>:1..: _._ ,. .“).” .‘. (’ .’ ” ,’ United States GAO General Accounting Washington, Office D.C. 20548 General Government Division B-237389.1 .Januarv ~ 10 1 19%) The Honorable J. J. Pickle Chairman, Subcommittee on Oversight Committee on Ways and Means House of Representatives Dear Mr. Chairman: In response to your request, this report discusses the need for the Internal Revenue Service (IRS) to improve distribution of tax materials to the public. Specifically, we assessed the availability of tax materials at IRS’distribution centers and walk-in offices during the 1989 filing season. As arranged with the Subcommittee, we are sending copies of this report to other congressional committees, the Secretary of the Treasury, the Commissioner of Internal Revenue, and other interested parties. The major contributors to this report are listed in appendix III. Please contact me on 272- 7904 if you or your staff have any questions concerning the report. Paul L. Posner Associate Director, Tax Policy and Administration Issues Executive Summary --- Taxpayers need a wide range of tax materials, such as forms, schedules, Purpose instructions, and pubhcations when they file their annual federal tax returns. Because the Internal Revenue Service (IRS) encourages taxpay- ers to file early. it is important that these materials be available early. Not being able to get t,ax materials when needed can frustrate taxpay- ers, especially if they made a special effort to visit an IRS office, and can cause them to file later or file inaccurately. In 1988, GAO reported that tax materials were not always available at walk-in sites and that tele- phone orders were not always completely filled. GAO noted, however, that availability improved as the 1988 filing season progressed. The Subcommittee on ( jversight, House Committee on Ways and Means, asked GAO to examine t,he availability of tax materials during the 1989 filing season at (1) IKS walk-in sites and (2) IRS distribution centers. Taxpayers can visit any of IRS’ over 600 walk-in sites across the country Background to obtain tax materials Taxpayers may also contact one of three IRS dis- tribution centers by mail or toll-free telephone and request to have an item shipped directI> to them. Besides filling requests from taxpayers, the distribution cent(*rb also supply the walk-in sites with materials. IRS made several changes in an attempt to better ensure the availability of materials during the, 1989 filing season. IRS required each walk-in site to stock a minimum (4 79 specific tax items, placed greater responsibil- ity on each site for managing its own tax material inventory, developed training to assist walk in site personnel, and opened a third distribution center. Between late January nnd mid-April 1989, GAO visited 60 walk-in sites in 13 states and checked fo? the 79 items each site was required to stock and a sample of optional items each site chose t,o stock. During t,hat same period, GAO also) 1jlaced telephone and mail orders to each of the t.hree distribution cctnr ~rs for randomly selected items on a randomly determined schedllic* I SVP pp. 12 and 13.) Although IKS took st ~1IS to improve the availability of tax materials, tax- Results in Brief payers may still have\ had difficulties obtaining materials in 1989. Walk- in sites GAO chctrk(bli c>;trly in the filing season were missing, on average, about 16 percent (11’1I c’rcbquircd items and 22 percent of the sampled Page 2 GAO/GGD-9034 Distribution of Tax Materials ExecutiveSummary optional items. Although availability later improved, the lack of availa- bility early in the season may have hampered taxpayer efforts to file early. Tax materials were not always available at walk-in sites because (1) dis- tribution centers did not make initial shipments to sites in a timely man- ner, (2) not all required items were included in the initial shipments to sites, and (3) prescribed inventory management procedures were not always followed. Taxpayers who tried to order items from the distribution centers also may have encountered difficulties. As of May 31, 1989, GAO had not received about 20 percent of the ordered items and, in many cases, IRS did not provide an explanation as to why an item was not shipped. Without an explanation, a requester does not know whether to look for the item elsewhere, wait for IRS to ship it, or reorder the item. Even when explanations were provided, they were not always correct. Principal Findings Materials Often Not Tax materials were not always available at the walk-in sites GAO visited, especially early in the filing season. Of the 24 sites visited before Febru- Available at Walk-In Sites ary 12, for example, 18 were missing at least 10 percent of the items GAO Early in the Filing Season checked for. Conversely, of the 36 sites visited after that date, only 4 were missing as many as 10 percent. Among the items missing most often were publications dealing with the supplemental Medicare pre- mium, tax rules for children and dependents, pension and annuity income, and individual retirement arrangements. (See pp. 16-20.) - Initial Shipments to Walk- More timely delivery of tax items to walk-in sites would improve availa- bility. Some deliveries were delayed because items, like a publication on In Sites Delayed the supplemental Medicare premium that GAO found missing on almost all of its visits, were not available from the printers until after the filing season began. Other delays, however, were caused by distribution cen- ters not shipping items to the sites as soon as they were available. One item, for example, was available at the center on December 27, 1988, but was not shipped to a sit<> uo visited until February 1, 1989. (See pp. 21 and 22.) Page 3 GAO/GGD-90.34 Distribution of Tax Materials Required Items Not In 1989, for the first Lime, IRS required that all its walk-in sites stock 79 commonly used tax it.ems. Some of the 79 items were not available at the Initially Shipped to Sites sites GAO visited bec~ausc they were not included in initial shipments to sitrs. This oc,crlrrc>tl tlccausc ( 1 ) IRS’ Kational Office did not include nine of the items on thr> preprinted list from which sites ordered stock and (2) some sites did not order required items that were on the preprinted list-apparently tllcl result, of some confllsion among the sites as to what \vas required. (Sfhcbp 22. ) Inventory Management IRSdcvelopcd an lrl\ cmtory management manual and training to provide Procedures Not Always improved invenLc)ry control procedures for walk-in site personnel. Per- sonnel at over 50 ~~t~rc~~ntof the sites GAO visited. however, did not Followed receive the training E:vcbnat sites where personnel were trained, proce- duros covered by t hc\ training were not always followed. For example, the procedures ~111 for setting reorder points to help ensure that stocks were replenished before they ran out,. At 33 of 60 &es GAO visited, how- ever’, at least one ircm ~‘as at or below the reorder point and had not been reordered. Twc~lvc~of the sites had five or more items at or below I hi reorder point I tr;lt had not b~~cn reordered. (See p, 23.) Distribution Centers Did GAO placed 223 m;lil and telephone orders to IRSdistribution centers and Not Always Process received 80 perccant of the 2,206 items ordered. IKS procedures require that, taxpayers b(> provided an explanation as to why an item they Orders Completely ordrred was not shipped. GAO, however, received no explanation for most of the items It did not receive. An clxplanation is important because it notific,s the rc’qlctSstc~rthat IRS received thr order and tells the requester why the* item is unavailable. In those instances where GAO rc,r(Gvc,d an c~xplatiation, tat.rr follow-up with the centers indicat,ed that many of thus oxplan:\tions wctre inac*curat,e. (See pp. 27-29.) IIS officials attrlI)ul r%dproblems to procc>ssing errors at distribution cen- Leri;, lost ordfxrs. :lnd t hc higher risk for error posed by the make-up of GAO’S orders. (; XCI h(~liovcs that, the cenWrs need to supplement their yualit,y rtlvicws I () \pcscifically assess pc,rformance in handling larger orders likt thos~~ ~~i,~w~l by G.W. ‘l’hosct ~~rdcrs may rcquirc more han- dling than the, WIJ 11~ orders the ccntrrs said they typically receive and thus may htt m ~‘1’\ll?cItptiblfX to error. I SW pp. 30, 33. and 34.) Page 4 GAO/GGB90-34 Distribution of Tax Materials Executive Summary recommends t klill IRS Recommendations GAO . make initial shipmcrrts of tax materials to walk-in sites within 48 hours after receipt at the distrrbution centers (the same st,andard centers use in filling reorders from walk-in sites); * automatically include all required tax items in the initial shipments to each walk-in site; . train walk-in site personnel responsible for tax material inventories in reordering procetlr~rc~s and inventory management techniques and moni- tor walk-in site opt’rar ion5 to make sure that procedures and techniques are implemented; anti . supplement distribution center quality reviews to specifically assess performance on ordl,rs where errors are most likely to occur. -_______ The Commissioner of Imernal Kevenue, in commenting on a draft of this Agency Comments report, expressed agreement with its findings and recommendations and said that corrective a.tions have already been taken in preparation for the 1990 filing seast~r (See pp. 24 and 35.) Page 5 GAO/GGD-9034 Distribution of Tax Materials Executive Summary Executive Summary 2 Chapter 1 8 Distribution of Tax Material 8 Introduction IRS Made Changes Intended to Improve Availability of 11 Tax Materials in 1989 Objective, Scope, and Methodology 12 Chapter 2 15 Tax Materials Not IRS Took Steps to Improve Tax Material Availability at 15 Walk-In Sites Always Available at Most Walk-In Sites IIad Missing Tax Materials 16 All Walk-In Sites, Availability of Tax Materials Improved as Filing Season 18 Progressed Especially Early in the Availability Could Be Improved With More Timely 21 Filing Season Deliveries and Better Inventory Management Conclusions 23 Recommendations to the Commissioner of Internal 24 Revenue Agency Comments and Our Evaluation 24 Chapter 3 25 Distribution Centers Distribution Center Procedures for Processing Orders 25 GAO’s Orders Were Not Always Filled Completely 27 Could Do a Better Job Most Items Were Received in a Timely Manner 30 of Filling Mail and IRS’ Quality Review Results Differed From GAO’s Results 33 Conclusions 35 Telephone Orders Recommendation to the Commissioner of Internal 35 Revenue Agency Comments and Our Evaluation 35 Appendixes Appendix I: Listing of Tax Items Required to Be Stocked 38 at Walk-In Sites and Number of Times Each Item Was Missing During 96 GAO Visits Appendix II: Comments From the Internal Revenue 41 Service Appendix III: Major C’ontributors to This Report 44 Tables Table 1.1: Distribution Center Work Load for the First 5 11 Months of 1989 Page 6 GAO/GGD-9034 Distribution of Tax Materials Executive Summary Table 3.1: Center Provided Explanations for Nonreceipt 29 of Requested Items Figures Figure 1.1: Tax Material Distribution 9 Figure 1.2: Location of IRS Walk-In Sites Visited by GAO 13 Figure 2.1: Frequency of Missing Required Items 18 Figure 2.2: Percentage of Missing Items at Sites Visited 19 Before and After February 12, 1989 Figure 2.3: Percentage of Missing Tax Materials at 12 20 Sites GAO Visited More Than Once Figure 3.1: Percent of Items Received by Range of 31 Workdays - All Orders Figure 3.2: Percent of Items Received by Range of 32 Workdays - Mail Orders Figure 3.3: Percent of Items Received by Range of 33 Workdays - Telephone Orders Abbreviation IHS Internal Revenue Service Page 7 GAO/GGD-9034 Distribution of Tax Materials Chapter 1 Introduction Each year, between January 1 and mid-April, millions of taxpayers file tax returns with the Internal Revenue Service (IRS). To better manage and process this large volume of returns, IRS encourages taxpayers to file early in the filing season. To file early, taxpayers need the appropri- ate tax materials (i.e., forms, schedules, instructions, and publications). Having the right tax materials available should also help taxpayers com- ply with the tax law and minimize errors on tax returns. IRS is responsible for providing tax materials, and over 600 individual Distribution of Tax items are available for distribution depending on the needs of the tax- Material payers. Most taxpayers receive annually a package of tax materials through the mail. Taxpayers who want additional materials or who do not receive a tax package can obtain tax materials at about 64,000 banks, post offices, and libraries; at over 600 IRS walk-in sites; or through phone and mail orders placed with three IRS distribution cen- ters. Figure 1.1 shows the distribution proc*ess. Page 8 GAO/GGD-9034 Distribution of Tax Materials Chapter I Introduction Figure 1.1: Tax Material Distribution IRS Natlonal Office Designs Tax Material to Implement Legislation and Refines Existing Materials \ 4 - Government Printing Office Prints and Contracts for Printing of Tax Material Printers Print Tax Materials and (1) Ship to Banks, Post Offices, and Libraries (2) Mail Tax Packages to Taxpayers (3) Supply IRS Distribution Centers IRS Distribution Centers - (1) Supply IRS Walk-In Sites (2) Supply Banks, Post Offices, and Libraries (3) Fill Phone and Mail Orders From Taxpayers \ Page 9 G A O XGDM-34 Distribution of Tax Materials Chapter 1 Introduction IRS estimated that it printed 2.2 billion tax items during fiscal year 1988, at a cost of $57.3 million. It further estimated that postage and freight costs associated wit,h transporting tax materials to distribution centers, walk-in sites, and taxpayers totalled $137.3 million. IRS was unable to determine the staffing and facility costs incurred by the distribution centers and walk-in sites. The distribution points providing materials to taxpayers are discussed below. Direct Mailout Usually in mid-December, printers mail tax packages to taxpayers who filed returns the previous year. Each package contains tax materials for filing a return, a special address label, a preaddressed envelope for mail- ing the return, and a form for ordering any additional tax materials. The decision as to what tax materials will be included in a particular tax- payer’s package depends on the type of return the taxpayer filed the previous year. IRS’ annual report for 1988 stated that IRS mailed about 117 million tax packages that year to individuals and businesses. Banks, Post Offices, and IRS has a special program for organizations that wish to distribute tax Libraries materials to the public. The program is primarily set up to distribute tax materials through banks, post offices, and libraries, but also includes state and local governments, chambers of commerce, military posts, and others. The variety of material provided through this program varies according to the participating organization. IRS’ 1988 annual report stated that more than 400 million tax forms and instructions were dis- tributed to taxpayers through this program. -.-- Walk-In Sites Over 600 IRS offices located throughout the country stock tax materials for distribution to taxpayers, The number and type of tax items availa- ble vary from office to office depending on which items each office chooses to stock. In its 1988 annual report, IRS reported that more than 100 million pieces of tax material were distributed through its walk-in sites Distribution Centers For the 1989 filing season, IRS had three distribution centers responsible for (1) sending an initial shipment of tax materials to IRS’ walk-in sites, (2) filling subsequent requests for materials from the sites, and (3) fill- ing phone and mail orders received directly from taxpayers. The three Page 10 GAO/GGD9@34 Distribution of Tax Materials Chapter 1 Introduction centers are located in Richmond, Virginia (Eastern); Bloomington, Illi- nois (Central); and Ranch0 Cordova, California (Western). Each center serves a portion of the country with the Eastern and Central centers each responsible for about 40 percent of the total workload and the Western center responsible for the rest. As shown in table 1.1, during the first 5 months of calendar year 1989, the three centers filled over 11 million taxpayer and IRS walk-in site requests for tax materials. Table 1.1: Distribution Center Work Load for the First 5 Months of 1989 Center Orders filled Eastern 4,274,770 Central 4302,320 Western 2,621,044 Total 11.198.934 During the filing season, when work loads are heaviest, the Eastern and Central centers are each staffed with about 200 telephone operators and about 1,100 to 1,200 persons responsible for filling orders. The Western center, with a smaller work load, has a staff of about half that size. As part of a review of the 1988 tax return filing season, we assessed the IRS Made Changes availability of certain forms and publications. We testified in February Intended to Improve 1988 that several documents were not available at six walk-in sites we Availability of Tax visited early in the filing season.’ As we reported later, however, a recheck of availabi1it.y at five of those sites in March and April 1988 Materials in 1989 showed that the situation had improved.2 We also reported that of the 23 test phone orders we placed with IRS’ distribution centers, 17 were received in 10 workdays or less (the standard IRS sets for itself), 4 were received within 11 to 15 days, and 2 were never received. For the 1989 filing season, IRS placed a priority on making tax materials available to the public and implemented several changes toward that end. IRS (1) established a list of tax items that all walk-in sites were required to stock, (2) plarcd greater responsibility for tax material inventory managemcni on each walk-in site, (3) developed a training ‘Status of the 1988 Tax Kr.tuy Wing Season (GAO/T-GGD-88.13, Feb 23, 1988) ‘Effective Implementatwn ot 1111~Tax Reform Act led to lJnrventfu1 1988 Filing Season (GAO/ GGD-89-2. NW 14.1988) Page 11 GAO/GGD-9034 Distribution of Tax Materials Chapter 1 Introduction course for site personnel involved in managing tax material inventories, (4) opened the Western Distribution Center, and (5) planned to imple- ment an automated phone order system and integrate it with the distri- bution centers’ computt&ed inventory management system. The Subcommittee on Oversight, House Committee on Ways and Means, Objective, Scope, and asked us to monitor the availability of tax materials at IRS distribution Methodology centers and walk-in offices during the 1989 filing season. To accomplish this objective, WC focusctd on the following questions: . Were tax items available to taxpayers at walk-in sites‘? . Were responsible walk-in site personnel trained in and using tax mate- rial order proccdurcs? . Were walk-in site tax mattBria1 inventories properly managed’? . Were phone and mail orders properly and timely filled? To address these questions, we did work at 1~s’National Office, the three distribution centers, and 60 walk-in sites. We randomly selected the 60 wdlk-in sites from those located within a 200-mile radius of participat- ing GAO offices in Cincmnati, Ohio; Dallas, Texas; New York, New York; and San Francisco, California. As shown in figure 1.2. the 60 sites were located in 13 differcbnt slates and included sites serviced by each of IRS’ three distribution coni tars. By visiting 48 sites om’e and 12 sites four times each, we completed a total of 96 walk-in site \,isits from late <January through mid-April 1989. WC visited 12 sites 4 times each to measure changes in tax material availability as the filing season progressed. At each of the walk-in sites, we ( 1) determined the availability of 79 tax items that IRS’ Kational Office required each site to stock, (2) determined the availability of ran- domly selected items from those which the site chose to stock over and above the 79 requirclcl itc‘ms, (3) determined whether responsible walk- m site personnel had bc(sn trained in inventory management procedures, and (4) evaluated how sites managed their stocks of tax materials. Page 12 GAO,‘GGD-9034 Distribution of Tax Materials Figure 1.2: Location of IRS Walk-h Sites Visited by GAO - 1 Page 13 GAO/GGDYO-34 Distribution of Tax Materials Chapter 1 Introduction To evaluate the availability of tax materials at IRS’ distribution centers, we placed a total of 118 mail and 105 telephone orders at the three cen- ters. An official in the Publishing Services Branch of IRS’ National Office identified listings of items available to the public. We randomly selected our orders, which were generally for 10 tax items each, from these list- ings. In total, we ordered 1,164 items by mail and 1,042 items by phone. Staff from our offices in Cincinnati, Dallas, New York, San Francisco, and Washington, D.C. placed the orders between January 23 and April 14,1989. We randomly selected the type of order (mail or phone); the date the order was to be placed; the time the order was to be placed, if by phone; the ident.ity of the items to be ordered; and the GAO office placing the order. No two orders were exactly the same. For each order, we recorded (1) whether we received the item, (2) when we received the item, and (3) whether IRS provided an explanation when we did not receive an item. Our orders were not intended to represent the kinds of orders a distribu- tion center most frequently receives. As such, our results indicate the centers’ performance in responding to orders like ours, not the centers’ overall performance in filling taxpayers’ orders during the 1989 filing season. We did our work from October 1988 to July 1989 and in accordance with generally accepted government auditing standards. IRS provided written comments on a draft of this report. Those comments are included in appendix II and are evaluated on pages 24 and 35. Page 14 GAO/GGD-9034 Distribution of Tax Materials Chapter 2 .-~~~ -~ Tax Materials Not Always Available at All WakIn Sites, EspeeiaUy Early in the Flling Season Having tax materials available at walk-in sites is important if IRS is to minimize the frustration felt by taxpayers who make a special effort to visit a site in search of information only to find it unavailable. Recogniz- ing this, IRS implemented changes that were intended to improve tax material availability at its walk-in sites during the 1989 filing season. Each walk-in site was required to stock 79 tax items as well as any optional items it chose to stock. In addition, training was developed to help site personnel better understand their inventory management responsibilities. Our visits to walk-m sites showed that, despite those changes, tax mate- rials were not always available, especially at those sites visited early in the filing season. For example, of the 24 sites we visited before Febru- ary 12, 1989, 18 were missing at least 10 percent of the required and optional items we were checking for. Conversely, only 4 of the 36 sites visited aft,er February 12 were missing as many as 10 percent of the Items. If IRS is going to encourage early filing, as it has done in recent years. those materials taxpayers commonly need to prepare their returns must be available early. .4vailability of materials was a problem because (1) some tax items were delivered late from prmters to the distribution centers, (2) distribution centers did not make initial shipments of tax items to walk-in sites as soon as the items were available, (3) several required stock items were not included in the initial shipments to walk-in sites, and (4) many walk- in site staff were not following reordering procedures. An IRS goal is to provide high-quality service to taxpayers. One way IRS IRS Took Steps to provides service is by distributing tax materials. To better meet the pub- Improve Tax Material lic demand for tax mat.erials, IRS changed the distribution process at its Availability at Walk-In walk-in sites for the 1989 filing season. Those changes, which were intended to improve tax material availability and improve inventory Sites management, focust‘tl on . requiring that each walk-in site stock a minimum of 79 specific tax items, . making walk-in site personnel more responsible for managing invento- ries and ordering rcplrnishments when needed, and . developing inventor) management procedures and training for walk-in sire pt,rsonnel. Page 15 GAO/GGD-9034 Distribution of Tax Mat&ala - Chapter 2 Tax Materials Not Always Available at All Walk-In Sites, Especially Early in the Filing Season Before 1989, each walk-in site had a recommended list of tax materials to stock that varied depending on whether the site was considered large, medium, or small. In 1989, all sites were required to stock the same 79 tax items. IRS’ National Office developed the listing of required items to ensure uniformity in what sites stock and to make available what it