	Progress in Achieving IRS’ Business Vision

Mr. Chairman and Members of the Committee: I am pleased to have this opportunity to assist you in your continuing review of the Internal Revenue Service’s (IRS) Tax Systems Modernization (TSM). In March 1996, we appeared before this Committee to discuss the managerial and technical weaknesses of TSM. Today, our testimony focuses on IRS’ progress in achieving important programmatic aspects of its business vision for 2001 and how TSM supports that vision. While IRS predicted that it would need many fewer staff to maintain existing work levels, it anticipated investing the staff savings made available from TSM back into its customer service and enforcement programs. IRS planned to implement this system at all 10 service centers. Return-Free Filing

As part of its vision for 2001, IRS planned to provide a return-free filing capability for a limited number of taxpayers by 2001. IRS Lacks a Cost-Effective Strategy for Obtaining the Taxpayer Data That May Be Needed for Customer Service and Compliance

Our message regarding IRS’ progress in achieving its business vision for processing tax returns is really no different than it was in 1992—IRS’ strategy for returns processing needs to be based on a clear definition of its downstream business requirements for customer service and compliance and an analysis of the cost and benefits of providing those requirements under some of the different scenarios that IRS is currently considering as a part of its reengineering effort. Until such an analysis is completed, IRS has no assurance that its technology investments for submission processing are sound. Improving Information Systems

In addition to organizational and work process changes, IRS’ customer service vision depends on increasing the use of and implementing new information systems. Managerial, Technical, and Human Resource Challenges Remain

IRS’ strategy for improving customer service offers promise as it is designed to improve taxpayers’ ability to get assistance from IRS and provide IRS employees access to the information they need to help taxpayers.
Why GAO Did This Study

GAO discussed the Internal Revenue Service's (IRS) progress in achieving its business vision for 2001 and how its Tax Systems Modernization (TSM) supports that vision.

What GAO Found

GAO noted that: (1) as part of its business vision, IRS will increase the number of returns it receives electronically, consolidate its paper processing operations, and provide return-free filing; (2) without a returns processing strategy based on its customer service and compliance needs and a cost analysis, IRS has no assurance that its TSM investments are sound; (3) IRS plans to improve customer service by reorganizing its customer service centers according to the work performed, expanding and simplifying telephone interaction with customers, and using information systems to provide the information IRS employees need to assist customers; (4) while IRS customer service improvements appear promising, IRS must continue to handle its current workload through the conversion, train its customer service employees, and develop the necessary information systems; (5) IRS plans to improve enforcement and voluntary compliance; (6) while access to good data and more staff could improve enforcement and voluntary compliance, IRS does not plan to use its savings from TSM to hire more employees; and (7) managerial and technical weaknesses could jeopardize TSM investments.