IRS Can Do More To Identify Tax Return Processing Problems and Reduce Processing Costs

GGD-83-8: Published: Oct 14, 1982. Publicly Released: Oct 14, 1982.

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GAO reviewed Internal Revenue Service (IRS) procedures to determine how well it processes individual income tax returns and whether improvements can be made in the tax return processing system.

The review showed that IRS can reduce individual income tax return processing costs by gathering and analyzing additional data on return processing problems. The most specific data on return processing errors should provide IRS with the detailed information it needs on the causes of processing problems so that preventive action could be taken. In fiscal year 1981, IRS processed about 94 million individual returns and identified about 33 million errors on those returns. Although IRS corrects most errors it detects, its present quality monitoring activities do not produce the detailed data necessary to readily determine systematic and procedural causes of errors so that it can take corrective action. GAO also gathered specific data on the errors, including the cause of error, and where on the tax return the error occurred. GAO believes that these kinds of data are essential for determining the systematic and procedural weaknesses which cause the errors. Through its evaluation of the return processing system, GAO found that IRS could reduce costs by as much as $1.7 million annually if it made several changes to its return processing operations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should determine the cost effectiveness of providing new direct data entry equipment with the capability to prompt transcribers when they fail to key certain tax data into the computer. If cost-effective, he should ensure that the new direct data entry equipment includes this prompting feature.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should clarify for taxpayers the difference between FICA tax withheld and federal income tax withheld by changing the wording on the form W-2, clarifying tax booklet instructions, and revising the math error notice message presently sent to taxpayers who mistakenly enter the amount of FICA tax withheld instead of the amount of federal income tax withheld.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should require taxpayers who want IRS to compute their tax for them to enter their income tax withholding on their returns. IRS should change its processing procedures so that these returns do not automatically appear on the errors register.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should change procedures for correcting tax returns with multiple error conditions so that all readily identifiable independent errors can be corrected when they first appear on the error register.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should have the quality monitoring activity gather more specific data on types of errors made, who made the errors, why the errors occurred, and where the errors occurred. These data should then be analyzed at both the service center and national office levels to determine the corrective action that can be taken to prevent similar future errors.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  6. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should determine the merits of having data transcribers key into the computer the money amounts and line numbers from tax returns.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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