con- sidered to be the most commonly used forms, schedules, instructions, and publications. Besides the required items, sites also had the option to stock additional items (referred to as “optional items”) to accommodate taxpayers living in thtair service area. During the 1988 filing season, walk-in sites received their tax materials through eight automatic shipments spaced over the filing season. This distribution pattern resulted in sites that had items out of stock while waiting for an automatic shipment or that received automatic shipments they did not need. To solve these problems, IRS decided, for the 1989 filing season, to send only an initial shipment of each item the site indi- cated that it intended to stock. The initial shipment generally repre- sented 25 percent of the walk-in site’s estimated 1989 needs. Sites were expected to order additional quantities, as needed, directly from the appropriate distribution center. With the multiple automatic shipments before 1989, walk-in site person- nel did not have to be too concerned about inventory management. The change in 1989 to one initial shipment placed greater responsibility for inventory management on walk-in site personnel. IRS developed inven- tory management procedures and training to help walk-in site personnel carry out their duties. The inventory management procedures covered such areas as how to time reorders to avoid running out of tax material before stocks can be replenished. The unavailability of tax items at walk-in sites can have several conse- Most Walk-In Sites quences. It can (1) frustrate taxpayers who may have made a special Had Missing Tax effort to visit the site, (2) inconvenience taxpayers by forcing them to Materials look elsewhere for an it.em, and/or (3) cause taxpayers to file later or file inaccurately. With that in mind, we reviewed tax material availabil- ity at 60 walk-in sites in 13 states between danuary 25 and April 13, 1989. We visited 12 sites four times each (to assess trends) and visited 48 sites one time each for a total of 96 visits. At each of these sites, we reviewed the availability of the 79 required items and a sample of up to 21 optional items. Page 16 GAO/GGD9034 Distribution of Tax Materials Chapter 2 Tax Materials Not Alwavs Available at Au W&-In Sites, EspeciaU~ Early in the Filing Season Tax materials were not always available at the walk-in sites. For exam- ple, we checked for each of the 79 required items during each of our 96 visits-a total of 7,584 checks-and found an item missing during 533 (7 percent) of those checks. On 89 of our 96 visits, we found at least 1 of the 79 items missing. An optional item was missing 222 (11 percent) of the 1,988 times we checked, and at least one such item was found miss- ing during 71 of our 96 visits. The frequency with which we found required items missing varied depending on the item. As shown in appendix I, publications (which are generally intended to help taxpayers understand the requirements relat- ing to a specific issue) were more likely to be missing than were forms and instructions. Among the publications missing most often were two dealing with the supplemental Medicare premium (found missing on 84 and 22 of our 96 visits, respectively) and others dealing with tax rules for children and dependents (missing on 39 visits), pension and annuity income (missing on 20 visits), and individual retirement arrangements (missing on 18 visits). The availability of items also varied considerably from site to site. As shown in figure 2.1, for example, of 79 required items checked for dur- ing our 96 visits, w’c found from 0 to 41 missing. Page 17 GAO/GGD-9034 Distribution of Tax Materials Chapter 2 Tax Materials Not Always Available at All Walk-In Sites, Especially Early in the Filing Season Figure 2.1: Frequency of Missing Required Items 30 28 26 24 22 20 18 16 14 12 10 6 6 4 2 cl Although we found items missing during most of our visits, the situation Availability of Tax improved as the 1989 filing season progressed. As shown in figure 2.2, Materials Improved aS the 24 walk-in sites visited before February 12, 1989, were missing an Filing Season average of about 15 pc’rcent of the required items and 22 percent of the optional items, while thcl 36 sites visited after that time were missing an Progressed average of about 4 percc‘nt of the required items and 8 percent of the optional items. Of’ the, 23 sites visited before February 12, 18 had at least 10 percent of the> IINIW missing. Conversely, of the 36 sites visited after that date. only 1 hrid as many as 10 percent missing. To further determim III,> a\ ailability of tax materials over the course of 1he filing season, WV v151tcd 12 walk-in sites four t,imes each. As shown In figurt3 2.3, at <ba(‘1I01’1IIOW 12 sites. the mlmbt~r of missing items ticclint~ti bctwccn ttlcb Iit ,I ,~!~ti fourth visits. Page 18 GAO/G<;D-90-14 Distribution of Tax Materials Chapter 2 Tax Matmia.ls Not Always Available at AU WalkIn Sites, Especially Early in the Filinjt season at Sites Visited Before and After 22 Percent February 12,1989 20 16 16 14 12 10 6 6 4 2 Required tax Optional tax items items Before 2112B9 After 2/l Z/89 Reflects results of ~n~tlal VISIIS 10 60 sites 24 sites were wslted before Z/12/89 and 36 sites were vlslted after 2/12/89 Results of follow U/I VISIIS are shown I” ftgure 2 3 Page 19 GAO/GGD9%34 Distribution of Tax Materials ___ Chapter 2 Tax Materials Not Always Available at All Walk-In Sites, Especially Early in the EuiIlg Srason Figure 2.3: Percentage of Missing Tax Materials at 12 Sites GAO Visited More 26 Percent Than Once 24 22 20 16 16 14 12 10 6 6 4 2 0 Required tax Dptional tax items ilems Frst wit (between Jan 25 and Feb. 9) I Second visit (between Feb. 14 and Mar. 2) Tfwd visit (between Mar. 7 and Mar. 23) Fourth wit (between Mar. 30 and Apr. 13) Based on checks for 948 requred Items and 251 optional Items Although availability improved as the season progressed, we did not find all 79 required ittams at any one site until a March 30, 1989, visit. Several sites, in&ding one visited February 8, would have had all required items available c,arlier were it not for Publication 936 (Some Facts About The Supplemental Medicare Premium), which did not become available to the walk-in sites until late March 1989. IRS officials in the Publishing SW\ ices Branch said that Publication 936 was delayed because it took a long time for IRS t,o develop guidance to help taxpayers interpret the Metliczr~~ (‘wtastrophic Coverage Act, of 1988 (P. I,. lOO- 3W), which was c~n;lcWtl in -July 1988. Page 20 GAO ‘GGD-9034 Distribution of Tax Materials - Chapter 2 Tax Materials Not Always Available at AU Walk-h Sites, Especially Early in the Filing Season Tax materials were not always available at the walk-in sites because of Availability Could Be late deliveries from prjnters, shipping delays by distribution centers, the Improved W ith More failure to automatically ship required items, and poor inventory man- agement at walk-in sitcts. Timely Deliveries and Better Inventory Management Late Deliveries Tax materials normally flow from printers to distribution centers and then to the walk-in sites. Walk-in sites were authorized to offer 1989 tax Contributed to Items Not materials to the public in December 1988. Some tax items scheduled to Being Available be at walk-in sites bcforc .January 1989, however, were not available at distribution centers until later in the filing season. The centers did not receive 38 of the 79 required and 7 1 of the 205 optional tax items that we looked for at walk-in sites until after the items were scheduled for delivery to those sites IRS officials in the Publishing Services Branch said that some late deliv- eries were due to ( 1) legislation that was enacted close to the start of the filing season and (2) the lengthy process for developing or modifying tax materials and obtaining the necessary approvals before an item can be printed. They citc‘d several items, in addition to Publication 935, that were delivered late for those reasons. For example, Form 8586 on the low income housing credit, which was necessitated by the Technical and Miscellaneous Kevem~e .4ct, of 1988 (I’. L. 100-647, enacted in Nov. 1988) was not shippcbd from the printers lmtil early March 1989. Distribution Centers