2012 Tax Filing:

IRS Faces Challenges Providing Service to Taxpayers and Could Collect Balances Due More Effectively

GAO-13-156: Published: Dec 18, 2012. Publicly Released: Jan 17, 2013.


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What GAO Found

While there have been efficiency gains and efforts to improve service, the Internal Revenue Service (IRS) faced challenges providing telephone service and responding to correspondence, continuing trends experienced in recent years. In 2012, 82 percent of individual taxpayers filed their returns electronically (e-filed), reducing IRS's processing costs. IRS also increased calls answered using automated service and added a variety of self service tools, which helped gain efficiencies. However, IRS's level of telephone service (the percentage of callers seeking live assistance who receive it) declined to 68 percent. In addition, of the 21 million pieces of paper correspondence IRS received, about 40 percent were considered overage (meaning that IRS did not respond within 45 days of receipt), an increase compared to last year. While IRS plans to continue to pursue efficiency gains, its strategy for future years does not specifically address how it plans to reverse these negative trends. Reversing the declines in telephone and correspondence services may require IRS to consider difficult tradeoffs, such as reassessing which phone calls IRS should answer with a live assistor and which it should not because automated services are available.

GAO identified about 3.8 million returns where taxpayers self-acknowledged a balance due of $13.8 billion for tax year 2010, the most recent data available. During IRS's notice phase, when IRS sends letters to taxpayers telling them how to pay the balance, the majority of this amount is either fully paid or accounted for through installment agreements. However, at least $4.4 billion remained uncollected after IRS sent as many as four notices to taxpayers. These amounts become subject to more costly collections actions, such as phone or face-to-face contact. Best practices, such as risk-based approaches where contacts are tailored to the taxpayer, have helped increase collections in states such as New York and California. IRS has developed an analytics plan and uses some riskbased processes to identify which notices taxpayers will receive, but has not yet implemented the plan and management responsibilities are unclear. As a result, IRS has not tested more advanced risk-based approaches. This may lead to delayed collection of taxpayer debt, higher costs for IRS, and additional penalties for taxpayers who pay late.

Why GAO Did This Study

The tax filing season is an enormous undertaking during which the IRS processes millions of tax returns, issues billions of dollars in refunds and provides service to millions of taxpayers over the phone, online, and face-to-face. It also identifies taxpayers who owe additional taxes and begins the process of collecting their balance due. GAO was asked to review IRS's performance during the 2012 filing season. Among other things, this report (1) assesses IRS's performance in processing returns, issuing refunds, and providing service to taxpayers over the phone, online, and in-person; and (2) describes what is known about taxpayers who filed returns with a balance due for tax year 2010 and assesses IRS's efforts to ensure timely payment. To conduct the analyses, GAO obtained and compared IRS data from 2007 through 2012, reviewed pertinent IRS documents, interviewed IRS officials and observed IRS operations, and interviewed other experts in tax administration, including from states and tax preparation firms.

What GAO Recommends

GAO recommends that IRS outline a strategy to improve taxpayer service, define appropriate levels of service, and describe how it intends to manage performance declines; clearly define the roles and responsibilities of those reviewing the notice phase; and pilot risk-based approaches for contacting taxpayers who have a balance due.

In response to GAO's first recommendation, IRS said it is pursuing some steps to improve service. IRS described plans to implement the other two recommendations.

For more information, contact James R. White at (202) 512-9110 or whitej@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Priority recommendation

    Comments: IRS neither agreed nor disagreed with GAO's recommendation from December 2012, but has made progress in developing a customer service strategy that defines appropriate levels of telephone service; however, as of February 2020, IRS had not finalized its strategy nor determined the appropriate levels of service for correspondence and wait time. In January 2017, IRS shared results of a benchmarking study that compared its telephone service, measures, and goals to comparable agencies and companies. The team that conducted the study recommended options for additional measures to indicate the level of access taxpayers have to service across service channels. In September 2019, IRS provided GAO its revised customer service strategy; however, it did not include correspondence service. In July 2019, the Taxpayer First Act (Public Law 116-25) was enacted which requires IRS to develop a comprehensive customer service strategy. As of February 2020, IRS had established an internal office to implement this requirement. Completion of a comprehensive customer service strategy that defines appropriate levels of service and wait time as well as specific steps to manage services based on an assessment of time frames, demand, capabilities, and resource requirements would enable IRS to make a more informed request to Congress about resources needed to deliver specific levels of service. Further, finalizing a long-term comprehensive strategy will help ensure IRS is maximizing the benefit to taxpayers and possibly reduce costs in other areas.

    Recommendation: The Acting Commissioner of Internal Revenue should take the following action outline a strategy that defines appropriate levels of telephone and correspondence service and wait time and lists specific steps to manage service based on an assessment of time frames, demand, capabilities, and resources.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: In March 2014, IRS indicated the roles and responsibilities around the Collection Balance Due Notice process had been documented and executive approval had been obtained as of February 18, 2014.

    Recommendation: The Acting Commissioner of Internal Revenue should clearly define and document the roles and responsibilities of IRS offices administering the notice phase, such as in resolving tax debts.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: IRS agreed with our recommendation to pilot more risk-based approaches for contacting taxpayers who have a balance due. IRS officials conducted an in-depth analysis of the model they used to identify potential cases that have balances that are currently considered to be not collectable. In December 2015, IRS officials said it had implemented new models for scoring cases in its Automated Collection System as of July 2015. According to IRS, it can use scores from these models in its prioritization and case assignment processes and enable Field Collection to select and assign the most productive cases to revenue officers. In August 2017, IRS reported that it evaluated its inventory delivery model, which will allow IRS to determine the effectiveness of new and prior currently not collectible model scores. IRS officials confirmed that they expect to realize savings from better selection in a few years, but the amount of savings is not yet known.

    Recommendation: The Acting Commissioner of Internal Revenue should tailor appropriate and timely interventions with taxpayers who file balance due returns, by pilot testing risk-based approaches that could include (1) implementing the Advanced Consolidated Data Analytics plan, and (2) using more data driven methods to identify the most appropriate method for contacting a taxpayer.

    Agency Affected: Department of the Treasury: Internal Revenue Service


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