Processing of Returns Was Timely, but Opportunities to Improve Taxpayer Service Exist

During the 2011 filing season, the percentage of returns e-filed increased  considerably and IRS expects new systems to speed refunds to  taxpayers. Although fewer taxpayers receive face-to- face assistance than in other ways, IRS is taking steps to improve service  at TAC and VITA sites. E-Filing Increased and the Shift to New Processing Systems Continues

IRS processed about 140 million returns and almost reached its e-file  goal of 80 percent (78 percent of individual returns were e-filed and 22  percent filed on paper), established by Congress in 1998. IRS’s Refund Timeliness Measure and Goal Do Not Reflect Processing Performance and Capabilities

IRS’s current refund timeliness measure and goal, which it routinely uses  in budget justification documents and to assess its performance, do not  include e-filed returns. The IRS Restructuring and Reform Act of 1998  requires IRS to report to Congress on how it has maintained processing  times of 40 days or less for paper returns, in addition to implementing a  plan to increase electronic filing, and IRS maintains a goal of issuing   Due to improvements  refunds for returns filed on paper within 40 days.in the percentage of e-filed returns (nearly 80 percent of returns are now  filed electronically) the measure does not apply to the majority of returns  filed by taxpayers. In 2011, 72 percent of taxpayers seeking live telephone  assistance got through to a CSR, compared to 81 percent in 2007. Where’s My Refund online self-service tool. IRS officials were uncertain exactly how much it  would cost to develop the line but said that it would probably cost less  than $1 million. In addition, from January 1 through June 30, 2011, CSRs answered over  60,000 calls from taxpayers inquiring about the location of a TAC or VITA  site. However, IRS does not have an automated telephone line for  those taxpayers to call. Due to budgetary  constraints, IRS does not plan to expand the number of IRS  employees or sites supported in 2012. IRS officials believe that the increase in the use of the search tool over  the years is due in part to site visitors not being able to easily locate the  information they are seeking. IRS acknowledged that the existing manner  in which IRS manages content on its website contributes to more  searches because of duplicative and outdated information. IRS Is Developing an Internet Strategy, but Fundamental Elements Are Missing

As we noted earlier, IRS has begun spending a planned $320 million on  its website over a 10-year period. IRS’s investment plans include, among other  things, introducing new, more secure portals for taxpayers to access  information. Online services are a substantially less expensive  means for IRS to conduct business with taxpayers compared to telephone  or paper correspondence, making it important for IRS to promote  interactive website services. Recommendations for Executive Action

We recommend that the Commissioner of Internal Revenue take the  following four actions: develop a new refund timeliness measure and goal to more  appropriately reflect current capabilities; offer an automated telephone line that gives taxpayers the status of  their amended tax return, unless IRS has a convincing cost-benefit  analysis to suggest that the costs exceed the benefits; assess the costs and benefits of automating the TAC/VITA location  telephone lines, and automate these lines if the benefits exceed the  costs; and  complete an Internet strategy that provides a justification for the implementation of online self-service  tools and includes an assessment of providing online self-service  tools that allow taxpayers to access and update elements of their  account online; acknowledges the cost and benefits to taxpayers of new online  services;  sets the time frame for when the online service would be created  and available for taxpayer use; and  includes a plan to update the strategy periodically. Since 2007, IRS telephone service has  continued to suffer and we believe that a rigorous assessment of the  costs and benefits of automating the TAC/VITA telephone line will give  IRS better information on how to allocate scarce resources.
Why GAO Did This Study

The tax filing season is an enormous undertaking in which the Internal Revenue Service (IRS) processes millions of tax returns, issues billions of dollars in refunds to taxpayers, corrects taxpayers' errors, and provides service to millions of taxpayers through telephones, website, and face-to-face assistance. Among other things, GAO was asked to assess (1) IRS's performance processing returns and issuing refunds, and providing telephone assistance, and (2) IRS's plans to expand self-service options on its website. To conduct the analyses, GAO obtained and compared data from 2007 through 2011, reviewed IRS documents, interviewed IRS officials, observed IRS operations, and interviewed tax-industry experts, including from tax preparation firms.

What GAO Found

During the 2011 filing season the following occurred:
Electronic filing (e-filing) increased to nearly 80 percent of the 140 million individual returns filed. The benefits of e-filing include that it is more accurate, faster, and less expensive for IRS than processing returns filed on paper.
Due to the increase in e-filing, new systems, and IRS's performance in recent years, its refund timeliness measure and goal are outdated. The measure only relates to the 22 percent of returns filed on paper. IRS's goal is to issue refunds for paper-filed returns within 40 days. In 2012, IRS expects to issue most refunds within 4 to 6 days of processing a return (paper and e-filed), meaning the current goal does not reflect current performance and capabilities.
The percent of callers seeking live assistance who receive it remained much lower than in 2007 and the average wait time for callers continued to increase. Providing live telephone assistance is expensive. However, IRS can shift some assistor-answered calls to less costly tools. Two such opportunities include creating self-service phone lines for taxpayers seeking to identify the (1) status of their amended return--a source of high call volume--and (2) location of a Taxpayer Assistance Center (TAC) or Volunteer Income Tax Assistance (VITA) site, where IRS employees and volunteers prepare returns, respectively. IRS officials expect the benefits of the amended return line to exceed the costs, but have not studied the costs and benefits of adding a TAC/VITA locator line.
The use of IRS's website is growing, particularly the number of searches, which IRS officials attribute, in part, to taxpayers having difficulties locating information. Having an easily searchable website is important for IRS because it reduces costly phone calls. IRS has begun spending a planned $320 million on its website over 10 years. However, IRS's initial strategy for providing new self-service tools online does not include allowing taxpayers to access account information and is missing fundamental elements, including a justification for new services and time frames. Doing so would provide Congress and taxpayers with a better understanding of the online services IRS plans to provide with its significant investment on its website.

What GAO Recommends

GAO recommends that IRS develop a new refund timeliness performance measure to better reflect current capabilities, create an automated telephone line for taxpayers seeking information about amended returns unless IRS has a convincing costbenefit analysis suggesting the costs exceed the benefits, assess the costs and benefits of automating a TAC/VITA locator line, and finalize a strategy for determining which self-service tools to provide on its website.
IRS agreed with three of GAO's recommendations, but said that resources are not available to automate the TAC/VITA line. GAO believes a review of the costs and benefits would better inform IRS decisions about how to allocate scarce resources.