Did After distribution c,cWt’rs received items t’rom printers, they accumu- Not Always Ship Tax lated several items t)cBforcsmaking the initial shipment to walk-in sites. Distribution crntcsr ()f’fic,ials said that this procedure was used when Items Promptly sc,nding t,ax mwtcrlals to practit,ioners before the filing season to save J)ost,age and as a (“HI\ c>rGnc.c to the practitioners. They said that centers continued to follow this procedure when making initial shipments to \valk-in sites btlfor(> ,Ind during the filing season and that as many as 2 weeks could pass I )cstwt’en the time an item was received at the distribu- tion ccntcr and t,hlx I imr~ it was shipped to the walk-in sites. W identi- fied several instanc,cs: where the elapsed t imt> was even greater than 2 uccks. Page 21 GAO GGGD-90-34 Distribution of Tax Materials Chapter 2 Tax Materials Not Always Available at All Walk-In Sites, Especially Early in the Filing Season Although the practice of accumulating items for shipment may be prac- tical before the beginning of the filing season, it delays the availability of tax materials once the filing season begins. If the distribution centers had made their initial shipments to the sites as quickly as they try to fill walk-in site reorders (within 48 hours of receipt of the reorder), fewer items would have been missing at the walk-in sites. For example, a site we visited in late ,January had not yet received an initial shipment of 12 it,ems that we were checking for. The distribution center had those 12 items available from 7 to 36 days before shipping them to the site-an average of about 13 days. For example, Publication 521 (Moving Expenses) was not shipped to the site until February 1, 1989, even though it was available at the distribution center on December 27, 1988. Required Stock Items Were IJsing an ordering list that has preprinted on it many of the items availa- ble for stocking by walk-in sites, each site, before the filing season Not Always Included in begins, identifies the number and type of items it wants to stock. During Initial * r.. Shipments to Walk- the last quarter of calendar year 1988 and into the 1989 filing season, In sites distribution centers sent each site an initial shipment of the items that the site indicated it wanted to stock. Some of the 79 required items were not available at some of the walk-in sites we visited because they were not part of the initial shipments made to the sites. This occurred, in part, because 9 of the 79 required items were not included on the preprinted ordering list that sites used to indi- cate which items they wanted to stock. 1RS National Office officials explained that the ordering list did not include the nine items because it was developed before the list of required items was finalized. Once the latter list was finalized and sent to the field, it was up to each site to make sure it had ordered supplies of all 79 items and to submit another order, if necessary. Several sites, however, did not order supplies of all 79 items, including items that were on the preprinted ordering list. Of the 60 sites we visited, 37 did not order one or more of the 70 required items that were included on the ordering list. The number of required items not. ordered for initial stocking by those sites ranged from 1 to 38, with an average of 6 In explaining why SC)mc sites did not order required items even though the items were included on the ordering list, a National Office official said that a change> in procedure may have caused some confusion. In the past, sites were sent ;I list of recommended items to stock, which varied by size of office, with no requirement that a site stock all the recom- mended items. In 19-)x!). however, all sites were required to stock the Page 22 GAO/GGD-9034 Distribution of Tax Materials chapter 2 Tax Materials Not Alwavs Available at Au Walk-h Sites, Especially Early in the Filing season same 79 items. National Office officials agreed that a good way to avoid confusion in the future and ensure that required items are available at all walk-in sites would be to automatically ship a supply of each required item to each site. Poor Inventory Once sites received their initial supply of tax materials, they were responsible for monitoring inventory and ordering new stock. IKS devel- Management May Have oped procedures and training to help walk-in site personnel carry out Contributed to Items Not this responsibility. Being Available IKS developed an inventory management manual and organized training to cover material cont,ained in the manual. The purpose of the training was to instruct IRS personnel at walk-in sites on reordering procedures and inventory management techniques. An important part of the man- ual was a section on when to reorder materials and how to identify reorder points. This section was intended to ensure that walk-in sites did not run out of an item before a new supply was received. At 34 of the 60 walk-in sites we visited, staff in charge of having a suffi- cient supply of tax material available had not received the inventory management training. Site personnel said that they did not attend train- ing because (1) they were unaware training was available, (2) they were hired after training was offered, (3) their office did not have enough money to send them to the training, or (4) they were too busy to attend the training. IRS’ national survey of walk-in site personnel after the filing season confirmed our results. It showed that 211 of 467 respondents (45 percent) had not, received training. Site personnel, whether trained or not, did not always follow reordering procedures. IRSprovides guidance to site personnel for determining when to reorder tax materials. The objective of specifying reorder points is to ensure that a new supply of materials arrives before availa- ble stock runs out. Of the 60 sites we visited, however, 33 had at least one item that was at or below a reorder point and had not been reor- dered. Of the 33 sit es, 12 had 5 or more items that were at or below the reorder point and had not been reordered. Our visits to IRS’walk-in sit,es showed that the availability of tax materi- Conclusions als improved as the filing season progressed. That is of little comfort, however, to the taxfjaycr who wants to file early-as IRS encourages. Some of the reasons for missing material, such as late legislation, may be Page 23 GAO/G4XHO-34 Distribution of Tax Materials Chapter 2 Tax Materials Not Always Available at AU Walk-In Sites, Especially Early in the Filing Season outside of IRS’ control. However, other reasons, such as delays in ship- ping materials from distribution centers to sites, the confusion over what items sites are required to stock, and the failure of some sites to follow inventory management procedures, are correctable. We recommend that IKS Recommendations to the Commissioner of . make initial shipments of t,ax materials to walk-in sites within 48 hours Internal Revenue ,)f their receipt at, the distribution centers, a automatically include, itI1 required tax items in the initial shipments to each walk-in site. and . train all walk-in site personnel responsible for tax material inventories in reordering procedures and inventory management techniques and monitor walk-in site operations to make sure the procedures and tech- niques are implemented. In commenting on a draft of this report (see app. II), the Commissioner Agency Comments and of Internal Revenue expressed agreement with our recommendations Our Evaluation and noted several steps that would be taken to help ensure a successful 1990 filing season. In rt>sponse to our first recommendation, he said that the distribution centers in *January 1990 would begin making weekly consolidated shipmcnls to walk-in sites of all tax materials received that week, with more immt>tliatt> shipment,s-within 48 hours-if circum- stances warrant. He explained that IRS has neither the staff nor the transportation budget to implement a standard 4%hour turnaround as we recommended. WC recognize II& fiscal situation and believe that the proposed act,ions mcac? hcs intent of our recommendation. Weekly ship- ments. supplement(a11 with more immediatca shipments to meet urgent needs, should improvr, thtl overall availability of’tax materials at walk- in