As you requested, our statement today will cover three areas (1) IRS’ efforts to correct management and technical weaknesses that have impeded its Tax Systems Modernization (TSM) program as well as whether IRS can successfully complete the program within the time frames and cost figures it has established; (2) IRS efforts to collect delinquent tax debts and deal with its accounts receivable problems; and (3) the viability of return-free filing as an option to the current tax filing system. IRS has continued with plans to spend billions more on TSM solutions with little confidence of successfully delivering effective systems within established TSM time frames and cost figures. At that time, we considered IRS’ response to be a commitment to correct its management and technical weaknesses. Further, IRS is in the process of rethinking and rescoping many of its modernization and operational initiatives that would affect accounts receivable and collections. Several staffing-related projects have been affected by IRS’ actions taken in response to its reduced appropriations for fiscal year 1996. Although IRS is attempting to address some of the problems, their underlying causes remain and continue to hinder the potential for significant improvement.
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed the Internal Revenue Service's (IRS) Tax Systems Modernization (TSM) Plan, focusing on: (1) IRS efforts to correct TSM management and technical weaknesses within an established time frame and cost figure; (2) IRS plans to collect delinquent taxes and correct accounts receivable discrepancies; and (3) the viability of return-free filing.

What GAO Found

GAO noted that: (1) IRS has attempted to address its management and technical weaknesses, but its initiatives do not satisfy previous recommendations or provide assurance that the problems will be timely corrected; (2) IRS continues to spend billions of dollars on TSM solutions, but it has little confidence in its ability to deliver an effective system within the established TSM time frame and cost figure; (3) IRS is rethinking its modernization and operational initiatives related to accounts receivable and delinquent taxes, but it projects a 13-percent decrease in collections for fiscal year 1996; and (4) return-free filing is a viable option if taxpayers continue to provide information regarding their tax status and number of dependents, and employers are legally authorized to compute tax liabilities under final withholding.