Tax Administration:

IRS Improved Performance in the 2004 Filing Season, But Better Data on the Quality of Some Services Are Needed

GAO-05-67: Published: Nov 15, 2004. Publicly Released: Nov 15, 2004.

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Most taxpayers have their only contact with IRS during the filing season, with tens of millions filing their returns, getting refunds, and seeking assistance by calling or visiting IRS's offices or Web site. GAO was asked to assess IRS's performance in 2004 relative to goals and prior years' performance as well as initiatives or other factors that significantly affected performance for the following areas: (1) the processing of paper and electronic returns, (2) telephone service, (3) walk-in service, and (4) Web site service.

During the 2004 filing season, IRS met many of its performance goals and continued a trend of improvement in recent years. However, IRS did not improve in all dimensions of its filing season services and lacks sufficient data to evaluate quality in others. IRS processed returns and issued refunds smoothly. The proportion of returns filed electronically is up to 47 percent. Despite this achievement and numerous initiatives to increase electronic filing, IRS does not expect to reach its long-term goal of having 80 percent of all individual tax returns filed electronically by 2007. A higher percentage of taxpayers was able to reach IRS assistors by telephone than last year and the accuracy rate for providing taxpayers with information about their accounts remained stable. However, the accuracy rate for answering tax law questions declined to 2001 levels. Consistent with IRS's strategy, the number of taxpayers visiting IRS walk-in sites declined, while the number having tax returns prepared at volunteer sites increased. Finally, although IRS continued to expand its Web site services, the site's feature for answering tax law questions raises some concerns. Despite the 2004 improvements, IRS has opportunities for further service improvements. For example, IRS has limited data with which to assess the quality of key services at its walk-in sites and sites staffed by volunteers. Although IRS has initiatives under way to measure quality at both types of sites, the initiatives have been delayed and important details have not yet been determined, which may undermine IRS's efforts to improve services in this area. In the meantime, some of IRS's quality data is likely to be biased. Until IRS fully implements its initiatives and gathers data on quality, it will have difficulty monitoring and improving performance at its walk-in sites and volunteer sites.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: GAO was primarily concerned with delays in developing a means of monitoring the quality of return preparation services at volunteer sites. In time for the 2005 tax filing season, IRS had two methods in place to assess quality at volunteer sites: 1) firsthand observational reviews conducted by IRS representatives of volunteer/taxpayer interaction at a sample of sites (including a review of the taxpayer's return and paperwork for accuracy), 2) "mystery shopping" conducted by representatives from partner groups posing as taxpayers seeking return assistance. Notably, however, IRS implemented neither of these methods as planned for the duration of the 2005 tax filing season. First, IRS abandoned observational reviews by the second week in February because of concerns raised by the National Taxpayer Advocate and other partners. Second, IRS conducted only 14 of the planned 100 mystery shopping reviews, which did not yield a statistically valid sample.

    Recommendation: To address problems with the data for assessing the quality of services at IRS walk-in and volunteer sites, the Commissioner of Internal Revenue should direct the appropriate officials to ensure that the delays with the development and implementation of the Quality Assurance initiative at volunteer sites are addressed.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: IRS has taken actions to address these delays and further implement contact recording to collect data on the quality of services at walk-in sites. According to IRS officials, since its pilot of contact recording in 2005, IRS has continued deploying contact recording as a method of collecting data to measure accuracy of account and tax law assistance. We recently subsequently reported that while IRS appears to be on schedule based on its implementation plan for contact recording, it has previously experienced delays implementing other parts of its quality review program. As of July 2007, IRS has deployed contact recording to 127 of its 401 walk-in sites; these sites account for 46 percent of IRS walk-in site contacts. IRS will continue to install contact recording at 175 additional walk-in sites in fiscal year 2008 and have contact recording fully deployed by the end of fiscal year 2009. With contact recording, IRS will have better data collection and analytics of account and other assistance. As a result, IRS and the Congress have better information and understanding of the quality of service IRS is providing at walk-in sites.

    Recommendation: To address problems with the data for assessing the quality of services at IRS walk-in and volunteer sites, the Commissioner of Internal Revenue should direct the appropriate officials to ensure that the causes of delays in implementing improved quality measurement at walk-in sites are addressed.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: Both the Internal Revenue Service Commissioner as well as the Commissioner of the Wage and Investment Division have acknowledged that data obtained by direct management observation may be inherently biased because of employee's knowledge that they are being observed.

    Recommendation: To address problems with the data for assessing the quality of services at IRS walk-in and volunteer sites, the Commissioner of Internal Revenue should direct the appropriate officials to recognize and disclose the limitations of the Embedded Quality performance data that will be obtained by direct management observation in 2005 when interpreting and reporting on service quality at walk-in sites.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Implemented

    Comments: In IRS's response to the report, the Commissioner noted that during the 2004 filing season, the Electronic Tax Law Assistance (ETLA) option was inadvertently placed in a prominent Web site location, causing the Service to experience an unanticipated demand that exceeded its ability to deliver the service levels it intended. The Commissioner added "We fully recognize the relationship between the prominence of the ETLA web location and the need for commensurate staffing." Review of the IRS website in 2006 shows that the ETLA feature is not prominently placed at this time, consistent with the Commissioner's remarks that the ETLA option was designed to serve a very limited number of customers. Furthermore, IRS's performance in responding to tax questions received via Internet during the 2005 and 2006 filing season was better than its performance during the 2004 season, suggests that staffing levels are appropriate given current web placement of the feature. Specifically, during the 2005 filing season IRS took an average of only 1.2 business days to respond to tax law questions submitted via the Internet. During the 2006 filing season, IRS took an average of 2.2 days to respond. On the other hand, in the 2004 filing season, IRS took, on average, over three days to respond to tax law questions submitted via Internet.

    Recommendation: With respect to the Web site's Electronic Tax Law Assistance feature, the Commissioner of Internal Revenue should recognize that decisions about the prominence and staffing to give the feature are related.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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