sites. The Commissioner sa~ti also that ( 1 ) required items, of which there will be 87 in 1990, will t)r’ %hipped automatically to each walk-in site; (2) revised training mai.c~r~als were dist,ribut.ed to field offices in October 1989; and (3) rcgion;~l ,.,fficcs were asked to ensure that all appropriate walk-in personnel alra I rained and that rcqllired procedures are being followed. Page 24 GAO/GGD90-34 Distribution of Tax Materials Chapter 3 - Distribution Centers Could Do a Better Job of F’illing Mail and Telephone Orders Taxpayers may also obtain tax materials by placing mail and phone orders directly with IKS distribution centers. IRS’goal is to fill all orders completely and within 10 workdays. If an ordered item is not available, IRS procedures require that an explanation be provided so the taxpayer will know that the order was received and when or if to expect the ordered item. As of May 3 1, 1989, we had received about 80 percent of the items we ordered through the mail and over the phone. About 71 percent of the items we received were received within 10 workdays. In only about 25 percent of the cases in which we did not receive an item did the distribu- tion center provide the required explanation as to why. Follow-up with the centers indicated that most items we did not receive were probably available at the centers when we ordered them. IRS officials gave three reasons for the problems we experienced: processing errors at the distribution centers, orders lost in the mail or at the centers, and the additional handling required to fill our orders. IRS officials said that our orders increased the risk of processing errors because they were larger and contained some items that were not fre- quently requested. This might explain why distribution center quality reviews did not detect problems to the same extent we did. Nonetheless, IRS distribution center officials said that we should have received the ordered items or explanations why the items were missing. They said that our results had identified weaknesses that they plan to correct through increased training and supervision and restructured quality reviews. Taxpayers may request Lax materials from IRS’ three distribution cen- Distribution Center ters by calling a toll-rree telephone number or by mail. Procedures for Processing Orders At the Central and Western Centers, mail and telephone orders were processed in mucxh t hc same way during 1989. Operators rec.orded tele- phone orders on order forms that were then sent to a receipt unit, which was also responsible for opening mail orders. The receipt unit (1) sorted orders according to t hc items requested so that the orders would go to the appropriate proc essing line; (2) determined whether the items ordered were availahlr by comparing items requested with a list of items not, available at 11r1xcent cr; (3) researched items they could not initially identify and dct(‘rmlntXd whether requested items were available for public distribution. ;tntl (4) prepared not ices t,o explain that an item needed to be backorllcrt~d or was not available to t axpaycrs because, for Paye 25 GAO/GGD-90-34 Distribution of Tax Materials Chapter 3 Distribution Centers Could Do a Better Job of Filling Mail and Telephone Orders example, the item was obsolete or was only available for IRS’ internal use. The receipt unit then sent sorted orders to the order fulfillment unit. The order fulfillment unit contains several processing lines. Depending on the number of different items ordered and their type, an order might be handled by only one person on one line or by several persons on sev- eral different lines. The person on the line either pulls the ordered item from stock and puts it in an envelope or notes on the order form that the item is not available. If an ordered item is not available, the order fulfill- ment unit prepares the appropriate notice and inserts it in the envelope, which is eventually sent t.o the taxpayer. Among the notices that taxpayers might receive is one that tells them that an out-of-stock item has been backordered and will be mailed once the center receives a new supply. Those notices can be prepared by the receipt unit, which works from a list of out-of-stock items, or the order fulfillment unit, which might identify an out-of-stock item when it attempts to fill an order. At the Eastern Center, mail orders were generally handled as discussed above. Telephone orders were processed a little differently, however, because Eastern used an automated phone order system that allowed operators to enter phone orders into a computer. The system (1) checked ordered items for availability, which allowed the operator to tell the requester that an item was not available and the reason why; (2) auto- matically generated a backorder notice when an item was not available; and (3) generated an order for processing. The orders were sorted and sent to the order fulfillment unit at which point the process was the same as at the other centers. IRS had intended to use the automated phone system at all three centers during the 1989 filing season. After realizing the system could not han- dle the work load, however, IRS decided in late December to limit the system’s use to Eastern. IRS officials said they have increased the sys- tem’s efficiency and capacity through software and hardware modifica- tions and expect to have the system fully operational at all three centers by January 1990. Page 26 GAO/GGD-9034 Distribution of Tax Materials Chapter 3 Distribution Centers Could Do a Better Job of Filling Mail and Telephone Orders We placed 223 mail and telephone orders to the three distribution cen- GAO’s Orders Were ters between January 23 and April 14, 1989. Those orders involved a Not Always Filled total of 2,206 items. which we randomly selected from a list of tax mate- Completely rials that an IRS National Office official said would be stocked at the centers and available to taxpayers. Because the items were randomly selected, they included not only items that might be ordered by many taxpayers but also items that might be ordered by only a few taxpayers. For example, our orders included such frequently used items as Form 1040, the basic individual income tax form, and Publication 501, which provides information on exemptions and the standard deduction, and such less frequently used items as Form 6478, which is filed to claim a credit for using alcohol as a fuel, and Publication 908. which provides information on bankruptcy. Our primary intent in placing the mail and phone orders was to detcr- mine to what extent the center either (1) sent us the item we ordered or (2) sent us an explanation, such as “item obsolete,” as to why we would not receive the item. If, by May 31, 1989, we had received neither the item nor an explanation, we considered the order incomplete.’ If we received a backorder notice or some other explanation for a missing item that indicated we would eventually receive the item, WC considered the order complete only if WC received the item by May 3 1. IJsing those criteria, we considered only 84 (38 percent) of our 223 orders to be complete. The 139 incomplete orders included 15 for which we received nothing. Most of the 139 incomplete orders, however, were complete except for 1 or 2 items. As a result, although only 38 percent of our 223 orders were complete, we received 80 percent of the 2,206 items we ordered. For most items we did not receive, we also received no explanation as to why. Even when we received an explanation, it was not always accu- rate. Follow-up with the centers indicated that (1) many of the items we did not receive shor~ld have been at the centers when we ordered them and (2) our failure to rcccive them was apparently occasioned by processing errors Page 27 GAO, WXNO-34 Distribution of Tax Materials Chapter 3 Distribution Centers Could Do a Better Job of FiIling Mail and Telephone ON&S Explanations Often Not As noted above, many of our orders were considered incomplete because we did not receive an item and were not given an explanation. There are Provided for Missing Items several reasons why items ordered by taxpayers might not be available at the distribution center. For example, the center may have depleted its stock and may be awaiting a shipment from the printer, the