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GAO discussed the Internal Revenue Service's (IRS): (1) current fiscal condition; and (2) budget request for fiscal year (FY) 1992. GAO noted that: (1) the IRS fiscal condition appears more stable in FY 1991, enabling it to more fully implement congressionally authorized compliance initiatives; (2) congressional reallocations of IRS appropriations could require it to absorb a $74-million shortfall for some cost increases; (3) full funding for existing staff and related support costs was the IRS budget priority for FY 1992; (4) IRS requested $34 million in the FY 1992 budget to enable it to collect more delinquent accounts; and (5) IRS telephone assistance in 1991 was better than the previous year's but well below the answer rate for the 1989 filing season. GAO also noted that: (1) maintaining labor and support costs accounted for 51 percent of the requested $622 million increase over the FY 1991 authorized level; (2) the additional staff IRS requested for FY 1992 was appropriate in light of the reduced staffing levels that resulted from past hiring freezes; (3) IRS projections to achieve budget savings of $141 million may be unrealistic; and (4) increasing the number of examinations of high-dollar tax returns will only expand audit coverage by .01 percent, doing little to reverse the steady decline in audit coverage.

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