2023 Tax Filing: IRS Improved Customer Service, but Could Further Improve Processing and Evaluate Expedited Hiring
Fast Facts
IRS has previously had challenges processing tax returns on time and meeting taxpayer needs. But in 2023, IRS's service showed improvement. Tax filers experienced faster processing times, shorter wait times for phone service, and more in-person options for getting tax help. However, the agency fell short of some of its goals for processing tax returns on time.
Also, IRS was able to use a faster hiring process to bring on more staff to support tax filers—but it hasn't evaluated how well this new process works.
We recommended that IRS build on its improvements for future years by evaluating its recent hiring and tax return processing efforts.
Sorting Tables Used for Paper Tax Returns at IRS Austin, TX Processing Center
Highlights
What GAO Found
The Internal Revenue Service (IRS) made progress in resolving prior year challenges with processing returns during the 2023 tax filing season. By April 22, 2023, IRS had processed all prior year returns and had a backlog of 6.1 million current year returns, 10.3 million fewer than at the same point in 2022. IRS also generally reduced the average number of days to process paper returns, which vary by type. However, GAO found that IRS missed its processing time goals for some returns. In addition, some IRS monitoring reports contained data errors because IRS lacked a designated official to ensure accuracy of the reports. Furthermore, although IRS introduced efforts to improve processing, the rate of errors staff made when processing returns continued to gradually increase.
Tax Documents in the IRS Kansas City, MO Processing Center, May 2023
IRS generally improved its customer service to taxpayers, especially telephone service, but continued to struggle in providing correspondence services. IRS customer service representatives answered 7.7 million calls during the 2023 filing season—a 65 percent increase compared to 2022—and the average time to answer a call improved from 28 to 3 minutes. However, IRS responses to taxpayer inquiries via mail continue to be delayed, with 61 percent of inquiries considered late as of the end of the filing season. Addressing GAO's 2022 recommendation to estimate time frames for resolving these delays will better set expectations for, and potentially reduce repeat inquiries from, taxpayers.
During fiscal years 2022 and 2023, IRS hired about 26,000 employees for its filing season workforce. IRS used funding from COVID-19 supplemental appropriations and the Inflation Reduction Act, along with an expedited hiring authority, to fill many of these positions. IRS has requested continued use of this authority but has not evaluated its recent expanded use. Doing so could help IRS inform efforts aimed at improving its usage of this flexibility.
Why GAO Did This Study
During the annual tax filing season, IRS processes more than 160 million individual and business tax returns. IRS also provides telephone, correspondence, online, and in-person services to tens of millions of taxpayers. Partly as a result of the COVID-19 pandemic, IRS has faced challenges in recent years processing tax returns and refunds, meeting taxpayer service demands, and hiring employees. The Inflation Reduction Act of 2022 provided IRS tens of billions of dollars in funding to improve these and other areas.
GAO was asked to review IRS's performance during the 2023 filing season. This report assesses IRS's performance on (1) processing tax returns, (2) providing customer service to taxpayers, and (3) hiring staff to support filing season operations. GAO analyzed IRS documents and filing season performance data related to tax return processing, customer service, and hiring. GAO also visited two IRS processing facilities and held discussion groups with IRS staff.
Recommendations
GAO is making four recommendations to IRS to evaluate and address causes of missing timeliness goals for tax return processing, designate a responsible party to ensure accuracy of reporting, track and evaluate efforts to improve return processing, and monitor and evaluate its use of expedited hiring authority. IRS agreed with the recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Internal Revenue Service | The Commissioner of Internal Revenue should evaluate and determine the cause of certain returns not meeting processing time goals and develop a plan for addressing these processing shortfalls. (Recommendation 1) |
IRS agreed with the recommendation. In response, in June 2024, IRS revised its guidance to employees preparing inventory reports on how to calculate the number of days IRS spends processing returns. IRS stated that this adjustment in reporting methodology would account for days in which the agency was awaiting taxpayer responses to complete processing. However, IRS did not provide us with documentation of its evaluation of the cause behind missing timeliness goals and that this change would address the underlying cause of not meeting the goals. To fully address this recommendation, IRS will need to provide documentation showing the cause for missing processing deadlines and that the agency's action addresses that identified cause. Fully implementing this recommendation would help IRS mitigate processing delays and could help IRS avoid paying incurring interest payments.
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| Internal Revenue Service | The Commissioner of Internal Revenue should identify a responsible party who approves and checks the accuracy of Submission Processing data reports and coordinates report dispersal to ensure that they do not contain errors. This individual and quality review process should be documented, such as in the Internal Revenue Manual. (Recommendation 2) |
As of October 2024, IRS has taken some action in response to our recommendation. IRS updated its Internal Revenue Manual to identify an official responsible for reviewing and confirming the accuracy of certain Submission Processing reports. We are requesting additional information to determine if IRS's actions fully implement our recommendation.
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| Internal Revenue Service | The Commissioner of Internal Revenue should systematically track and evaluate improvement initiatives aimed to address the most common submission processing errors. IRS should document this tracking and evaluation process in guidance, such as in the Internal Revenue Manual. (Recommendation 3) |
IRS agreed with this recommendation. As of September 2024, IRS has taken some actions to implement this recommendation, including introducing a tracking system on the improvement initiatives. This system includes actions taken and results of initiatives. However, in November 2024, IRS officials said that this list may not be comprehensive. Additionally, IRS did not provide documentation of its tracking and evaluation process for improvement initiatives in guidance. We have requested more information and documentation from IRS and will evaluate it to determine the extent to which the agency has implemented our recommendation.
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| Internal Revenue Service | The Commissioner of Internal Revenue should develop and implement plans to monitor and evaluate its use of direct hire authority. (Recommendation 4) |
As of September 2024, IRS has taken some action to implement this recommendation, including monthly reporting on staff hired using direct hire authority. This monthly report included direct hires by job series; pay plan, grade, and step; and appointment type, as well as hiring metrics for vacancies or direct hire events. To fully implement this recommendation, IRS needs to evaluate its use of direct hire authority to determine if hiring flexibilities are meeting the agency's needs. Without a comprehensive review, IRS may miss opportunities to develop strategies or inform efforts aimed at transforming its hiring and onboarding processes by reducing its overall time to hire.
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