forwarding the data through a data processing and
telecommunications infrastructure to two computing centers, which
maintain IRS's primary taxpayer account databases. To help taxpayers
comply with their tax obligations, IRS provides various services at its
call sites, walk-in sites, volunteer sites, and on the Web site. For
example, taxpayers can call IRS toll-free to get answers to tax law
questions and order tax forms and publications; get information or help
in preparing their returns at IRS walk-in sites; get their returns
prepared at community-based coalition and other volunteer organization
sites in partnership with IRS; and get information, including answers
to tax law questions, through IRS's Web site.
Since the IRS Restructuring and Reform Act of 1998[Footnote 6] (RRA
98), IRS has been particularly focused on improving taxpayer service.
To help achieve this, in 2001, IRS established a suite of balanced
performance measurements in accordance with RRA 98 and the Government
Performance and Results Act of 1993.[Footnote 7] The performance
measurement system emphasizes accountability for achieving specific
results and reflects IRS's priorities, which are articulated in its
mission and strategic goals--top quality service to all taxpayers
through fair and uniform application of the law, top quality service to
each taxpayer in every interaction, and productivity through a quality
work environment. IRS has defined three elements of balanced measures
to ensure balance among its priorities, such as providing timely and
accurate service: (1) customer satisfaction, (2) employee satisfaction,
and (3) business results (quality and quantity measures). IRS
establishes goals each fiscal year for its performance measures and
uses them to hold managers and frontline staff more accountable for
improving filing season performance.[Footnote 8]
IRS's W& I operating division is one of four divisions that IRS
established as part of a reorganization that took effect in October
2000. The other three divisions are Small Business and Self-Employed,
Large and Mid-Size Businesses, and Tax Exempt and Government Entities.
IRS's Processing of Returns And Refunds Improved, and IRS Closed One
Paper Processing Center:
We found that on the basis of a comparison of IRS's performance in 2003
and 2002, IRS's processing of individual income tax returns and refunds
generally improved in 2003 and IRS exceeded most of its 2003 processing
goals. In addition, the growth in electronic filing has enabled IRS to
close paper processing operations at one location and reduce the total
number of staff devoted to paper processing.
Processing Performance Improved in 2003 Compared To Last Year:
IRS's performance improved in 2003 relative to 2002 for seven of the
eight measures that are part of its suite of balanced measures it uses
to judge its performance in processing individual income tax returns,
refunds, and remittances.[Footnote 9] For example, IRS's measure of the
percentage of refunds on returns filed on paper issued within 40 days
or less (refund timeliness--paper) increased from 98.2 percent in 2002
to 98.8 percent in 2003. In addition, IRS's measure of the percentage
of notices issued to taxpayers that had an error on the notice (notice
error rate) decreased from 18.7 percent in 2002 to 9.7 percent in 2003.
IRS also exceeded its fiscal year 2003 performance goals for five of
the eight measures (including refund timeliness--paper), although it
missed its goals for two measures (deposit error rate and letter error
rate). We could not compare performance for one measure (refund
interest paid) to prior years or its 2003 performance goal, because IRS
implemented a programming change that changed the way it calculated the
measure for the 2003 filing season and did not have the necessary data
to revise the goal for the 2003 filing season. Table 2 in appendix I
describes these eight measures and shows the results IRS reported for
each of the measures.
Other information supports the conclusion that the 2003 filing season
went smoothly and without significant disruptions, as the following
examples illustrate.
* Production data that IRS uses to monitor operations and identify and
resolve issues that could disrupt operations showed IRS met processing
deadlines and did not experience significant disruptions in 2003. These
data showed that, on average, IRS met or exceeded its goal for the
number of days it takes to process individual income tax returns.
* Directors, managers, and staff at the Atlanta and Brookhaven
Submission Processing centers voiced similarly positive views about the
filing season and processing, and the Director of Submission Processing
attributed improvements during the 2003 filing season to efforts to
build upon a largely successful 2002 filing season and the small effect
of tax law changes on taxpayers during the 2003 filing season. Appendix
II provides more detailed information about the Jobs and Growth Tax
Relief Reconciliation Act of 2003[Footnote 10] and its impact on the
2003 filing season and potential impact in 2004.
* The Commissioner of IRS testified in May 2003, before the annual
Joint Congressional Review held as part of RRA 98, that IRS had made
progress during the 2003 filing season, although he acknowledged that
IRS has yet to provide the level of service that taxpayers, the
Congress, and IRS agree is necessary.
* The then Acting Commissioner of Internal Revenue testified in April
2003 before the Subcommittee that, among other things, the filing
season was going smoothly, with no significant delays in processing
returns and issuing refunds. Representatives from the National
Association of Enrolled Agents,[Footnote 11] National Association of
Accountants, and H&R Block--the largest tax preparation firm--all
expressed positive feedback about IRS's processing operations during
this filing season.
* According to TIGTA's report on the 2003 filing season, IRS processed
most returns accurately and on time and the filing season went
well.[Footnote 12] TIGTA reported that most of the key tax law changes
that affected taxpayers in 2003 were correctly implemented or
subsequently corrected after processing began. However, TIGTA
identified some areas of the tax laws that were not correctly
implemented and could result in loss of taxpayer entitlements and
erroneous tax assessments.[Footnote 13]
Closing of Paper Processing Operations at One Center Is a Key
Initiative and Represents Payoff From Modernization:
The growth in electronic filing and resulting reduction in the number
of paper returns received in recent years has enabled IRS to close the
paper processing operations at its Brookhaven Submission Processing
Center--one of its eight centers for processing individual income tax
returns filed on paper. The closure is a key processing initiative in
2003. IRS's long-term strategy for paper processing is to continue
closing its processing centers as electronic filing grows and shift the
processing of paper returns to the remaining centers. IRS picked
Brookhaven for the initial closure based on several factors, including
paper return volume, personnel costs, labor availability, and real
estate costs. As we noted in our interim testimony on IRS's filing
season performance, this closing represents a significant consolidation
of IRS's processing operations and a key payoff from modernization,
specifically the growth in electronic filing.[Footnote 14] IRS
officials attributed not meeting the goal for the percentage of letters
issued to taxpayers with errors (letter error rate), in part, to the
loss of experienced and knowledgeable personnel as a result of IRS's
announcement that it would be closing some processing centers.
In addition to closing paper processing operations at one of its
centers, IRS has seen other improvements in its processing operations
over the past several filing seasons. For example, in 1996, the average
number of days it took processing centers to process individual tax
returns ranged between 8 and 11 days. In 2003, the average number of
days ranged between 6 and 8 days. In addition, IRS's measure of the
percentage of refunds with IRS-caused errors in the entity information
(e.g., name or Social Security number) or refund amount declined from
9.8 percent in 2001 to 5.4 percent in 2003. IRS officials also told us
that, since 2001, the eight submission processing centers that process
individual tax returns each met or exceeded the established deposit
program completion date--the date by which the processing centers must
finish processing all tax receipts associated with the April peak
processing period.
According to IRS officials, the improvements in processing performance
have resulted from a combination of factors, including better data
processing equipment and more emphasis on performance management. For
example, in the late 1990s, IRS began replacing two key data processing
systems, which allowed for faster processing. In addition, IRS
officials told us that they now rely more heavily on technology to
communicate with employees, which they believe allows for faster and
more accurate dissemination of information from headquarters to field
staff and vice versa. As a result of RRA 98, IRS also has stressed the
importance of reaching the goals for its balanced measures as compared
to prior years, when IRS placed less importance on these types of
measures.
The improvements in processing performance also have enabled IRS to
reduce the number of staff devoted to its paper processing operations,
while employee satisfaction has increased. According to IRS officials,
the number of staff years used in paper processing operations has
decreased from 11,542 in fiscal year 2001 to 10,619 in fiscal year
2003, a decrease of about 8 percent.[Footnote 15] At the same time, the
level of employee satisfaction has increased, as 63 percent of the
staff assigned to processing expressed being satisfied with their job
in 2003, an increase from 54 percent in 2001.
Electronic Filing Grew in 2003, but at Current Growth Rate IRS Will Not
Achieve Long-Term Goal:
The number of individual income tax returns that IRS received
electronically continued to grow and IRS met its goal for the
percentage of returns filed electronically. However, the current rate
of growth of electronic filing will not allow IRS to achieve its long-
term electronic filing goal of 80 percent by 2007,[Footnote 16] despite
numerous initiatives to reduce barriers to and encourage more
electronic filing.
Despite Growth in Electronic Filing In 2003, IRS is Not on Track to
Achieve Its Long-Term Goal:
The number of individual returns filed electronically continued to grow
in 2003. IRS received an estimated 53 million individual tax returns
electronically in 2003, an increase of about 13 percent from 46.9
million in 2002. The percentage of individual tax returns filed
electronically reached an estimated 41 percent in 2003, up from 35.9
percent in 2002. While the number of tax returns filed electronically
in 2003 fell just short of IRS's performance goal of 54 million, IRS
met its performance goal for the percentage of individual tax returns
filed electronically.
