Tax Administration
Issue Summary
In recent years, the Internal Revenue Service (IRS) has experienced declining resources and an increased workload—raising concerns about its ability to provide service to taxpayers and enforce tax laws.
The IRS's mission is to provide American taxpayers with top-quality service by helping them understand and meet their tax responsibilities; it is also responsible for enforcing tax laws. In FY 2019, the agency reported that it had:
- Collected over 95% of all the money the federal government received ($3.5 trillion before tax refunds)
- Processed over 253 million tax returns and related documents and nearly 122 million refunds
- Provided taxpayer assistance to over 67 million taxpayers through its toll-free telephone lines, correspondence, in-person sites, and almost 651 million visits to IRS.gov
- Received over 3.5 billion information returns—such as Forms W-2 and 1099—that employers and others file
- Examined about 1 million tax returns
However, there are a number of ways that the IRS could improve how it collects and enforces taxes.
Limited customer service options
The IRS helps millions of taxpayers through its telephone, correspondence, online, and in-person services. However, these services do not fully meet taxpayer needs. For example, while the IRS offers a range of online services (such as allowing taxpayers to track refunds and view their accounts), taxpayers want more internet options. The agency recognizes this, but has not considered taxpayer input in developing new online services. Furthermore, the IRS relies on private companies to help taxpayers file electronically, but it has not fully considered the benefits and costs of doing so.
Additionally, taxpayers with limited English proficiency have very limited service options, and some translated content on the IRS’s website was outdated during the 2019 filing season. As of January 2020, the agency also hadn’t assessed whether to translate many of its common tax forms (such as Form 1040) into other languages.
Outdated Translated Information on IRS.gov for 2019 Filing Season
Identity theft refund fraud
Another ongoing challenge confronting the IRS is identity theft refund fraud. This occurs when an identity thief obtains an individual’s Social Security number and other personally identifiable information and uses them to file a fraudulent tax return seeking a refund. The IRS has taken steps to address such fraud, including continued development and deployment of the Return Review Program (a system which screens returns for potential identity theft and other refund fraud). However, it could improve and expand how it uses this program.
Another way that the IRS can prevent paying out fraudulent refunds is by better verifying the identities of millions of taxpayers. By updating its authentication procedures to comply with new government standards, and evaluating potential new authentication technologies and approaches, the IRS could better protect taxpayers.
Reduced workforce
Fewer individual and corporate tax returns have been audited in recent years, largely because the IRS doesn't have the people it needs to enforce existing tax laws and implement new ones. Hiring freezes, retirements, and low morale have shrunk the agency's workforce. For instance, its enforcement workforce (which helps collect unpaid taxes) declined by about 27% between FYs 2011-2017. This has led to a reduction in enforcement activities, which is causing billions of dollars in taxes to go unpaid every year.
Hiring freezes, retirements, and low morale have shrunk IRS's workforce, largely in enforcement
GAO recommended that IRS fully implement its strategic workforce plan to allow the IRS to identify and address workforce needs and skills gaps in its personnel. IRS agreed and is working to develop such a plan. By December 2021, the agency expects to implement the plan and monitor and evaluate the results.
