Fast Facts

IRS offers a range of online services, including services that allow taxpayers to track refunds or view their accounts. Although IRS recognizes that taxpayers want more online options, it hasn’t considered taxpayer input in developing new services. Also, its efforts to determine whether current online services meet taxpayer needs haven’t yet been sufficient to make decisions about how to move forward.

IRS has long relied on private companies to help taxpayers file electronically, but it hasn’t given adequate consideration to the benefits and costs of this agreement with industry.

We made 7 recommendations to address these and other challenges.

A person looking at the IRS website

A person looking at the IRS website

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Highlights

What GAO Found

The Internal Revenue Service's (IRS) online services for individual taxpayers primarily provide taxpayers one-way communication of key information derived from their tax return, such as when an anticipated refund should arrive, or allow taxpayers to pay money owed or make payment arrangements. IRS has done little research or reporting on the extent to which its online services are satisfying taxpayers' needs. Also, IRS has not set a target for using online services to help reduce taxpayer burden. Selected foreign and state revenue agencies' online services have developed online filing and communication capabilities, such as filing a tax return on the agency's website and offering electronic chats between revenue agency employees and taxpayers (see figure).

The U.S. Internal Revenue Service's and Three Foreign Revenue Agencies' Online Services The U.S. Internal Revenue Service's and Three Foreign Revenue Agencies' Online Services

IRS has long-term planning documents which detail online services it intends to develop, which include services to communicate digitally with taxpayers, to achieve its goal of modernizing the taxpayer experience. However, GAO found that IRS has not sufficiently considered taxpayer input in the prioritization process for these new services and instead prioritizes services primarily based on the potential benefit to IRS operations or how quickly a service might be developed. Without considering taxpayer input on user needs and preferences, IRS risks developing services that taxpayers do not use.

A group of private sector tax preparation companies known as Free File, Inc., has a long-standing agreement with IRS in which the companies provide free electronic tax preparation and filing services to eligible taxpayers in exchange for IRS not offering its own filing capability. However, few taxpayers use these services and GAO found that IRS has given inadequate consideration to the full benefits and costs of the Free File agreement to all parties. Not considering these costs and benefits has implications for the future evolution of IRS's online services, including helping taxpayers electronically file amended returns.

Why GAO Did This Study

IRS recognizes that taxpayers want more choices in how they interact with IRS, including through online services. GAO was asked to review IRS's online services—those which allow IRS and individual taxpayers to exchange personalized information electronically. This report (1) examines what is known about how IRS's current online services are meeting taxpayers' needs, and provides information about selected foreign and state revenue agencies' online services; (2) evaluates the extent to which IRS's strategy for identifying and prioritizing the development of new online services is consistent with relevant requirements and leading practices; and (3) examines how IRS is addressing key challenges in providing online services.

GAO assessed IRS's online services against relevant requirements, agency goals, and leading practices; interviewed IRS officials; and identified additional services and practices from six foreign and state revenue agencies selected for offering multiple online services for exchanging personalized information with taxpayers.

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Recommendations

GAO is making seven recommendations to IRS, including measuring and reporting on the effect of online services on satisfaction and taxpayer burden and setting a target for reducing burden, considering taxpayer input when prioritizing new online services, and ensuring that any renewal of the Free File agreement reflects benefits and costs. IRS agreed with six recommendations, but disagreed on setting a target to reduce burden. GAO continues to believe IRS should set such a target.

Recommendations for Executive Action

Agency Affected Recommendation Status
Office of the Commissioner The Commissioner of the IRS should ensure that information is collected on taxpayers' experiences with all online services and the extent to which the services are meeting taxpayers' needs. (Recommendation 1)
Open

Recommendation status is Open.

As of 1/30/2020 IRS had not taken action. We will continue to monitor IRS's efforts to address this recommendation.
Office of the Commissioner The Commissioner of the IRS should ensure that information collected on taxpayers' experiences with online services is summarized in the document serving as IRS's performance plan and report. (Recommendation 2)
Open

Recommendation status is Open.

As of 1/30/2020 IRS had not taken action. We will continue to monitor IRS's efforts to address this recommendation.
Office of the Commissioner The Commissioner of the IRS should direct the Director of OLS and the Chief Research and Analytics Officer to work together to analyze the potential effects of online services on taxpayer burden. (Recommendation 3)
Open

Recommendation status is Open.

As of 1/30/2020 IRS had not taken action. We will continue to monitor IRS's efforts to address this recommendation.
Office of the Commissioner The Commissioner of the IRS should ensure that taxpayer input is included as an element of IRS's identification and prioritization process for new online services. (Recommendation 4)
Open

Recommendation status is Open.

As of 1/30/2020 IRS had not taken action. We will continue to monitor IRS's efforts to address this recommendation.
Office of the Commissioner The Commissioner of the IRS should work with relevant officials to set a target to reduce taxpayer burden through the development of new online services. (Recommendation 5)
Open

Recommendation status is Open.

As of 1/30/2020 IRS had not taken action. We will continue to monitor IRS's efforts to address this recommendation.
Office of the Commissioner The Commissioner of the IRS should direct the Chief Information Officer and the Director of OLS to ensure that planned future capabilities of digital communication platforms are tested or piloted before deployment with a particular focus on mitigating the risks that were identified in prior pilots of digital communication services, such as challenges in establishing common objectives and enrolling taxpayers. (Recommendation 6)
Open

Recommendation status is Open.

As of 1/30/2020 IRS had not taken action. We will continue to monitor IRS's efforts to address this recommendation.
Office of the Commissioner The Commissioner of the IRS should direct the Commissioner of W&I to work with the Director of OLS to ensure that future decisions regarding whether to renew the Free File agreement incorporate findings from a comprehensive examination of the benefits and costs of the agreement as it relates to long term plans for IRS's online services, including plans to file amended returns electronically. (Recommendation 7)
Open

Recommendation status is Open.

Our report identified IRS's pledge to "not enter the tax preparation software and e-filing services marketplace" as a potential cost of IRS's agreement with Free File, Inc. to provide services to eligible taxpayers. Shortly after our report was issued, the Commissioner of the Wage and Investment Division signed on December 23, 2019 an addendum to the most recent agreement between IRS and Free File, Inc. which among other provisions struck the language prohibiting IRS from offering its own online filing services. Under the terms of the addendum, companies participating in Free File, Inc. will continue to provide services to eligible taxpayers subject to some new requirements, such as a prohibition on companies excluding their services from internet search engines and surveying a sample of taxpayers about their experiences. The agreement between IRS and Free File, Inc. remains scheduled to expire in October 2021. While the deletion of the language prohibiting IRS from offering its own online filing services removes a cost for IRS, our recommendation was for any future renewal of the agreement to be based on a comprehensive examination of the benefits and costs of the agreement as it relates to IRS's plans to expand online services. IRS agreed with our recommendation. In 2021, IRS will have to decide whether to renew the agreement and we continue to believe that our recommended analysis should inform IRS's decision on this matter and consideration of potential alternative approaches for helping taxpayers file electronically for free. Therefore, we will continue to monitor IRS's efforts to address the recommendation.

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