Although electronic filing continues to grow, IRS is not on track to
reach its long-term electronic filing goal of 80 percent by 2007. As
figure 2 shows, the growth rate from 1996 through 2003 has generally
been decreasing. More significantly, the growth rate in 2003 represents
the smallest percentage increase in the number of individual tax
returns filed electronically since 1996. Some slowing of the growth
rate might be expected because, for example, taxpayers most easily
attracted to electronic filing have already converted.
Figure 2: Growth Rate in the Number of Individual Tax Returns Filed
Electronically, 1996-2003:
[See PDF for image]
Note: GAO analysis of IRS data. The growth rate for 2003 is estimated.
[End of figure]
The current growth rate will not enable IRS to meet its long-term
goals. We estimate, on the basis of the data in figure 3, that about 64
percent of individual tax returns will be filed electronically by 2007,
assuming annual growth rates for individual tax returns filed
electronically (about 13 percent) and total number of individual tax
returns filed (0.66 percent)[Footnote 17] continue through 2007. IRS
estimated an even lower percentage (54.4 percent) of returns would be
filed electronically by 2007.[Footnote 18] In order to achieve the
long-term goal of 80 percent, IRS would have to average more than a 19
percent growth rate in electronic filing from 2004 to 2007. However, in
its June 30, 2003, report to the Congress, the Electronic Tax
Administration Advisory Committee (ETAAC) [Footnote 19] said that the
trend of electronic filing is clearly toward lower annual growth rates
and as a result, IRS will have difficulty achieving its long-term goal
unless it finds additional ways to overcome taxpayer and tax
practitioner barriers to electronic filing. To the extent that IRS
misses the goal, more resources will have to be devoted to processing
paper returns.
Figure 3: Projected Percentage of Individual Tax Returns Filed
Electronically, 2004-2007:
[See PDF for image]
Note: GAO analysis of IRS data.
[End of figure]
IRS Has Taken Various Steps to Encourage More Electronic Filing, which
Is Key to Continued Modernization:
In 2003, IRS took various steps to encourage taxpayers and
practitioners to file electronically. These steps included the
following:
* IRS entered into an agreement with the Free File Alliance, a
consortium of 17 tax preparation companies, which requires the Alliance
to offer free on-line tax preparation and filing services for at least
60 percent (78 million) of all taxpayers during the filing season.
Taxpayers access the Alliance from a link on IRS's Web site. As of July
31, 2003, about 2.8 million taxpayers used the free on-line filing
services offered by the Alliance, which exceeded IRS's goal of 2.5
million taxpayers.[Footnote 20] However, IRS officials estimated that
only about 1 million of these taxpayers were filing electronically for
the first time.
* IRS continued to focus the electronic filing marketing campaign on
taxpayers and practitioners who file computer-prepared tax returns on
paper. In 2003, IRS planned to spend $15 million, the same as the
marketing budget in 2002.
* IRS mailed a package to about 32,000 tax practitioners who prepare
either some or all of their tax returns over the computer but submit
paper tax returns. The package explains the benefits of electronic
filing and encourages taxpayers to file all of their tax returns
electronically. This built on an initiative last year where IRS sent
letters to selected tax practitioners to encourage them to file returns
electronically.
According to IRS officials, these steps contributed to the growth in
the number of returns filed electronically in 2003; however, the
officials told us that they were unable to link the initiatives to a
specific increase in the growth of individual returns filed
electronically, with the exception of the Free File initiative.
The growth of electronic filing has been, and continues to be, a key
part of IRS's modernization strategy because it allows IRS to control
costs, shift resources out of labor-intensive paper return processing,
improve customer service, and as previously discussed, consolidate
submission processing operations at fewer centers. Electronic filing
has grown from almost 12 million returns in 1995 to an estimated 53
million in 2003, due to numerous initiatives implemented over the
years. For example, in 1999, IRS made electronic filing more appealing
by enabling taxpayers who owe money to pay their balance due either by
credit card or by direct debit from a checking or saving account. Also,
in response to concerns voiced by practitioners that electronic filing
was not entirely paperless, IRS began testing alternative signature
options that allowed certain electronic filers to sign their returns
electronically and thus avoid having to send any paper to IRS and
expanded those initiatives in 2000. Additionally, each year IRS has
expanded the list of forms and schedules that can be filed
electronically. As a result, according to IRS, 99 percent of all
individual forms and schedules can be filed electronically today.
Telephone Service Showed Improvement in Accessibility but Not Accuracy:
IRS provided more accessible telephone service in 2003; however, its
performance in providing accurate responses to taxpayers declined, and
IRS did not achieve most of its 2003 performance goals, primarily
related to accuracy. IRS implemented several initiatives in 2003 that
likely contributed to improved accessibility. Over a longer period of
time, IRS has significantly improved both the accessibility and
accuracy of its telephone service, which represents a payoff from its
modernization efforts.
Telephone Service Was More Accessible, Although Not More Accurate in
2003:
IRS receives millions of calls to its toll-free network during the
filing season when taxpayers, inquire about tax law issues, the status
of their refunds, or issues regarding their accounts, among other
things. As figure 4 shows, IRS received about 72 million calls in 2003,
about 31 percent fewer calls than it received in 2002. Figure 4 also
shows that calls about the status of refunds accounted for almost half
of total calls received through mid-July 2003.
Figure 4: Reasons Taxpayers Called for Telephone Assistance during the
2003 Filing Season:
[See PDF for image]
Note: GAO analysis of IRS data. The "Other" category includes special
telephone numbers, such as the one for victims of the September 11,
2001, terrorist actions, and calls that were abandoned or that reach a
busy signal from IRS's automated-service-only (TeleTax) number. In this
figure, total calls to IRS refer to the number of callers that tried to
reach a Customer Service Representative (CSR) or IRS's TeleTax number.
Data cover January 1 through July 12, 2003.
[End of figure]
Figure 5 shows that of the 72 million calls to IRS during the 2003
filing season (1) less than half of the calls resulted in the caller
receiving automated service, (2) about one third of the calls were
handled by a Customer Service Representative (CSR), and (3) about one
fourth of the calls resulted in the caller hanging up or being
disconnected without receiving service.
Figure 5: How IRS Handled Calls for Telephone Assistance during 2003
Filing Season:
[See PDF for image]
Note: GAO analysis of IRS data.
[End of figure]
IRS's overall performance in answering calls during the 2003 filing
season was mixed. As table 1 shows, IRS provided more accessible
telephone service in 2003 compared to 2002 as (1) a greater percentage
of callers attempting to reach a CSR received service, (2) a greater
percentage of callers attempting to access automated service completed
their calls, (3) a greater percentage of callers reached a CSR within
IRS's threshold of 30 seconds or less, and (4) callers spent less time
waiting for assistance on average. However, table 1 also shows that
IRS's performance on various accuracy measures declined in 2003 as
compared to 2002.
Table 1: IRS Tax Filing Season Telephone Assistance Performance, 2000-
2003 Filing Seasons:
Accessibility measures[A]: CSR level of service[B]; 2000: Actual: [J];
2001: Actual: 68%; 2002: Actual: 71%; 2003: Actual: 85%; Goals: 72%.
Accessibility measures[A]: Automated completion rate[C]; 2000: Actual:
47%; 2001: Actual: 47%; 2002: Actual: 36%; 2003: Actual: 59%; Goals: N/
A[K].
Accessibility measures[A]: Assistor response level[D]; 2000: Actual:
39%; 2001: Actual: 39%; 2002: Actual: 51%; 2003: Actual: 56%; Goals: N/
A[K].
Accessibility measures[A]: Average speed of answer[E]; 2000: Actual:
237 seconds; 2001: Actual: 337 seconds; 2002: Actual: 268 seconds;
2003: Actual: 159 seconds; Goals: N/A[K].
Accessibility measures[A]: Accuracy measures[A]; 2000: Actual:
2001: Actual: 2002: Actual: 2003: Actual:
Goals: [Empty].
Accessibility measures[A]: Tax law quality rate[F]; 2000: Actual: 73%;
+/-2%; 2001: Actual: 75%; +/-1%; 2002: Actual: 82%; +/-1%; 2003:
Actual: 80%; +/-1%; Goals: 84%.
Accessibility measures[A]: Accounts quality rate[F]; 2000: Actual: 59%;
+/-2%; 2001: Actual: 69%; +/-1%; 2002: Actual: 76%; +/-1%; 2003:
Actual: 70%; +/-1%; Goals: 76%.