item may be something that the center does not have (like an obsolete form), or the item may be something that is not available to the general public. When an item is not available, IRS procedures call for the requester to be provided an explanation. This explanation lets the requester know that IRS received the order and tells the requester why the ordered item is not available. Without this information, the requester does not know whether to look for this item elsewhere, wait for IRS to ship it, or reorder the item. Our 223 mail and phone orders included a total of 2,206 items. Of those, we did not receive 440 (20 percent). We analyzed the missing items to see to what extent the distribution centers provided explanations. We excluded from that analysis the 15 orders for which we received nothing because IRS may never have received those orders or may have lost them before it had a chance to prepare an explanation. Those orders accounted for 150 of the 440 missing items. The other 290 missing items were in orders that we know IRS received and processed because we received something back from IRS. IRS did not provide an explanation for 176 (61 percent) of those 290 items. We learned later that many of the missing items for which we had not received an explanation may have been in stock at the centers when we ordered them. Officials at two centers examined their inventory records on 145 items that were missing from orders placed at those centers. They determined that. 110 (76 percent) of those items should have been available at the time of our orders. According to the officials, the other 35 would not have been available because they were, among other things, obsolete, intended for IRS internal use only, or not yet printed.” Officials at the distribution centers and IRS’ National Office agreed that the centers need to do a better job of providing taxpayers with an expla- nation when an item is not available. They indicated that full implemen- tation of the automated phone system should help matters because the “Our orders included those kmds of items because IRS did not exclude them when it identified for us those items that would be stocked at the centers and available to taxpayers. Page 29 GAO/GGIH4%34 Distribution of Tax Materials Chapter 3 Distribution Centers Could Do a Better Job of Pilling Mail and Telephone Orders system automatically generates a backorder notice if an item is not available. Explanations Not Always Even when the distribution center explained why an item was missing from our order, the explanation was not always accurate. As shown in Accurate table 3.1, IRS provided explanations for 114 of the ordered items we did not receive. - Table 3.1: Center Provided Explanations for Nonreceipt of Requested Items Explanations Provided Number Percent Backordered--to be shipped when available 37 32 Obsolete 21 18 Not prlnted as of date request recewed 17 15 IRS could not ldentlfy reqlJested items 17 15 Forwarded to another location to be fllled 10 9 IRS Internal use only a 7 Other 4 4 Totals 114 100 Officials at two distribution centers examined explanations provided by their centers and furnished information that showed that several were incorrect. Some examples follow: - Of 26 backordered items reviewed at the two centers, 7 were available at the centers at the time of our order and should have been shipped instead of backordered, 7 were received by the centers in time to be shipped to and received by us before May 31 but were not, 7 were not available for shipment. 3 were not stocked by the center and the request should have been t’orwarded to another location for filling, and 2 were IRS internal use items t,hat would not be shipped to the public. - Of 14 items reported as obsolete, 2 were active items of which 1 was available when our order was placed. The other 12 were obsolete. - Of the 17 items that the distribution centers reported as not identifiable, which would lead rclquesters to believe that they had ordered something that did not exist,, IO were identified upon further review. Of the 10 identified items, 6 llad not been received from the printer at the time of our order, 3 were not generally available for public use, and 1 should have been availablfs at the time of our order. Page 29 GAO/GGD-99.34 Distribution of Tax Materials Chapter 3 Distribution Centers Could Do a Better Job of Filling Mail and Telephone Orders Prnreccino T?rrn~ Cited as Besides the need for distribution center personnel to do a better job of providing explanations, center officials pointed to other processing ~~~SUILS IUL lltctimplete errors that could account for our incomplete orders. Errors they identi- Orders fied included (1) picking the wrong item for shipment, (2) treating an incomplete order as completed, (3)entering the wrong item number when filling out an order blank for a written order, and (4) not thor- oughly researching a requested item before deciding it was not availa- ble. They said that several factors could account for those instances where entire orders were missing. The possibilities included nonreceipt of the order by the center, loss of the order at the center, and loss of the order after it left the center. Officials at the center using the automated telephone system said that they lost some orders when their telephone operators inadvertently hit a computer terminal key, thereby erasing the order-a situation they intend to correct through training. Center officials said that order processing personnel were generally low- paid employees hired on a temporary basis, often for a short period when the demand for tax materials was high. Many of those employees received limited training other than that obtained in actually doing the job. Center officials said that additional training and closer supervision would be provided in the future. National Office officials said that center performance in filling orders will improve if the automated phone order system is successfully imple- mented at all three centers. Although successful implementation should improve the telephone order taking process and the generation of back- order notices, it will have no effect on errors associated with filling those orders, such as pulling the wrong item from stock, or errors associ- ated with mail orders. We also assessed the speed with which distribution centers responded to Most Items Were our orders. IRS tells taxpayers to expect delivery of their orders within Received in a Timely 10 workdays. Of t,he 1,766 items we received, 71 percent were received Manner within 10 workdays and 92 percent within 15 workdays. As might be expected, items ordered by mail took longer than items ordered by tele- phone. Figures 3.1, X2, and 3.3 show the range of workdays from the date of request until the date of receipt. Page 30 GAO/GGD90-34 Distribution of Tax Materials Chapter 3 Distribution Centers Could Do a Better Job of Fi Mail and Telephone Orders Figure Range 3.1: Percent of Workdays of Items Received - All Orders by 4% 11 to 15days r 16 to 20 days 7 zr2Odays L 10 days and under Page 31 GAO/GGDW34 Distribution of Tax Materials Chapter 3 Distribution Centers Could Do a Better Job of Filling Mail and Telephone Orders Figure 3.2: Percent of Items Received by Range of Workdays - Mail Orders 7% 16 to 20 days 7% Over 20 days 10 days and under I 11 to15days Page 32 GAO/C&D-go-34 Distribution of Tax Materials Chapter 3 Distribution Centers Could Do a Better Job of Pilling Mail and Telephone Orders Figure 3.3: Percent of Items Received by Range of Workdays - Telephone Orders 10 days and under 2% of telephone orders received in 16 to 20 days. The distribution centers review filled orders before they leave the center IRS’ Quality Review to measure performance quality and to identify processing problems. In Results Differed From addit.ion, IRS’ National Office reviewed distribution center performance GAO’s Results during the 1989 filing swson. Each of those reviews showed better per- formance in 1989 than did our results, except for timeliness, where results were comparable At each of the distribution centers, a quality assurance staff sampled filled orders for such things as missing items; different quantities than ordered by the taxpayer; and an incorrect item, package size, or label. In contrast to the 38 percent