	Implementation Under Way but Work Remains

IRS has made a concerted effort to implement the Restructuring Act’s taxpayer rights and protections mandates. IRS’ Difficulties in Implementing the Restructuring Act

IRS has also experienced some difficulty in implementing the Restructuring Act. A second example of IRS difficulty in implementing the Restructuring Act is related to “innocent spouse” cases. Creating a Taxpayer- Focused Structure and Clearer Lines of Authority and Accountability

Notwithstanding a reduction in the number of its field offices, IRS’ organizational structure has not changed significantly in almost 50 years. Under this structure, authority for serving taxpayers and administering the tax code is decentralized to 33 districts and 10 service centers, with each of these geographic units organized along functional lines—such as collection, examination, and taxpayer service. Through its new taxpayer-focused operating divisions, IRS is centralizing management of key functions and creating narrower scopes of responsibility. Creating a simpler, more coherent organization and management structure is an important step, but it does not guarantee good management. Consequently, IRS needs to develop an integrated performance management system that aligns employee, program, and strategic performance measures and creates incentives for behavior supporting agency goals, including that of giving due recognition to taxpayers’ rights and interests. At the operational level, IRS is measuring its progress toward these goals through customer satisfaction surveys and through the business results measures of quality and quantity. Modernizing Information Systems to Support Business Modernization

accessing comprehensive information about individual taxpayer accounts or summary data on groups of taxpayers. For years, IRS has struggled to modernize its information systems to support high quality taxpayer service and management information needs. In 1995, we made over a dozen recommendations to correct management and technical weaknesses that jeopardized the modernization process. In February 1998, we made additional recommendations to ensure, among other things, that IRS develops a complete systems architectural blueprint for modernizing its information systems. Subsequently, in fiscal years 1998 and 1999, Congress provided IRS funds for systems modernization and limited their obligation until certain conditions, similar to our recommendations, were met. While IRS has made progress in addressing our recommendations and complying with the legislative conditions, the Service has not yet fully implemented our recommendations. As a result, at the direction of the Senate and House appropriation subcommittees responsible for IRS’ appropriation, we have continued to monitor and report on IRS’ system modernization efforts.
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed the Internal Revenue Service's (IRS) progress in implementing the taxpayer rights and protection mandates of the IRS Restructuring and Reform Act of 1998 and IRS' ongoing efforts to modernize its organizational structure, performance management system, and information systems.

What GAO Found

GAO noted that: (1) IRS has embarked on a concerted effort to implement the taxpayer rights and protection provisions; (2) in some instances, implementation is not complete, and in some others, it is too early to tell if implementation is successful; (3) IRS has experienced difficulties in implementing some aspects of the mandates; (4) these difficulties included determining when enforced collection actions, such as the seizure of delinquent taxpayers' assets, are appropriate and dealing with requests for relief under the innocent spouse provisions; (5) to streamline its management structure and create a more taxpayer-focused organization, IRS is in the midst of instituting a major reorganization; (6) IRS' new organization structure is built around four operating units, each with end-to-end responsibility for serving a group of taxpayers with similar needs; (7) through its new taxpayer-focused divisions, IRS is centralizing management of key functions and creating narrower scopes of responsibility; (8) IRS needs to develop an integrated performance management system that aligns employee, program, and strategic performance measures and creates incentives for behavior supporting agency goals; (9) at the operating level, IRS is measuring its progress toward these goals through customer satisfaction surveys and through business results measures of quality and quantity; (10) IRS' system difficulties hinder, and will continue to hinder, efforts to better serve taxpayer segments; (11) IRS has dozens of discrete databases that are function specific and are designed to reflect transactions at different points in the life of a return or information report--from its receipt to disposition; (12) as a consequence, IRS does not have any easy means of accessing comprehensive information about individual taxpayer accounts or summary data on groups of taxpayers; (13) GAO made over a dozen recommendations to correct management and technical weaknesses that jeopardized IRS' information systems modernization process; (14) in fiscal years 1998 to 1999, Congress provided IRS funds for systems modernization and limited their obligation until certain conditions, similar to GAO's recommendations, were met; (15) while IRS made progress in addressing GAO's recommendations and complying with the legislative conditions, IRS has not yet fully implemented GAO's recommendations; and (16) GAO believes that IRS' ongoing efforts to modernize its organizational structure, performance management system, and information systems are heading the agency in the right direction.