Accessibility measures[A]: Tax law customer accuracy rate[G]; 2000:
Actual: [J]; 2001: Actual: 79%; +/-1%; 2002: Actual: 85%; +/-1%; 2003:
Actual: 81%; +/-1%; Goals: 87%.
Accessibility measures[A]: Accounts customer accuracy rate[G]; 2000:
Actual: [J]; 2001: Actual: 88%; +/-1%; 2002: Actual: 91%; +/-1%; 2003:
Actual: 89%; +/-1%; Goals: 91%.
Accessibility measures[A]: Tax law timeliness rate[H]; 2000: Actual:
[J]; 2001: Actual: [J]; 2002: Actual: [J]; 2003: Actual: 99%; +/-1%;
Goals: N/A[K].
Accessibility measures[A]: Accounts timeliness rate[H]; 2000: Actual:
[J]; 2001: Actual: [J]; 2002: Actual: [J]; 2003: Actual: 97%; +/-1%;
Goals: N/A[K].
Accessibility measures[A]: Tax law professionalism rate[I]; 2000:
Actual: [J]; 2001: Actual: [J]; 2002: Actual: [J]; 2003: Actual: 100%;
+/-1%; Goals: N/A[K].
Accessibility measures[A]: Account professionalism rate[I]; 2000:
Actual: [J]; 2001: Actual: [J]; 2002: Actual: [J]; 2003: Actual: 100%;
+/-1%; Goals: N/A[K].
Source: IRS.
[A] Accessibility measures are based on actual counts from January 1
through mid-July. Accuracy measures are based on representative samples
and are estimated at the 90-percent confidence level and cover the
period from January through June.
BThis measure is intended to show the percentage of callers who wanted
to speak to a customer service representative (CSR) that got through
and received service.
CThis measure is intended to show the percentage of total callers who
completed a selected automated service. IRS did not establish a goal
for 2003 because the indicator is not an official measure.
DIRS uses the word "assistor" interchangeably with CSR. This measure
shows the percentage of callers that waited 30 seconds or less before
speaking to a CSR. IRS did not establish a goal for 2003 because the
indicator is not an official measure.
[E] The average number of seconds callers waited before speaking to a
CSR. IRS did not establish a goal for 2003 because the indicator is not
an official measure.
[F] The percentage of calls in which CSRs followed all IRS procedures
for the call type and provided correct answers.
[G] The percentage of calls in which CSRs provided correct answers for
the call type and took the appropriate follow-up resolution action.
[H] The percentage of calls in which CSRs used their time efficiently
when responding to taxpayers inquires. IRS did not establish goals for
2003 for these measures because they were new in 2003.
[I] The percentage of calls in which CSRs used effective communication
techniques to promote a positive IRS image when responding to taxpayer
inquires. IRS did not establish goals for 2003 for these measures,
because they were new in 2003.
[J] Comparable data do not exist.
[K] Not applicable.
[End of table]
IRS exceeded its goal for CSR level of service during the 2003 filing
season. However, IRS did not set goals for the three other workload
indicators of accessibility shown in table 1 because it did not
consider these indicators to be performance measures. We believe these
three indicators are important because they measure taxpayers' access
to automated service and gauge the taxpayer's experience when
attempting to reach a CSR.[Footnote 21] As we reported in November
2002, IRS removed the automated completion rate as a measure of the
effectiveness of serving taxpayers through automation.[Footnote 22] IRS
did not agree with our recommendation to reinstate this measure as a
means of determining the level of service provided by
automation.[Footnote 23] In December 2002, we also reported that IRS
stopped using the assistor response level and average speed of answer
measures to assess its performance in providing telephone service
because IRS's telephone call sites had no control over these
measures.[Footnote 24] In response to our recommendation that IRS
reinstate a telephone assistance caller wait-time measure, IRS plans to
reintroduce a wait-time measure for fiscal year 2004. This measure--
average speed of answer--is intended to gauge the customer's experience
when attempting to reach a CSR.
IRS officials attributed the improvement in the accessibility of
telephone service to several factors. For example, IRS experienced a
lower than expected number of calls in 2003--about 72 million calls
received in 2003 as compared to more than 104 million in 2002. IRS
officials told us that there were relatively few tax law changes that
had an impact on taxpayers during the 2003 filing season as compared to
last year, when IRS received a significant number of calls related to
the rate reduction credit. Another possible reason for the improvement
in accessibility could be the fact that IRS began using CSRs to route
tax law related calls in 2003. IRS made this change because in 2002 (1)
some callers spent up to 2 minutes navigating the menu options, (2)
other callers spent up to 3 minutes talking to one CSR only to be
transferred to another CSR for assistance, and (3) more than 50 percent
of the calls received by CSRs were re-routed to other CSRs for some tax
law topics. IRS officials told us that they made this change to improve
performance during the filing season and improve the customer
experience since many customers with tax-law-related calls had
difficulty using the menu options.
IRS did not meet its goals for any of its accuracy measures during the
2003 filing season, and its performance relative to these measures
declined compared to last year. IRS also began establishing baseline
data for four new accuracy measures and has not yet set goals for these
measures. These new measures assess how well CSRs manage their time and
whether CSRs promote a positive IRS image when communicating with
telephone callers. IRS plans to replace its existing tax law and
account quality measures and use the new timeliness and professionalism
measures and current customer accuracy measures to assess the accuracy
of its performance in providing telephone assistance beginning in
fiscal year 2004. According to IRS, the new timeliness and
professionalism measures are based on what customers indicated mattered
most to them and they are designed with consideration to industry best
practices. Although IRS began an analysis to determine whether there is
a correlation between how IRS rates its CSRs on these new measures and
how taxpayers report being treated in the customer satisfaction
surveys, the analysis was not completed when we completed our field
work.
IRS attributed the lack of improvement in the accuracy of telephone
service to several factors. For example, IRS officials attributed the
decline in the accounts quality rate to the training of newly hired
CSRs on account-related topics instead of the easier refund topics. In
addition, with the introduction of the Internet "Where's My Refund"
feature, IRS received fewer refund inquires, which resulted in more
complex calls being answered by CSRs. This feature is discussed in more
detail in the "IRS's Web Site Performance Showed Some Improvement"
section. IRS identified several items that contributed to the decrease
in the tax law customer accuracy rate, including the fact that CSRs had
difficulty adapting to the changes in the guide they use to query
callers. IRS officials also said another explanation for the lack of
improvement in providing accurate information to callers is that some
of IRS's telephone call sites were transferred from one operating
division to another division, which resulted in CSRs moving from one
area of expertise to another area and needing to be retrained.
IRS Implemented Several Initiatives in 2003 to Improve Telephone
Service:
IRS implemented several initiatives to improve telephone service in
2003. According to IRS officials, these initiatives were instrumental
in IRS improving access to telephone service during the 2003 filing
season, although it is difficult to determine specific cause/effect
relationships between the initiatives and improvements in telephone
service. Examples include the following.
* IRS established six new toll-free telephone numbers to better reflect
operating division responsibility and accountability--the Refund
Hotline, Refund Callback Line, Business and Specialty Tax Line, and
three new customer response numbers. These new numbers are part of
IRS's new toll-free strategy to improve the customer's experience by
targeting customer segments and creating more accountability for the
operating divisions. According to IRS officials, the three new customer
response numbers replaced one number that IRS used in the past and more
closely correspond to the operating division responsible for a
particular notice.
* IRS implemented a new feature on its Web site that enabled taxpayers
to find out if IRS received their returns and whether their refunds had
been processed, as discussed in the "IRS's Web Site Performance Showed
Some Improvement" section of this report. The new feature provides
taxpayers with another option to receive assistance while reducing the
demand for toll-free refund calls. According to IRS's analysis for the
period of January 1 to June 30, 2003, this new feature handled 32
percent of all IRS contacts from taxpayers with refund questions and
reduced the toll-free refund call demand.
Telephone Service Has Improved over the Past Several Filing Season
Partly as a Result of Modernization:
Since the mid-1990s, IRS has significantly improved its telephone
service. Although telephone service is not yet at the level desired by
taxpayers and the Congress, the improvements to date represent payoffs
from IRS's modernization efforts. For example, in 1997, about 49
percent of calls to IRS primary assistance lines either received a busy
signal or were abandoned before being answered, as compared to about 32
percent of calls in 2003. In addition, the percentage of calls where
taxpayers attempted to reach a CSR and received service increased from
about 68 to 85 percent between the 2001 and 2003 filing seasons. With
regard to accuracy, the percentage of tax-law-related calls in which
CSRs followed all IRS procedures and provided the correct answer
increased from 73 percent in 2000 to 80 percent in 2003, while the
percentage of account-related-calls in which CSRs followed all IRS
procedures and provided the correct answer also increased from 59 to 70
percent between the 2000 and 2003 filing seasons.
