	Objective, Scope, and Methodology

Our objective was to assess IRS’ performance during the 1994 filing season. Specifically, we focused on IRS’ ability to (1) process income tax returns and refunds accurately and efficiently and (2) provide taxpayers access to forms, information, and electronic filing methods. To achieve our objective, we validated the results of 1 service center’s test of the accuracy and timeliness of refunds by reviewing 853 randomly selected refunds; analyzed filing season-related data from IRS’ Management Information System for Top Level Executives and IRS data on processing errors, including those involving the EIC; reviewed IRS reports on refund fraud; reviewed computer system availability reports and attended weekly operational meetings held by IRS’ National Office Command Center; assessed the availability of tax materials by visiting 10 walk-in sites; tested taxpayers’ access to ordering forms and publications from IRS’ 3 tax material distribution centers by placing phone calls to those centers; analyzed IRS’ toll-free telephone system accessibility data, telephone activity data for area distribution centers, and telephone accessibility reports for the TeleFile system; compiled trend data for various indicators of IRS’ filing season performance; and interviewed IRS National Office officials and IRS officials in the Atlanta; Cincinnati; Fresno, CA; and Kansas City, MO, Service Centers responsible for the various activities we assessed. Use of Alternative Filing Methods Generally Increased

Although the overall number of individual filers has not significantly increased, taxpayer use of the various alternative filing methods generally increased in 1994. In 1994, 13.5 million individual income tax returns were filed electronically—up from 12.3 million in 1993. What is unclear is (1) how much of this growth is due to increased fraudulent activity rather than an improvement in fraud detection and (2) how much additional fraud might be going undetected. Taxpayers Continue to Have Problems Reaching IRS by Telephone

Taxpayers call IRS during the filing season for a variety of reasons. Toll-Free Accessibility Continued to Decline

A key indicator of filing season performance is how well IRS serves taxpayers who call toll-free telephone assistance to ask questions about their account, the tax law, or IRS procedures. It is the source of many of the errors made by taxpayers and tax practitioners in preparing returns, and almost all of the refund fraud cases identified by IRS involve the EIC. That situation may only worsen in 1995 as more people become eligible to claim the credit.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) performance during the 1994 tax filing season, focusing on: (1) IRS individual income tax returns and refunds processing; and (2) taxpayer accessibility to IRS information.

What GAO Found

GAO found that: (1) during the 1994 filing season, the number of filed tax returns increased and taxpayers increased their use of alternative filing methods; (2) tax refunds were accurately and timely issued at one IRS service center; (3) IRS reduced the amount of rework and downtime by improving the accuracy of its returns processing and computer operations; (4) IRS fulfilled most taxpayer requests for tax forms and publications and provided accurate toll-free telephone assistance to taxpayers with tax law questions; (5) during the 1994 filing season, IRS identified twice as many fraudulent claims as in 1993; (6) it is unclear whether the growth in tax fraud was due to increased fraudulent activity or improved IRS monitoring and detection; (7) taxpayers' ability to reach IRS by telephone continued to decline during the 1994 filing season; (8) at the peak of the 1994 filing period, IRS answered only about 20 percent of its toll-free telephone assistance calls, 50 percent of the calls to its forms distribution centers, and 13 percent of the calls to its Telefile system; (9) the Earned Income Credit (EIC) provision continued to cause problems for IRS and taxpayers; (10) EIC was the source of many tax preparation errors and almost all of the refund fraud cases identified by IRS; and (11) EIC fraud could increase significantly as more taxpayers become eligible to claim EIC.