	Introduction

This report responds to a request from the Chairman of the Subcommittee on Oversight of the House Committee on Ways and Means that we assess the Internal Revenue Service’s (IRS) performance during the 1999 tax filing season. In addition to providing data on various indicators that IRS uses to measure its filing season performance, this report discusses (1) IRS’ telephone service; (2) service provided at IRS walk-in sites; (3) other IRS efforts to assist taxpayers; (4) IRS efforts to reduce Earned Income Credit (EIC) noncompliance; (5) electronic filing; (6) IRS’ implementation of certain tax law changes; and (7) implementation of IRS’ new return and remittance processing system. Also, in 1999, IRS implemented new procedures, as mandated by the Taxpayer Relief Act of 1997 (TRA97), that require certain taxpayers to document their eligibility for the EIC before IRS approves their claim. To achieve our objective, we analyzed filing-season data from various IRS management information systems, such as the Management Information System for Top Level Executives; IRS data on processing errors, including errors involving the EIC and the child tax credit; and data on IRS’ toll-free telephone assistance and IRS’ Web site; obtained data on IRS’ goals and accomplishments for various performance measures and discussed the methodology for computing many of those measures with cognizant officials; assessed IRS’ methodology for measuring the quality of assistance provided taxpayers who call IRS with tax law questions and analyzed the results of that methodology; interviewed officials who were responsible for managing IRS’ toll-free telephone operations as well as officials at telephone call sites in Atlanta, GA, and Fresno, CA, and analyzed the results of toll-free telephone service customer satisfaction surveys; interviewed officials at IRS walk-in assistance sites in the Georgia and Northern California District Offices; observed walk-in services provided at shopping centers, grocery stores, and mobile van sites by the Georgia, Northern California, and Central California District Offices; and analyzed the results of walk-in customer satisfaction surveys; interviewed IRS National Office officials about the Taxpayer Education Program, with an emphasis on volunteer tax preparation services that are supported by IRS; interviewed officials in IRS’ Office of Electronic Tax Administration about various initiatives undertaken in 1999 in an effort to increase the use of electronic filing, reviewed data on taxpayer participation in the initiatives, and reviewed data on the results of those initiatives; interviewed officials in IRS’ EIC Project Office and in the Atlanta, Fresno, and Kansas City, MO, Service Centers about various efforts to improve the level of compliance associated with EIC claims; analyzed data on the results of those efforts; and interviewed National Office officials located at the Brookhaven, NY, Service Center who were responsible for national EIC compliance efforts; reviewed IRS’ returns processing guidance relating to the child tax credit, interviewed service center officials about their processing procedures, and discussed potential changes to IRS’ forms and instructions with officials at IRS’ National Office; obtained filing-season information from the largest national tax return reviewed reports issued by the Treasury Inspector General for Tax Administration on filing-season activities. In 1999, according to IRS’ own data, it met or exceeded its performance goals for five measures, came close to its goals for two measures, and fell short of its goals for two measures (i.e., quality of responses to tax law questions and level of access to the taxpayer service telephone system).As shown in table 2.1, there were four other measures for which IRS had no goal in 1999. IRS’ accomplishment in one of those areas, that is, timeliness of refunds for paper returns, raised some questions that IRS did not have the necessary data to answer. But, service did not improve; it deteriorated. Our discussions with IRS officials and analysis of relevant documentation indicated that the deterioration resulted from (1) unrealistic assumptions about the implementation and impact of IRS’ changes and (2) other problems managing staff training and scheduling and implementing new technology. For example, IRS enhanced the availability of services at its walk- in offices and expanded the availability of assistance to taxpayers who did not have convenient access to a walk-in office. However, while IRS made progress in assessing customer satisfaction with walk-in services in 1999, it made little progress in measuring the quality and timeliness of those services. In that regard, our review identified certain opportunities to streamline the recertification process and thus make it less burdensome to taxpayers and IRS. Our review also found that IRS service centers were not consistently following national guidelines for recertification, which could result in disparate treatment of taxpayers. To make electronic filing paperless and thus more attractive to potential users, IRS tested four initiatives in 1999. The other one-half erred in calculating the credit amount. Significant Changes to Computer Systems Accomplished Without Processing Disruptions

For the 1999 filing season, IRS made significant changes to the computer hardware and software that it uses to process returns and remittances. IRS identified many erroneous claims by validating SSNs and scrutinizing certain EIC claims.
Why GAO Did This Study

Pursuant to a congressional request, the GAO discussed the Internal Revenue Service's (IRS) performance during the 1999 tax filing season, focusing on: (1) telephone service; (2) availability of walk-in services; (3) other taxpayer service efforts; (4) Earned Income Credit (EIC) noncompliance; (5) electronic filing; (6) implementation of recent tax law changes; and (7) implementation of a new return and remittance processing system.

What GAO Found

GAO noted that: (1) IRS met or exceeded its 1999 goals for several performance measures, but fell short of its goals in two key areas - taxpayers' ability to access IRS' toll-free telephone service and the quality of IRS' responses to taxpayers tax law questions; (2) certain features of IRS' methodology for measuring the quality of responses to tax law questions also warranted IRS' attention; (3) the timeliness of refunds for paper returns raised some questions about IRS' timeliness that IRS could not answer; (4) IRS attempted to improve telephone service in 1999, however, service did not improve, but deteriorated; (5) GAO's work indicated this deterioration resulted from (a) unrealistic assumptions about the implementation and impact of IRS' changes, and (b) other problems managing staff training and scheduling and implementing new technology; (6) IRS enhanced the availability of its walk-in services by increasing Saturday hours and making services more accessible to taxpayers who did not have convenient access to a walk-in office; (7) IRS did a better job of measuring walk-in customer satisfaction in 1999 than 1998; (8) however, IRS made little progress in measuring the quality and timeliness of its walk-in services; (9) use of IRS' World Wide Web site on the Internet increased significantly during the 1999 filing season, but IRS data pointed to problems with taxpayers getting answers to tax law questions via electronic mail; (10) IRS stopped millions of dollars in erroneous EIC claims in 1999 by validating social security numbers and scrutinizing certain claims; (11) IRS implemented new procedures (called recertification) in 1999 that require certain taxpayers to document their eligibility for the EIC before IRS approves their claim; (12) GAO identified certain opportunities to streamline the recertification process and thus make it less burdensome to taxpayers and IRS; (13) IRS service centers were not consistently following the national guidelines for recertification, which could result in disparate treatment of taxpayers; (14) IRS implemented several initiatives in 1999 directed at making electronic filing paperless and thus more appealing to potential users; (15) 20 percent of the returns filed in 1999 included the new child tax credit; (16) many of those taxpayers erred in calculating the credit amount, while others who were eligible for the credit failed to claim it; (17) correction of these errors increased IRS' processing workload; (18) IRS made significant changes to the computer systems it uses to process returns and remittances; and (19) IRS accomplished those changes without any discernible processing disruptions.