IRS's telephone service improvements over the years are, in part, the
result of numerous modernization initiatives sustained over time,
although limited data exist to link specific initiatives to
improvements. In 1998, IRS revised its method of distributing calls,
shifting from an area-code-based routing system to a nationwide call
allocation system. In 1999, IRS centralized its toll-free telephone
operation at the Joint Operations Center to enable it to route calls on
the basis of availability of CSRs. Similarly, from 2000 through 2003,
IRS made several business process changes and implemented new
technology. For example, in 2001, IRS shifted millions of calls to an
automated answering system in order to free CSRs to answer more complex
calls. IRS also enhanced its call routing ability in 2002 by
implementing "network call screening" where callers, through the use of
menu options, indicated their subject matter prior to being routed to a
call site. Regarding accuracy, IRS began centralized monitoring of
account-and tax-law-related calls in 1998. In addition, a desktop
electronic version of IRS's guide used to answer tax-law-related
questions was made available to all CSRs. The guide has been improved
and now contains automated links to on-line research material. Using
this same technology, in 2002, IRS automated the guide that CSRs use to
answer account-related questions. Finally, because of modernization,
IRS's telephone service has improved over the years while maintaining
about the same workforce level in its telephone operations. For
example, IRS expended about 8,285 staff years in fiscal year 1999
providing toll-free telephone service compared to 8,340 staff years in
fiscal year 2002.
Quality of Walk-In Assistance Improved in 2003, but Assessing Long-Term
Improvements Is Difficult Because of Lack of Data:
The quality of service provided at IRS's walk-in sites showed some
improvement in 2003, and IRS met some of its 2003 performance
goals.[Footnote 25] In addition, IRS continued its initiative to shift
return preparation work to its community-based coalitions and other
volunteer organizations, which contributed to a decline in the number
of taxpayers assisted at IRS's walk-in sites. However, our assessment
was limited by the fact that IRS did not report performance for the
timeliness of walk-in assistance or the accuracy of account assistance
in 2003. Over the last several years, IRS has made efforts to
standardize and improve walk-in assistance, but a lack of long-term
performance data makes it impossible to quantify improvements.
Tax Law Accuracy and Volunteer Assistance Increased in 2003, but IRS
Did Not Report on Timeliness and Account Assistance:
The accuracy of tax law assistance provided at walk-in sites improved
between 2002 and 2003 on the basis of reviews conducted by
TIGTA.[Footnote 26] From January through April 2003, TIGTA found that
about 70 percent of its questions were answered correctly, an increase
of 20 percentage points over the same time period last year, but less
than IRS's 2003 performance goal of 80 percent. TIGTA also found that
the number of times IRS employees referred TIGTA auditors to a
publication instead of answering tax law questions--which had been an
issue last year--declined by about 87 percent. TIGTA attributed the
increased accuracy rates to IRS (1) revising the guidelines used by
walk-in staff, (2) certifying the proficiency of walk-in staff in
various tax law categories, and (3) immediately addressing the results
of TIGTA reviews at walk-in sites. As they did last year, field
assistance officials continue to disagree with the methodology used by
TIGTA to calculate tax law accuracy because TIGTA counts referrals to
IRS publications as incorrect.[Footnote 27] However, as we stated last
year, we believe that the complexity of tax laws and varying education
levels among taxpayers seeking assistance suggest that requiring field
assistance employees to walk the taxpayer through a publication to
identify the correct response is a necessary procedure that should be
followed in practice for their response to be considered
correct.[Footnote 28]
In addition to TIGTA reviews of tax law accuracy, IRS began measuring
the accuracy of return preparation assistance provided at walk-in sites
in January 2003, using existing data generated by the submission
processing centers.[Footnote 29] IRS data shows that from January 1 to
May 3, 2003, the accuracy rate for returns prepared at walk-in sites
was 99.8 percent, which exceeded IRS's performance goal of 91 percent.
IRS officials attributed the high accuracy rate to the use of
standardized software by walk-in staff to prepare and electronically
file returns and the lack of significant tax law changes in 2003 as
compared to last year. IRS also partners with community-based
coalitions--a collection of local organizations that help low-income
individuals and families--and other volunteer organizations to provide
free return preparation assistance to taxpayers as part of its VITA and
TCE programs.[Footnote 30] According to IRS officials, from January 1
to April 19, 2003, the accuracy rate for returns prepared at VITA sites
was 98.1 percent and 96.5 percent for returns prepared at TCE sites.
In 2003, the number of taxpayers that received return preparation
assistance from community-based coalitions and other volunteer
organizations increased; at the same time, the number of taxpayers
assisted at IRS's walk-in sites continued to decline. Figure 6 shows
the growth in the number of returns prepared by community-based
coalitions and other organizations, a decline in the number of
taxpayers receiving assistance at IRS walk-in sites, and a decline in
the number of returns prepared at IRS walk-in sites.[Footnote 31]
Figure 6: Assistance Provided by IRS Walk-in and Volunteer Sites, 2000-
2003 Filing Seasons:
[See PDF for image]
Note: GAO analysis based on IRS data. Total walk-in includes all face-
to-face assistance. It does not include the number of taxpayers
assisted by walk-in employees via telephone or correspondence, which
ranged from about 96,000 in 2000 to over 150,000 in 2003.
The number of returns prepared at volunteer sites was not available for
the 2000 filing season.
The time periods covered by this figure each began on January 1 and
ended on April 22, 2000, April 21, 2001, April 20, 2002, and April 19,
2003.
[End of figure]
IRS officials attributed the overall decline in the number of taxpayers
receiving assistance at walk-in sites to (1) IRS's strategy to reduce
the amount of return preparation assistance offered at walk-in
sites,[Footnote 32] (2) taxpayers use of more convenient means to
obtain services that do not require face-to-face contact, such as
through IRS's toll-free network and Web site, and (3) the increasing
number of taxpayers that receive return preparation assistance at
community-based coalitions and other organizations as part of IRS's
VITA and TCE programs.[Footnote 33] These officials also told us that
the decline in the number of taxpayers assisted at walk-in sites helped
IRS reduce its reliance on compliance staff. Traditionally, IRS has
detailed staff from its compliance functions, such as Examination and
Collection, to help provide walk-in assistance. In 2003, IRS was able
to reduce the number of compliance staff that helped to provide walk-in
assistance during the filing season by about 118 staff years (66
percent) during the filing season. IRS also reduced the total number of
staff years used to provide walk-in assistance during the 2003 filing
season by about 14 percent as compared to the same time period in 2002.
IRS did not report performance for two key indicators of walk-in
service in 2003--timeliness and accuracy of account assistance. For
years, IRS officials have contended that, when timeliness is monitored
at its walk-in sites, employees have felt in a hurry to provide
assistance to taxpayers, which could diminish quality. As a result, IRS
discontinued wait time as an official measure of field assistance in
2001 and no longer required walk-in sites that were manually capturing
and reporting wait-time information to do so in 2002. While we did not
agree with IRS's decision to discontinue wait time as an official
measure, we did agree with the decision to stop manual tracking of wait
time because it was not practical or accurate to do so.[Footnote 34]
This year, IRS no longer required that about 140 of its 400 walk-in
sites equipped with an automated system, known as the Queuing
Management System, which captures wait-time information to report that
information to upper-level management. Further, IRS did not consolidate
and disseminate this wait-time information to field managers. According
to field assistance officials, this decision was made for the same
reason they discontinued wait time as an official measure--because
walk-in staff felt pressured to hurry assistance. However, without
timeliness information, IRS lacks information about a key component of
service, which makes it difficult to balance timeliness and quality. As
a result, walk-in staff could take excessive time providing assistance
to a few taxpayers regardless of the impact on the wait time for other
taxpayers. For this reason, IRS includes timeliness as part of its
suite of balanced measures for monitoring telephone operations. In
addition, taxpayers reported in customer satisfaction surveys that
promptness of service was by far the highest ranked improvement
priority for its walk-in sites.
IRS also does not presently know the accuracy of the account assistance
it provides to taxpayers at walk-in sites. Account assistance differs
from tax law assistance--account assistance includes answers to
questions about taxpayers' refunds, payments, and tax debts. IRS
established baseline data for an account accuracy measure in 2002;
however, IRS subsequently decided not to measure account accuracy in
2003 so that its quality reviewers could focus on conducting reviews of
tax law accuracy at walk-in sites. IRS officials stated that they are
developing a plan for measuring account accuracy and hoped to begin
using quality reviewers to measure the accuracy of account assistance
in September 2003. Account accuracy is one of the balanced measures of
telephone performance.
IRS Took Steps in 2003 to Improve Walk-in Service:
IRS took several steps to improve walk-in service in 2003. According to
field assistance officials, these steps likely helped improve the
accuracy of tax law assistance, although they have not conducted any
analysis to determine the impact of these steps on any particular
aspect of quality of walk-in service. The following are three examples
of steps intended to improve accuracy.
