2010 Tax Filing Season:

IRS's Performance Improved in Some Key Areas, but Efficiency Gains Are Possible in Others

GAO-11-111: Published: Dec 16, 2010. Publicly Released: Jan 18, 2011.

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The Internal Revenue Service's (IRS) filing season is an enormous undertaking that includes processing individual income tax returns, issuing refunds, and responding to taxpayers. GAO was asked to assess IRS's 2010 filing season performance in relation to its goals and prior years' performance processing individual tax returns, answering telephones, and delivering Web and face-to-face services. To conduct the analysis, GAO analyzed data and documents from IRS, interviewed IRS officials, observed IRS operations, and interviewed tax industry experts.

IRS dealt with a number of challenges this filing season, including significant tax law changes, such as the Making Work Pay credit, and corresponding changes in taxpayer behavior. IRS balanced its resources across its filing season activities with improvements in some areas but fluctuations in others. Return processing: Electronic filing, which reduces costs to IRS, increased about 3 percent, to 71 percent of all individual returns. However, IRS experienced delays in issuing millions of refunds, which IRS officials attributed primarily to correcting taxpayer errors associated with the Making Work Pay credit and conducting additional automated checks. Telephone service: Compared to 2009, the percentage of callers seeking live assistance who received it improved in 2010 and the accuracy of answers remained high, at over 90 percent. However, the average wait time increased. Further, IRS's annual goal for providing caller assistance was lower than any of the preceding 5 years. However, IRS lacks a standard for what constitutes good customer telephone service that could be compared to its annual goals. Such a standard would make the gap between the annual goals and the standard more transparent. IRS is using a tool called Contact Analytics to better understand the reasons why taxpayers call. However, IRS has not assessed the costs and benefits of storing recorded calls for longer than the current 45 day period for use in Contact Analytics, and GAO identified gaps in the process IRS uses to solicit input on call topics from frontline IRS staff. Such input could be used to identify issues for further research using Contact Analytics. IRS's customer service staff also responds to taxpayer correspondence. IRS received about 20 million pieces of correspondence in 2010, but it does not have a performance measure that addresses the timeliness of taxpayer correspondence, a key agency objective. By not having such a performance measure, IRS managers may have a less informed basis for balancing resources across telephone and correspondence services. Web site: Visits to IRS's Web site increased and IRS is taking steps to improve content management before introducing a new Web site in 2012. Face-to-face: In 2010, taxpayer visits to IRS's walk-in sites and sites operated by volunteers remained about the same as in 2009. IRS's program to provide refunds on debit cards at certain volunteer sites, targeting taxpayers without bank accounts, received little use in 2010. IRS's evaluation of the program did not include taxpayers or volunteers. By not including these stakeholders, IRS risks not learning the real reasons for low participation. GAO's five recommendations to IRS are to establish a customer service telephone standard, assess the costs and benefits of storing recorded calls beyond 45 days, solicit information on call trends from employees, develop a performance measure for the timeliness of taxpayer correspondence, and involve key stakeholders in its evaluation of its debit card program. IRS disagreed with developing a customer service standard, not wanting to revise its measurement of phone service. However, a standard would allow IRS to communicate to Congress what it believes constitutes good service. IRS also disagreed with assessing the costs and benefits of storing calls beyond 45 days. GAO's report suggests that further analysis could show whether the benefits of doing so currently exceed the costs. IRS generally agreed with the other three recommendations.

Recommendations for Executive Action

  1. Status: Open

    Comments: As of August 2019, IRS finalized a customer service strategy identifying an optimal telephone level of service. According to the strategy, IRS has a process to compare major metrics with other agencies and private industry, and conducted two studies to look at industry practices. In response to our recommendation, IRS compared its telephone data with similar telephone environments, and determined that a telephone level of service between 70 and 80 percent provides an optimal balance for servicing customer service telephones and paper correspondence requests. However, IRS faced two significant challenges in managing the 2019 filing season: (1) implementing major tax law changes from the Tax Cuts and Jobs Act (TCJA), and (2) a lapse in appropriations that left IRS unfunded during five weeks leading up to the opening of the 2019 filing season. As a result of issues stemming from these challenges, IRS revised its 2019 filing season telephone service goals from 80 percent to 65 percent during the filing season, and from 75 percent to 63 percent for all of fiscal year 2019. By not maintaining the identified optimal level of service standard, IRS is missing opportunities to illustrate gaps between actual and desired levels of service that may have resulted from issues linked to TCJA implementation and the lapse in appropriations. IRS did outline steps it is taking to achieve the optimal range of 70-80 percent telephone level of service outlined in its customer service strategy. Specifically, IRS said that it is working to upgrade equipment for all IRS business units that provide telephone services to taxpayers. It also cited examples of these upgrades, such as implementing a customer callback system that allows callers to keep their place in queue without remaining on the phone. While IRS said it has allocated funding to begin the development and installation of the customer callback feature, it did not provide an estimate of the resources required to upgrade the equipment and otherwise achieve the optimum range of telephone level of service. By not providing sufficient information to Congress on resources needed to achieve an optimal level of service, IRS is missing opportunities to justify the resources it believes are needed to improve taxpayer service.

    Recommendation: To gain efficiencies and improve taxpayer service, the Commissioner of Internal Revenue should direct the appropriate officials, based on the quality of service provided by comparable organizations and on what matters most to the customer, to determine a customer service telephone standard, and the resources required to achieve this standard based on input from Congress and other stakeholders.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: IRS implemented this recommendation in 2012. As a result of engaging the telephone assistors, IRS is better able to identify emerging issues and improve the customer experience, including by providing alternative and more cost effective services.

    Recommendation: To gain efficiencies and improve taxpayer service, the Commissioner of Internal Revenue should direct the appropriate officials to use the existing process of regular team meetings with frontline telephone assistors to solicit information on call trends and other potential improvements to phone service and to supplement issues identified using Contact Analytics.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Not Implemented

    Comments: IRS disagreed with this recommendation. As of April 2015, IRS officials said that increasing the recorded call storage beyond 45 days would be a costly expenditure competing with other funding priorities, such as the Customer Contact History Database.

    Recommendation: To gain efficiencies and improve taxpayer service, the Commissioner of Internal Revenue should direct the appropriate officials to assess business units' needs for holding Contact Analytics calls beyond 45 days and store calls for this period or document that the costs of doing so exceed the benefits.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Implemented

    Comments: IRS agreed with this recommendation and started using more detailed performance measures that includes an overaged/timeliness measure for its correspondence beginning in fiscal year 2011. In February 2015, we reported that overaged correspondence increased from 25 to 49 percent. While not included among IRS's suite of balanced measures, IRS has taken steps to address correspondence overage rates, such as implementing its Phased Approach to Inventory with the goal of closing as many correspondence cases as early as possible.

    Recommendation: To gain efficiencies and improve taxpayer service, the Commissioner of Internal Revenue should direct the appropriate officials to establish a performance measure for taxpayer correspondence that includes providing timely service to taxpayers.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Closed - Implemented

    Comments: In August 2011, IRS completed a study to determine how to appropriately market debit cards and other services provided at Volunteer Income Tax Assistance (VITA) sites. IRS concluded that among other things, low-cost options, such as continuing to work through VITA and Tax Counseling for the Elderly (TCE) partners to promote the cards, exist to increase the use of debit cards at VITA/TCE sites.

    Recommendation: To gain efficiencies and improve taxpayer service, the Commissioner of Internal Revenue should direct the appropriate officials to establish an evaluation plan for the 2011 filing season debit card program that includes taxpayers, volunteer site partners, and other stakeholders and assesses the full range of reasons for program participation rates.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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