With respect to that part of the budget request for information technology, IRS (1) did not adequately support the $1.63 billion requested for operation and maintenance of its information systems but (2) did adequately support its $450 million request for business systems modernization. These include (1) labor and nonlabor savings of 2,287 staff years and $157.5 million from various improvement projects and workload decreases that IRS plans to use elsewhere in the organization, and (2) additional savings of $38.5 million resulting from better business practices that have not yet been identified. In some respects, IRS’s congressional justification has good links between the resources being requested and IRS’s performance goals. Interim Results of IRS’s 2002 Filing Season Show Impact of the Rate Reduction Credit

So far this filing season, IRS has processed returns smoothly with one major exception, seen continued growth in electronic filing, and achieved some improvements in telephone service. The one exception to smooth processing has been the large number of errors taxpayers are making related to the rate reduction credit. While IRS has measures that provide useful information on some aspects of its service and is making efforts to improve its performance measures, some measures of telephone service are constructed in a way that misses important aspects of the activity being measured and IRS has delayed implementation of some accuracy measures for services provided at walk- in offices. IRS had planned to begin measuring the accuracy of account and return-preparation assistance in January 2002, but those plans have been delayed until June. One question and a related scenario was developed from each of four tax law categories that most prompted taxpayers to call IRS’s toll-free assistance lines in fiscal year 2001.
Why GAO Did This Study

This testimony discusses the Internal Revenue Service (IRS) fiscal year 2003 budget request for the 2002 tax filing season.

What GAO Found

GAO found that IRS's plans for hiring and redirecting staff may be optimistic because budgets are prepared so far in advance of the fiscal year involved. IRS assumed (1) labor and nonlabor savings of 2,287 staff years and $157.5 million and (2) additional savings of $38.5 million from better business practices. IRS's justification does not always adequately link the resources being requested and the agency's performance goals. Although IRS provided adequate support to justify the $450 million request for its multiyear capital account for business systems modernization, it did not adequately support $1.63 billion of the $1.68 billion requested for its information systems. In the area of agency performance, GAO found that IRS has generally processed returns smoothly and seen continued growth in electronic filing. The one exception to smooth processing has been the large number of errors related to the rate reduction credit. IRS has had to correct millions of returns due to the credit, and taxpayers' call about the credit have greatly increased the demand on IRS's toll-free assistance lines. IRS's performance measures provide useful information to assess its success in assisting taxpayers. However, some measures of telephone service miss important aspects of the activity being measured, and plans to begin measuring some important aspects of IRS's walk-in service have been delayed.