* Field assistance managers began certifying the proficiency of walk-in
staff in various tax law topics in March 2003. According to field
assistance officials, walk-in staff that do not pass the certification
in a particular topic cannot assist taxpayers on that topic, and
managers are required to develop a plan to assist the staff in
improving proficiency in that topic.
* Field assistance managers and quality reviewers began conducting
monthly reviews of tax law accuracy at walk-in sites. IRS data show
that from January to April 2003, its reviewers reported receiving
correct responses to about 88 percent of the questions asked of walk-in
staff, which is higher than the results reported by TIGTA for the same
time period.
* IRS began training walk-in staff in fiscal year 2003 on how to guide
taxpayers through a publication to answer a tax law question, instead
of merely providing the taxpayer with the publication and having the
taxpayers figure out the answers by themselves. As part of this
training, IRS also developed guidance for walk-in staff to use that is
similar to what CSRs use for answering tax law questions received via
IRS's toll-free telephone network. In addition, field assistance
procedures emphasize that walk-in staff should not give taxpayers a
publication in lieu of providing an answer to their tax law question.
IRS Lacks Data for Assessing Long-term Improvements in Walk-In
Assistance:
Over the last few years, IRS has made efforts to standardize walk-in
assistance, but a lack of performance data makes it difficult for IRS
and us to quantify long-term improvements. As we reported in December
2000, IRS's National Office did not implement a quality review program
for walk-in sites until 2000.[Footnote 35] Before that time, IRS lacked
meaningful nationwide data to assess the performance of its walk-in
sites in terms of quality, timeliness, and taxpayer satisfaction.
Despite this fact, field assistance officials believe that there have
been improvements in the quality of services provided by walk-in sites
in recent years, based on a number of factors. For example, in 2001,
IRS reorganized its walk-in sites and established a set of measures,
such as tax law accuracy, to assess performance and to help provide
consistency and standardization. As a result, field assistance
officials told us that walk-in sites now capture workload data, for
example, more consistently, which makes the data more useful to
management and which indicates an improvement in recent years. The
officials told us that, in 2002, IRS also began providing more
consistent and standardized services, better training, and improved
access to taxpayer account information at walk-in sites. In addition,
IRS began refining the process for referring complex tax law questions
that are beyond the scope of training that walk-in staff normally
receive to expert field assistance, toll-free telephone assistance
CSRs, or compliance staff. Finally, as previously noted, IRS has also
been able to reduce its reliance on compliance staff over the last few
years, allowing it to redirect those resources to higher priority,
compliance-related work.
IRS's Web Site Performance Showed Some Improvement:
In 2003, IRS's Web site showed some improvement and taxpayers used it
more than in 2002. For example, from January 1 to July 31, 2003, more
than 430 million forms, publications, and other documents had been
downloaded from the Web site, a 22 percent increase over the same time
period last year.
Keynote--an independent Web site rater and a recognized authority on
Internet performance--reviewed the average delivery time and
availability[Footnote 36] of IRS's Web site and reported that the site
performed well, although the Web site did exhibit some minor
problematic periods. Keynote reported that from April 11 through April
16, 2003, IRS's home page was delivered in around 1 second and the Web
site had an average availability rate of 99.35 percent.[Footnote 37]
However, on April 14, 2003, Keynote reported that the site's average
delivery time experienced slowdowns of up to 6 to 8 seconds from 5 p.m.
to 9 p.m., and its average availability rate decreased to less than 90
percent. In 2002, Keynote reported that the Web site's average delivery
time was less than 1 second and its availability averaged close to 100
percent for most of the filing season.
Although Performance Declined for Questions Received Via IRS's Web
Site, Ease of Use Improved:
One important feature of IRS's Web site is the ability of taxpayers to
ask tax law and procedural questions of IRS via the Internet on its Web
site. IRS data indicate that its performance in answering questions
received from taxpayers via the Internet worsened during the 2003
filing season as compared to 2002. IRS took 3.7 business days on
average to respond to those questions in 2003, as compared with 2.1
business days in 2002 and its 2003 performance goal of 2 business days.
In addition, from January 1 to May 31, 2003, IRS responded accurately
to 73.7 percent of the questions, as compared to a 77.6 percent
accuracy rate for the same time period in 2002 and its 2003 performance
goal of 83.5 percent. IRS officials attributed the increase in the
average time to respond and the decrease in the accuracy rate to the
increased volume and complexity of the questions. Although the number
of questions received from taxpayers over the Internet is small when
compared to the number of questions received over the telephone,
providing accurate responses to these questions is particularly
important because of the potential for widespread dissemination of
inaccurate responses to other taxpayers.
We found that IRS's Web site was more user friendly in 2003. For
example, we did not find broken or inappropriate links between pages as
we have found in previous years. IRS also added an index to the Web
site, making it possible for users to search for forms, instructions,
or publications by topic. In addition, IRS resolved our concern that
the search functions do not always make the most pertinent information
readily available. In April 2003, we testified that when we typed,
"earned income tax credit" into the forms and publication search
function, Publication 596--the primary publication on the earned income
tax credit--was the 70th item on the list, and we had to scroll through
seven pages to find it. However, in June 2003, we again typed "earned
income credit" into the search function and found the publication was
the 9th item on the list and on the first page. IRS officials
attributed the improvement in the search function results, in part, to
working with contractors to (1) determine what the expected search
results should be for the most frequently used search terms, (2) adjust
the search results to ensure that those items appear at the top of the
list, and (3) expand the thesaurus within the search engine to include
an updated repository of the most frequently searched words, phrases,
and variations.
IRS Continues to Offer New Services to Increase Web Use, a Key Part of
Modernization:
IRS offered new services on the Web site for the 2003 filing season
that represent payoffs from modernization. For example, IRS implemented
a refund status check (Where's My Refund) feature on the Web site that
enabled taxpayers to find out if IRS received their returns and whether
their refunds were processed. As of June 9, 2003, IRS data show that
about 11 million taxpayers obtained data on their refund status using
this feature. The ability of taxpayers to check the status of refunds
on-line is particularly important because it has contributed to the
decreased number of refund call inquiries handled by IRS's toll-free
telephone operations and has the potential to further decrease those
calls. Taxpayers responding to a survey on the feature provided
favorable reviews--about 91 percent of the survey respondents said they
were satisfied or somewhat satisfied with the overall service provided
by the feature. In January 2003, IRS also made available on the Web
site a direct link to the Free File program offered through IRS
private-sector partners.
IRS's Web site is a critical part of modernization because, according
to IRS, it is more cost effective than other methods of providing
taxpayer assistance, such as answering telephone calls. As discussed
above, the initiative that allowed taxpayers to check the status of
their refunds shows the potential of the Web site to provide more cost-
effective services. Taxpayer's use of IRS's Web site and the services
IRS offers on its Web site have grown considerably over the past
several filing seasons, another indication that taxpayers are receiving
payoffs from modernization. For example, by July 31, 2003, taxpayers
already had downloaded more than 430 million forms and publications
compared to the 129 million for about the same time period in 2000.
Conclusions:
IRS's performance during the filing season is important because it
affects so many taxpayers. The filing season also plays a crucial role
in collecting the revenue that finances the federal government. The
improvements seen this year, as well as over the past several years,
are part of the payoff from IRS's ongoing modernization efforts.
One feature of modernization that has contributed to IRS's improved
performance is the greater reliance on performance measures to manage
its operations. A few years ago, IRS established performance measures
that are intended to balance priorities such as quality, timeliness,
customer satisfaction, employee satisfaction, and outcomes. The
measures IRS uses to assess its performance in providing telephone
service are an example of how IRS has achieved this balance. However,
as a result of IRS's decision in 2003 to stop requiring sites equipped
with an automated system for reporting wait-time data to report that
information, IRS's measures to assess walk-in assistance lack such
balance. Finally, managers do not have information on this important
aspect of quality and without the balance a timeliness measure would
offer, staff might focus on providing accurate assistance to a few
taxpayers regardless of the impact on the wait-time for other
taxpayers.
Recommendation for Executive Action:
We recommend that the Commissioner of Internal Revenue direct the
appropriate officials to require that IRS consolidate and disseminate
wait-time information to field managers based on information from sites
equipped with an automated system that can capture wait-time data, in
order to assess this important aspect of quality.
Agency Comments and Our Evaluation:
The Commissioner of Internal Revenue provided written comments in an
October 29, 2003, letter (see app. III). The Commissioner noted that
IRS's filing season readiness process provided the framework and
oversight to ensure that IRS was well prepared for the 2003 filing
season. The Commissioner partially agreed with our specific
recommendation, stating that IRS will require walk-in sites equipped
with Q-Matic to report wait-time information on a quarterly basis and
that the automated wait-time information available from these locations
would provide valuable data for an assessment of overall trends and
relationships in timeliness and quality. However, the Commissioner did
not agree to disseminate this consolidated wait-time information to
field managers. For years, as we report, IRS has contended that past
experience has shown employee reaction to timeliness measures tended to
increase the likelihood of inaccurate or incomplete answers. At the
same time, the Commissioner noted that routine monitoring of wait time
occurs by local managers for walk-in sites equipped with Q-Matic.
