2012 Tax Filing: IRS Faces Challenges Providing Service to Taxpayers and Could Collect Balances Due More Effectively
Highlights
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.
Recommendations
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.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status Sort descending |
|---|---|---|
| Internal Revenue Service | 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. |
Closed – Implemented
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.
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| Internal Revenue Service |
Priority Rec.
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. |
Closed – Implemented
IRS neither agreed nor disagreed with GAO's recommendation from December 2012, but as of February 2021 has taken multiple steps to develop and finalize a customer service strategy that defines appropriate levels of telephone and correspondence service and wait time and includes specific steps to manage service. First, 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. Based on this and other work, IRS concluded that its ideal telephone level of service is between 70 and 80 percent, which optimizes a balance between wait time, disconnects, and assistor availability. In February 2021, IRS detailed its steps to manage telephone and correspondence service based on an assessment of time frames, demand, capabilities, and resource requirements. IRS defined appropriate levels of correspondence service as responding within 45 days of receipt. Further, because the same staff answer both the telephones and correspondence, IRS said that it balances its resources based on demand, which includes call volume and total inventory of correspondence. For example, IRS said that it prioritizes telephone calls during the filing season, and strives to maintain an ending inventory of about 500,000 pieces of correspondence throughout the year. In January 2021, IRS released a customer service strategy as required by section 1101 of the Taxpayer First Act (Pub. L. No. 116-25, 133 Stat. 981). This strategy outlines proposals to improve service to taxpayers across all channels, including improving telephone and correspondence level of service and wait times. The strategy also introduces proposed digital communications, performance measures, and estimated costs for delivering these service improvements. These efforts enable IRS to make a more informed request to Congress about resources needed to deliver specific levels of service and help ensure IRS is maximizing the benefit to taxpayers.
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| Internal Revenue Service | 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. |
Closed – Implemented
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.
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