IRS’ processing of undeliverable mail involves labor-intensive and manual procedures at the 10 IRS service centers. Extent and Causes of Undeliverable Mail

American society is very mobile. Estimates made by these groups indicated that undeliverable mail rose from 6.5 million pieces in 1986 to as much as 15 million pieces in 1992. The Postal Service may not deliver or forward mail, and mail is returned to IRS. IRS incorrectly records taxpayers’ addresses in its databases. In addition, it said these undeliverable notices cost IRS millions of dollars in lost revenue and increased collection costs. A 1992 National Office quality improvement project reported that IRS had at least 1.2 million invalid business addresses in IRS computer files, resulting in about 2.25 million pieces of undeliverable mail annually. Efforts by IRS to Reduce Undeliverable Mail

IRS has recognized the need to reduce the amount of its undeliverable mail and has several studies and projects focusing on ways to deal with it. To implement this program, IRS’ Collection function in the 10 service centers is to start processing undeliverable mail after the first occurrence of this mail as the other service center functions do. The recommendations included (1) developing standardized procedures for processing undeliverable mail throughout IRS and making the Collection function’s automated systems available to other service center functions; (2) testing alternative methods for taxpayers to provide address changes to IRS, such as the use of a tear-off return stub on notices; and (3) adopting procedures to help ensure that taxpayers’ addresses would be accurately updated in its databases. We believe that increasing taxpayers’ awareness of the importance of providing address changes to IRS is fundamental to developing a strategy to minimize the volume of undeliverable mail. However, this unit did not process all of the service center’s undeliverable mail. Conclusions

Although it is unlikely that the problem of undeliverable mail can be totally eliminated, IRS needs to give undeliverable mail more attention because it adversely affects operations and can cause undue burden on taxpayers.
Why GAO Did This Study

In response to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) processes for handling undeliverable mail, focusing on the: (1) amount of and reasons for undeliverable mail; and (2) impact of undeliverable mail on taxpayers and IRS.

What GAO Found

GAO found that: (1) IRS estimates that it had about 6.5 million pieces of undeliverable mail in 1986 and about 15 million pieces in 1992; (2) undeliverable mail is principally caused by taxpayers failing to leave forwarding addresses, the U.S. Postal Service not delivering or forwarding mail, and IRS incorrectly recording taxpayers' addresses in its files; (3) taxpayer interest and penalties can substantially increase because of undeliverable mail, which eventually can lead to IRS attachment of taxpayers' liquid assets; (4) IRS loses millions of dollars in revenue annually and incurs increased operating costs because of undeliverable mail; (5) the IRS Collection Division plans to start processing undeliverable mail after the first occurrence and send only two instead of four service center notices to decrease collection costs; (6) IRS has implemented only a few recommendations to decrease its undeliverable mail because it expects its Tax Systems Modernization initiative to resolve its undeliverable mail problem; (7) senior IRS management recently requested responsible IRS offices to develop action plans to decrease the amount of undeliverable mail in a recent internal IRS report; (8) IRS needs to increase taxpayers' awareness of the need to provide address changes to minimize the volume of undeliverable mail; and (9) more efficient processing of undeliverable mail could result if IRS consolidates mail processing functions into one centralized unit.