However, routine monitoring does not provide overall performance data
and timeliness data is only available to some managers locally. In our
view, there needs to be a balance between measuring quality and
timeliness and too much focus on either could create inappropriate
incentives for IRS's walk-in staff. As noted in our report, IRS already
consolidates and reports tax law and return preparation accuracy at its
walk-in sites and plans to do the same for accounts accuracy. Without
consolidated timeliness information, field managers would have a
difficult time balancing quality and timeliness.
:
We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate Committee on Finance, the House
Committee on Ways and Means, and the Ranking Minority Member,
Subcommittee on Oversight, House Committee on Ways and Means. We are
also sending copies to the Secretary of the Treasury; the Commissioner
of Internal Revenue; the Director, Office of Management and Budget; and
other interested parties. We will also make copies available to others
on request. In addition, the report will be available at no charge on
the GAO Web site at [Hyperlink, http://www.gao.gov.] h [Hyperlink,
http://www.gao.gov] ttp://www.gao.gov.
:
:
This report was prepared under the direction of Joanna M. Stamatiades,
Assistant Director. Other major contributors are acknowledged in
appendix IV. If you have any questions about this report, contact me on
(202) 512-9110.
Sincerely yours,
Signed by:
James R. White:
Director, Tax Issues:
[End of section]
Appendixes:
Appendix I: Data on IRS's Processing Performance Relative to Fiscal Year
2001-2003 Performance and Fiscal Year 2003 Goals:
As table 2 shows, (1) the Internal Revenue Service's (IRS) performance
in 2003 improved over last year for seven measures and (2) IRS exceeded
its performance goals in 2003 for five measures but missed its goals
for two measures (deposit error rate and letter error rate). IRS's
performance in 2003 could not be compared with its performance in 2002
and prior years or 2003 goal for one measure (refund interest paid)
because IRS revised the way the measure was computed and did not have
the necessary data available to revise the goal. Table 2 also shows
that IRS's processing performance has generally improved for each of
its measures since 2001.
Table 2: IRS's 2001-2003 Tax Filing Season Processing PerformanceA:
Measure Name: Deposit error rate; Definition: Percentage of payments
applied in error by, for example, reimbursing a taxpayer who overpaid
when the taxpayer wanted any overpayment credited to next year's tax
bill; Fiscal year 2001 actual[B]: 5.0%; Fiscal year: 2002: actual:
4.8%; +/-0.3%; Fiscal year: 2003: actual: (through July 31): 4.4%; +/
-0.3%; Fiscal year: 2003: goal: 2.4%; Comments: Performance
improved, but performance goal not met. According to IRS officials, the
goal was too aggressive.
Measure Name: Deposit timeliness-paper; Definition: Interest value of
money not deposited by the business day after receipt per $1 million in
deposits. Measure assumes an 8 percent interest rate; Fiscal year 2001
actual[B]: $748; Fiscal year: 2002: actual: $578; Fiscal year: 2003:
actual: (through July 31): $542; Fiscal year: 2003: goal: $573;
Comments: Performance improved and performance goal exceeded.
Measure Name: Letter error rate; Definition: Percentage of letters
issued to taxpayers with errors (includes systemic errors).[C]; Fiscal
year 2001 actual[B]: Not comparable because of revisions to the
measure; Fiscal year: 2002: actual: 7.4%; +/-0.6%; Fiscal year:
2003: actual: (through July 31): 7.2%; +/-0.5%; Fiscal year: 2003:
goal: 6.2%; Comments: Performance improved, but goal not met.
According to IRS officials, the goal was not met because of loss of
experienced and knowledgeable personnel as a result of IRS's
announcement that it would be closing some processing centers.
Measure Name: Notice error rate; Definition: Percentage of incorrect
notices issued to taxpayers (includes systemic errors).[ C]; Fiscal
year 2001 actual[B]: Not comparable because of revisions to the
measure; Fiscal year: 2002: actual: 18.7%; +/-2.7%; Fiscal year:
2003: actual: (through July 31): 9.7%; +/-0.5 %; Fiscal year: 2003:
goal: 13.2%; Comments: Performance improved and performance
goal exceeded.
Measure Name: Refund error rate -individual (paper); Definition: The
percentage of refunds with IRS-caused errors in the entity information
(e.g., incorrect name or Social Security number) or refund amount;
includes systemic errors.[ C]; Fiscal year 2001 actual[B]: 9.8%; Fiscal
year: 2002: actual: 8.0%; +/-3.8%; Fiscal year: 2003: actual:
(through July 31): 5.4%; +/-3.5%; Fiscal year: 2003: goal: 7.6%;
Comments: Performance improved and performance goal exceeded.
Measure Name: Refund interest paid; Definition: Amount of refund
interest IRS paid per $1 million of refunds issued; Fiscal year 2001
actual[B]: Not comparable because of revisions to the measure; Fiscal
year: 2002: actual: Not comparable because of revisions to the
measure; Fiscal year: 2003: actual: (through July 31): Not
comparable because of revisions to the measure; Fiscal year: 2003:
goal: Not applicable; Comments: We cannot assess performance
relative to previous years or 2003 goal. In 2002, IRS implemented a
programming change that revised how it calculates the measure and did
not have the necessary data to revise the goal for the 2003 filing
season.
Measure Name: Refund timeliness-individual (paper); Definition:
Percentage of refunds issued within 40 days or less; Fiscal year 2001
actual[B]: 95.2%; Fiscal year: 2002: actual: 98.2%; +/-2.3%; Fiscal
year: 2003: actual: (through July 31): 98.8%; +/-2.3%; Fiscal year:
2003: goal: 98.4%; Comments: Performance improved and
performance goal exceeded.
Measure Name: Productivity; Definition: Weighted volume of documents
processed per staff year expended at the processing centers; Fiscal
year 2001 actual[B]: 30,133; Fiscal year: 2002: actual: 28,257;
Fiscal year: 2003: actual: (through July 31): 30,094; Fiscal year:
2003: goal: 29,302; Comments: Performance improved and
performance goal exceeded.
Source: IRS data.
Note: GAO analysis of IRS data.
[A] The measures for fiscal year 2003 are through July 31, which were
the latest data available at the time we ended our audit work.
According to IRS officials, the 2003 results through July 31 are
reflective of IRS's performance during the filing season. In addition,
IRS officials told us that the results for the measures should not
change significantly through September 30.
[B] According to IRS officials, they did not compute a margin of error
for these measures in 2001.
[C] Systemic errors are computer-generated errors over which a
particular processing center would have no control.
[End of table]
[End of section]
Appendix II: Advance Payment of Child Tax Credit Had Minimal Impact on
2003 Filing Season:
The Jobs and Growth Tax Relief Reconciliation Act of 2003,[Footnote 38]
signed into law on May 28, 2003, increased the amount of the child tax
credit from $600 per child to $1,000 for 2003 and 2004. The act also
provided for eligible taxpayers to receive the increase of $400 this
summer in order to stimulate the economy more rapidly than if taxpayers
had to wait until they filed their tax year 2003 return. The Department
of the Treasury mailed approximately 24 million advanced payment checks
from late July to mid-August 2003 in a manner similar to the advanced
payment checks issued in 2001.
IRS took several steps in 2003 to prepare taxpayers for the advanced
payments. For example, in May IRS set up a special menu prompt on its
tax law and refund inquiry toll-free lines that provided taxpayers with
general information about the child tax credit advance payment. In mid-
July, IRS (1) provided additional information--such as when taxpayers
could expect their advanced payment checks based on the last two digits
of their social security number--on this special menu prompt, (2)
established a new toll-free number to provide taxpayers with specific
information about the advanced payments, and (3) updated its Web site
to provide taxpayers with information on eligibility requirements and
the ability to check the status of their advance payment.
According to IRS officials, passage of the Jobs and Growth Tax Relief
Reconciliation Act of 2003 had a minimal impact on the 2003 filing
season. For example, the officials reported that IRS experienced some
increase in telephone calls before the legislation was passed, but they
expected the majority of taxpayers to call for telephone assistance in
mid-August or later--after the advance payments were mailed. Data on
calls were not available in time to be reflected in this report. IRS
did not allocate additional resources to provide this assistance and
estimated that, as a result of an anticipated increase in demand, the
CSR level of service performance measure might drop by about three
percentage points by the end of 2003 fiscal year. IRS officials
anticipate that some additional impact on telephone service will occur
during the 2004 filing season.
IRS also anticipates that, based on its experience with the 2001 rate
reduction credit, a number of taxpayers will make errors, such as with
the Child Tax Credit Worksheet computation during the 2004 filing
season. However, IRS anticipates there will be fewer errors in 2004
because fewer taxpayers are affected by the child tax credit. As we
reported last year, taxpayers and tax practitioners made many errors
related to the rate reduction credit during the 2002 tax filing
season.[Footnote 39] However, IRS expects fewer problems with the child
tax credit and advanced payment and attributes this in part to IRS
having learned lessons from its experience during the 2002 filing
season. For example, IRS has identified the types of errors taxpayers
and tax professionals made related to the rate reduction credit and was
preparing strategies to minimize the impact on taxpayers during the
2004 filing season.
[End of section]
Appendix III: Comments from the Internal Revenue Service:
DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE WASHINGTON, D.C.
20224:
COMMISSIONER:
October 29, 2003:
Mr. James R. White Director, Tax Issues U.S. General Accounting Office
441 G Street, N.W. Washington, D.C. 20548:
Dear Mr. White:
I agree with your assessment that the 2003 filing season was one
highlighted by many improvements. As you acknowledged, preparing for
the filing season is a monumental undertaking requiring cross-
functional planning and coordination. Our Filing Season Readiness
process provides the framework and oversight to insure that we are well
prepared, and I appreciate your recognition of our success. The brief
synopsis highlighting the progress we have made since 1998 reflects our
sustained efforts and the many improvements from our modernization
program. We recognize that there are still improvement opportunities,
and we plan to continue to build on our success.
Telephone Service:
We dramatically improved our customers' experience by increasing
telephone access this filing season. Increased accessibility meant that
more taxpayers were able to receive service on their initial attempt
and waited for a much shorter period of time when requiring assistance
from a Customer Service Representative (CSR). While we did receive
fewer calls than planned, part of that decrease and the improved access
was the result of a comprehensive strategy that:
Established six new toll-free numbers specifically targeting customer
segments based on their service need;
Provided improved scripts, menu options, and personalized call routing
for tax law callers to reduce the number of transferred calls;
Implemented a skill-based routing process that supports specialization
and matches each call to a CSR with the identified skills; and:
* Realigned five call sites from Small Business/Self Employed Division
to the Wage and Investment Division to better match the specialized
workload.
Our success in improving our customer's experience is evidenced by the
results of the Customer Satisfaction Survey related to telephone
service. For the period January through March 2003, 94 percent of the
callers responding to the survey gave the IRS a rating of 4 ("mostly
satisfied") or 5 ("completely satisfied"):
regarding their experience using our toll-free service. For the period
April through June 2003, the result was 93 percent satisfied.
As noted in your report, our tax law customer accuracy rate decreased
from 85 percent in 2002 to 81 percent in 2003, and our accounts
customer accuracy rate decreased from 91 percent in 2002 to 89 percent
in 2003. However, we successfully implemented a new quality measurement
and improvement system that has the potential for achieving significant
progress. The Embedded Quality (EQ) System represents a cultural
transition from our pass/fail system of quality review to a system that
aligns quality review standards with employee performance standards.
Under the old pass/fail system, any one incorrect action would result
in a fail rating. The EQ System computes defects per opportunity. The
measurement for defects per opportunity is the total number of
opportunities to take correct action divided by missed opportunities
(defects). This provides a more accurate picture of service quality and
allows for targeted performance feedback. It represents a new way of
doing business that builds commitment and capability among all
individuals to continually improve customer service, employee
satisfaction, and business results.
The components that are evaluated by the EQ System include:
Timeliness; Professionalism; Customer Accuracy; Regulatory/Statutory
Accuracy; and Procedural Quality.
Our new approach to the EQ System of measurement and improvement is
expected to:
* Shape organizational and individual performance by developing
appropriate measures; and:
* Establish accountability by connecting organizational and human
performance.
Tax Return Processing:
Our returns processing activities were highly effective. Detailed
planning, coordination and a dedicated staff contributed to this
success. As noted in your report, we continued to improve our
performance while consolidating our processing workload. We improved
our performance in each of our Processing Performance measures. Through
July, we processed over 125 million income tax returns and issued over
$189 billion in timely refunds to our customers.
Electronic Filing:
We are pleased that your report recognizes our progress with the IRS's
website and electronic filing. In particular, the report notes our
success with the Free File Alliance. While we have not yet reached our
long-range goal of 80 percent of all federal tax and information
returns filed electronically, we are making progress.
During the 2003 tax filing season, we continued to set new records in
e-file:
* Electronic Filing -As of September 25, 2003, over 53 million taxpayers
e-filed, surpassing last year's volume of 46.7 million.
* Home computer e-filing - People filed more than 11.9 million returns
from their home computers, a 27 percent increase from last year.
* Over 2.8 million taxpayers used the free online filing services
offered by the Free File Alliance, which exceeded our goal of 2.5
million taxpayers.
Electronic payments - There were more than 1.2 million e-payments, a
rise of 37.3 percent over the same time last year. This includes
552,694 credit card payments.
Electronic signatures - More than 32.5 million taxpayers signed their
return electronically using one of the three Personal Identification
Number options.
* Web activity -The IRS site at www.irs.gov remains one of the most used
sites during the filing season, with 4.3 billion hits. In addition, the
IRS continues to experience an increase in the number of files
downloaded, exceeding 534 million.
Plans for improving electronic filing for the 2004 tax filing season
include:
* Continuing our aggressive encouragement of electronic filing through
the deployment of e-services. E-services are a suite of Web-based
products that will allow firms to do business with the IRS
electronically.
E-services will give IRS e-file Providers easier access to the IRS and
the ability to receive information electronically. This will reduce
response times enabling IRS e-fife Providers to better serve their
clients. All e-services products will be quick, convenient, and easy-
to-use.
* We are working with the Free File Alliance members to develop program
requirements (i.e., refinements) designed to improve Free File. The
requirements being discussed are a direct result of analysis and
feedback gathered from taxpayers regarding their experience with the
program. Also, throughout this past filing season we monitored the
performance of Alliance members' by doing independent reviews of each
of their websites and online programs to ensure compliance with
requirements set forth in our Agreement. As a result, key improvements
for 2004 include:
* Increasing information about forms an* schedules on the Alliance
websites;
* Guaranteeing tax return calculations; and:
* Increasing information regarding the Alliance members' customer
service options and state return programs.
Taxpayer Assistance Centers (Walk-In Service):
We are continuing our strategy to reduce the number of taxpayers who
need to visit us in person by increasing the availability of electronic
services and volunteer services. In addition, we have taken steps to
enhance the taxpayer's experience at our Taxpayer Assistance Centers
(TACs). As your report recognizes, we took aggressive actions to
improve the accuracy of tax law assistance. We required employees to
complete directed learning on each tax law subject and validated their
proficiency by conducting monthly certifications of selected topics. We
are also revising all tax law training to incorporate the Publication
Method. The Publication Method is a technique to "walk" a taxpayer
through a publication to cover all appropriate probing questions and to
illustrate the correct answer to his/her question. Our long-term
approach to improving quality is the implementation of the EQ System,
similar to the process discussed above for telephone service. When
fully implemented (Fiscal Year 2005), the EQ System will provide us
with a common approach to measure our performance keyed to what is
critical to the customer, employees, and our organization.
Stakeholder Partnerships, Education and Communication (SPEC):
In the second year of implementing a partner-based business model that
leverages the resources of community coalitions in delivering tax
preparation and education, IRS significantly increased the scope and
availability of volunteer services. Based on annual surveys conducted
after the filing season, the IRS:
increased its partner overall satisfaction from 83 percent to 87
percent, and maintained a very high taxpayer overall satisfaction rate
of 96 percent. For example, these efforts achieved:
* 1.6 million volunteer prepared returns, a 29.6 percent increase over
2002, with a 97 percent filing accuracy rate;
143 million outreach contacts, including 57 million EITC-related
contacts, using a wide variety of communication channels including
media, direct mail, seminars, conferences, and community-based
marketing; and:
* An increase from 40 to over 160 community-based coalitions in 2003.
National partners such as United Way, Health and Human Services Office
of Community Services, Annie E. Casey Foundation, and the National
League of Cities serve as the foundation to access, serve, and educate
millions of taxpayers.
My response to your recommendation for Executive Action is as follows:
Recommendation:
You recommended that the Commissioner of Internal Revenue Service
direct the appropriate officials to require that the IRS consolidate
and disseminate wait-time information to field managers based on
information from sites equipped with an automated system that can
capture wait-time data, in order to assess this important aspect of
quality.
Response:
We continue to agree with you that measuring customer wait-time is an
important indicator of the service we are providing to our customers.
Although we do not currently consolidate and disseminate wait-time
information to TAC managers, these managers have information on wait-
time available for their local TACs. TAC managers routinely monitor
wait-time information on the automated system (Q-Matic) and allocate
TAC resources to ensure that customers do not have excessive wait-
times. We believe this local monitoring is the best method available to
ensure that customers are being served within a reasonable time period.
For the same reasons noted in our response to your 2002 Filing Season
report (GAO-03-314), we do not agree that it is necessary for
headquarters to consolidate and report TAC wait-times. Therefore, we do
not plan to implement your recommendation.
However, your report also observed that during the 2003 filing season,
Q-Matic equipped sites were not required to report wait-time data to
headquarters. We agree that the automated wait-time information
available from these locations
would provide valuable data for an assessment of overall trends and
relationships in timeliness and quality. As a result. Q-Matic sites
will be required to report wait-time information on a quarterly basis.
Again, I appreciate your observations on the successful tax filing
season for 2003. If you have any questions, please call Floyd Williams,
Director, Legislative Affairs, at (202) 622-3720.
Sincerely,
Signed for:
Mark W. Everson:
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
James White, (202) 512-9110 Joanna Stamatiades, (404) 679-1984:
In addition to those named above, James Cook, Leon Green, Marshall
Hamlett, Ron Heisterkamp, John Lesser, Jay Pelkofer, Amy Rosewarne,
Sonja Ware, and Daniel Zeno made key contributions to this report.
(440183):
FOOTNOTES
[1] Most taxpayers file their returns between January 1 and April 15,
which is the deadline for filing individual income tax returns.
However, millions of taxpayers get an extension from IRS, which allows
them to delay filing until as late as October 15.
[2] U.S. General Accounting Office, Internal Revenue Service:
Assessment of Fiscal Year 2004 Budget Request and 2003 Filing Season
Performance to Date, GAO-03-641T (Washington, D.C.: Apr. 8, 2003).
[3] IRS uses workload indicators, such as the number of returns
processed, for purposes of resource planning. It uses balanced measures
primarily for gauging business results (quantity and quality measures)
in addition to employee satisfaction and customer satisfaction.
[4] U.S. General Accounting Office, Tax Administration: IRS Needs to
Further Refine Its Tax Filing Season Performance Measures, GAO-03-143
(Washington, D.C.: Nov. 22, 2002).
[5] The Joint Operations Center is the organization responsible for
managing IRS's telephone operations.
[6] P.L. 105-206.
[7] The Government Performance and Results Act of 1993 (P.L. 103-62)
was enacted to hold federal agencies accountable for achieving program
results. IRS's balanced measurement system is consistent with the
intent of the act.
[8] Although IRS establishes goals for its balanced measures on a
fiscal year basis, our assessment of these measures is based on the
filing season, when most taxpayers have their only interaction with
IRS.
[9] The data we report for 2003 are as of July 31, which were the
latest data available at the time we ended our field work. According to
IRS officials, the results through July 31 reflect IRS's performance
during the filing season.
[10] P.L. 108-27.
[11] The National Association of Enrolled Agents is a national
association of over 10,000 independent, licensed tax professionals
called enrolled agents. Enrolled agents are licensed by the federal
government and are authorized to appear in place of the taxpayer at
IRS.
[12] Treasury Inspector General for Tax Administration, The 2003 Filing
Season Was Completed Timely and Accurately, but Some New Tax Law
Changes Were Not Effectively Implemented, Reference No. 2004-40-003,
(Washington, D.C., 2003).
[13] TIGTA identified taxpayers that were allowed retirement savings
contribution credits and student loan interest deductions in excess of
the amounts allowed by the new tax law changes, taxpayers with
potential unclaimed additional child tax credits, and taxpayers that
were allowed a "dual benefit" for the tuition and fees deduction and
the education credit.
[14] GAO-03-641T.
[15] According to IRS officials, the staff year data for fiscal year
2003 represent actual staff year data through August 2, 2003, plus
projected staff year usage through September 30, 2003.
[16] RRA 98 provides, in part, that it should be the goal of IRS to
have at least 80 percent of all federal tax and information returns
filed electronically by 2007. IRS's goal for individual income tax
returns is consistent with this overall goal--80 percent by 2007.
[17] We used a 3-year average for the growth rate in the total number
of individual tax returns because the growth rate in 2003 was negative
and we believe that a 3-year average is more representative of future
growth. IRS officials attributed the negative growth rate in 2003 to
the downturn in the U.S. economy.
[18] See Report of the Joint Committee on Taxation Relating to the
Internal Revenue Service as required by the IRS Reform and
Restructuring Act of 1998, JCX-53-03, May 19, 2003.
[19] Electronic Tax Administration Advisory Committee, Annual Report to
Congress, (Washington, D.C., June 2003). RRA 98 mandated that the
Secretary of the Treasury convene an electronic commerce advisory group
to ensure that the Secretary receives input from the private sector on
IRS's plan to increase electronic filing. ETAAC was created in 1998 in
response to that mandate and, among other things, is required to report
to the Congress annually on IRS's progress towards meeting the
electronic filing goals set in the act.
[20] TIGTA confirmed that IRS exceeded its goals for the Free File
Alliance, although they had recommendations to improve the program. See
Treasury Inspector General for Tax Administration, Improvements are
Needed to Ensure Individual Taxpayers Have an Easy, No-Cost Option to
e-file Their Tax Returns, Reference No. 2003-40-165, (Washington, D.C.,
2002).
[21] IRS has other measures that we are not reporting on because the
measures do not provide adequate information to make conclusions about
the ease with which taxpayers reached IRS or the accuracy of the
responses they received after reaching IRS.
[22] GAO-03-143.
[23] IRS based its disagreement on the data on automated calls not
being good enough to merit attention as a balanced measure. While we
recognized that there were data weaknesses with the measure, our
recommendation also called for IRS to revise the formula before
including it among its balanced measures. See GAO-03-143.
[24] U.S. General Accounting Office, IRS's 2002 Tax Filing Season:
Returns and Refunds Processed Smoothly; Quality of Assistance Improved,
GAO-03-314 (Washington, D.C.: Dec. 20, 2002).
[25] At any one of IRS's more than 400 walk-in sites, taxpayers can
obtain (1) forms and publications; (2) assistance with their tax
accounts; (3) answers to tax law questions; (4) limited return
preparation assistance; and (5) various other types of assistance, such
as help getting a taxpayer identification number.
[26] In 2001, the Congress directed TIGTA to review the accuracy of tax
law assistance provided by all of IRS's walk-in sites, S. Rep. No. 107-
57 (2001). From January through April 2003, TIGTA reviewers visited 72
walk-in sites and asked a total of 283 tax law questions.
[27] TIGTA counts referrals as incorrect when the IRS employee merely
provided the publication, without walking the customer through it to
identify the answer, as required by established field assistance
procedures.
[28] GAO-03-314.
[29] IRS considers a return as being accurate if no math errors
(obvious errors such as mathematical errors, omitted or inconsistent
data, or other inconsistencies) are identified on the return.
[30] These programs use IRS-trained volunteers to help prepare basic
tax returns for taxpayers with special needs, including people with
disabilities, those with low or fixed incomes, non-English speaking
people, and the elderly, during the filing season.
[31] IRS's walk-in sites provide return preparation assistance to
taxpayers taht meet certain income requirements. For the 2003 filing
season, the income ceiling for return preparation assistance was
$35,000.
[32] IRS planned to reduce return preparation assistance by 20 percent
in both fiscal years 2003 and 2004 and expects walk-in sites to provide
additional tax law assistance, as well as perform some compliance
functions.
[33] According to IRS, the number of community-based coalitions
increased from 6 in fiscal year 2000 to 150 in fiscal year 2003. In
2004, IRS plans to continue expanding VITA and TCE sites in underserved
areas, such as rural communities, while improving the operational
effectiveness and productivity of existing partnerships.
[34] GAO-03-143 and GAO-03-314.
[35] U.S. General Accounting Office, Tax Administration: Assessment of
IRS' 2000 Tax Filing Season, GAO-01-158 (Washington, D.C.: Dec. 22,
2000).
[36] According to Keynote, availability is the percentage of time the
Web site's home page downloads fully and average delivery time is the
time it takes for the home page to fully download from the time the
user hits the "enter" key on the keyboard. According to IRS, a home
page is charged with an error and therefore receives a lower percentage
of availability even if a graphic that has nothing to do with the
user's ability to get pertinent content information from the page does
not download properly. As such, according to IRS, the measure does not
reflect whether the Web site itself is available or not. Also,
according to IRS, errors can be the result of heavy traffic on the
Internet in general and may have nothing to do with the home page.
[37] Keynote measured the average delivery time and availability of
IRS's Web site from 5 p.m., Eastern Daylight Time (EDT), on April 11,
2003, to 9 a.m., EDT, on April 16, 2003.
[38] P.L. 108-27.
[39] GAO-03-314.
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