accuracy rate for our orders (see p. 27), each of the centers reported processing accuracy rates of over 90 percent during the 1989 filing sc~ason. Center officials said that their results probably differed from ours because most of the orders they receive, and thus the bulk of the cen- ters’ quality review samples, are for one or two items relating to individ- ual tax returns. Such ordt-rs are normally filled with little difficulty. In contrast, they said thar olu- larger orders of items randomly selected from all items available t’or distribution would present greater opportu- nity for error (because thc‘y might require more handling or involve Page 33 GAO/GGD-90-34 Distribution of Tax Materials Chapter 3 Distribution Centers Could Do a Better Job of Filling Mail and Telephone Orders items that more likely require research) while having less chance of being selected for quality review. Because a center’s quality reviews involve samples of the center’s over- all work load, the results may mask problems with certain types of orders. One of the areas we discussed with distribution center officials was the possibility of doing separate quality reviews of orders like ours, where the risk of error seems greatest. They said that they expect to change their quality reviews before the 1990 filing season to better mea- sure performance in filling all types of orders. There are other reasons, unrelated to the nature of our orders, why our results might differ from the distribution centers’ results. The centers, for example, would consider an order complete if a missing item were covered by a backorder notice. We would not consider the order com- plete until the backordered item was received. Our orders included 37 items for which we had received a backorder notice but had not received the backordered item by May 3 1, 1989. A separate study by IKS’National Office showed that 81 percent of its test orders were filled completely, compared with our rate of 38 percent. IRS considered an ordc,r complete if it received the correct item or if a backorder notice or information notice were included. In the National Office study, 30 IRS employees in 30 different states placed a total of 5,100 orders from January 9 to March 17, 1989. The number of items ordered ranged from 1 to 58 but usually included 3 to 8 items per order. The ordered items were judgmentally selected, with each participant placing the same order on a given day. Alt,hough 5,100 orders were placed, IRS decided to stop its study after analyzing 3,071 of those orders because of time and resource constraints. In discussing the National Office study, IRS officials said that (1) they, unlike us, accepted, as a valid explanation for a missing item, an infor- mal slip of paper stating that an item had been backordered but not identifying which item; (2) they, like the distribution centers, considered an order complete if a backorder notice were included, whereas we did not consider the order complete until the backordered item had been received; (3) their analysis, unlike ours, included only orders for which they had received something-15 (or about 11 percent) of the 139 orders we considered incomplete were orders for which we had received nothing; and (4) distribution center personnel sometimes knew which orders were test orders. Those circumstances may account for some oi the difference betwcfxn IRS’results and ours. Page 34 GAO/GGD-YO-34 Distribution of Tax Materials Chapter 3 Distribution Centers Could Do B Batter Job of Filling Mall and Telephone Orders Taxpayers requesting materials from IRS’S distribution centers should Conclusions expect to receive the materials in a timely manner or receive an expla- nation if, for some reason, an item is not available. On the basis of IRS’ responses to our orders, that does not always happen. It was not completely clear why distribution centers had problems filling many of our mail and telephone orders. Some of the reasons could rest outside IRS. For example, we cannot be sure that some of our orders or IRS’ shipments were not lost in transit. Other reasons obviously rest with IRS and seem to involve mistakes in filling orders or failures to provide required explanations. Although some error can be expected in an order processing operation, there should always be efforts to minimize errors through a quality review process that pinpoints problem areas. In that respect, the fact that our orders were apparently larger and more diverse than the typi- cal order received by the distribution centers served to point to prob- lems that were not being disclosed through the centers’ quality reviews. Our orders apparently required handling by more people at the centers and were more likely to involve items that required explanations because they were out of stock or not available to the public. We believe that the centers need to have a better basis for assessing their perform- ance in handling those kinds of orders so that taxpayers who make such orders can be as assulcd of good service as taxpayers who order one or two common items. That can be accomplished, in our opinion, by doing separate quality reviews of less typical cases-those where the risk of error seems greatest. That will help management identify areas that require closer supervision, additional training, or other corrective action. - We recommend that IKS supplement the distribution centers’ quality Recommendation to reviews to specifically assess performance on orders in which errors are the Commissioner of most likely to occur. Internal Revenue The Commissioner of Internal Revenue, in commenting on a draft of this Agency Comments and report (see app. II), agrt>ed with our recommendation and said that dis- Our Evaluation tribution center workl)lans call for more quality reviews during the fil- ing season and that sampling of telephone order taking and processing lines will be increased tc) pinpoint specific problems. He said also that IRS Page 36 GAO/GGD90-34 Distribution of Tax Materials - Chapter 3 Distribution Centers Could Do a Better Job of Fillii Mail and Telephone Orders would emphasize to the distribution centers the importance of monitor- ing infrequently ordered items where the risk of error is greatest. Page 36 GAO/GGD9034 Distribution of Tax Materials Page 37 GAO/GGD90-34 Distribution of Tax Materials Appendix I Listing of Tax Items Required to Be Stocked at Walk-In Sites and Number of Times Each Item Was Missing During 96 GAO Visits Number of times Item Title missing -- w-2 Wage and Tax Statement 3 -__ __~~ ~- -.--__ InstructIon Instruct\ons for W-2 and W-2P w-2 2 w-3 Transmittal of Income and Tax Statement -__ 2 w-4 Employee’s WIthholdIng Allowance Certificate 2 ~_ ~..____ ____~ 940 Employer’s Annual Federal Unemployment Tax Return 2 --.__ ~- 941 Employe?s Quarterly Federal Tax Return 9 942 Employer’s Quarterly Tax Return For Household ~.-~-. Employees __.- IO 1040 U S lndlvldual Income Tax Return 0 InstructIon Instructions for Form 1040 Form 1040 0 1040SchA/B ltemlzed Deductions/ Interest and Dlvldend Income 1 1040 Sch C Proflt or (Loss) from Business or Profession (Sole Proprietorshlp) d ~~ ~- 1040 Sch D Capital Gains and Losses and Reconclllation of Form 1099-B 0 1040 Sch E Supplemental Income SchedLile ___ 0 1040 Sch F Farm Income and Expenses 1 __- 1040 Sch R Credit for the Elderly or for the aermanently and Totally Disabled 1 InstructIon lnstructlons for Form 1040 Scht?d>le R 1040 Sch R L‘I 1040SchSE ~--- Computation of Social Security Self~fmployment Tax 1 1040 A U !i lndlvldual Income Tax Returrl n - -__- __-__- 1040 EZ Income Tax Return for Stngle Fslers with No Dependents _ _.-.-- 0 Instructions lnz,tructibns for Forms 1040 A ar~~i 1040 EZ 1040 A/EZ 0 ____ 1040 ES Estimated Tax for In&duals 2 1040 x Amended U Slndlvldual Income Tax Return 1 InstructIon Instructions for Form1040 X 1040 x 0 1096 Annual Summary and TransmIttat of US. Information Returns 4 ...___- InstructIon InstructIons for Form 599 Serle: 1098. 5498, 1096, and W2r-‘- 1099 ~_-- 7 i 099~MISC Statements for Reclplents of Miscellaneous _ Income ~~---_______-~~- 6 2106 Employee Business Expenses ~~ ~~ ~______._____ 1 InstructIon ln&u&ns for Form 2106 Form 2106 1 ___- 2119 ~~ Sale or Exchange of Princrpal Restdence 0 2210 Underpayment of Estimated Tar by lndlvlduals 14 Instruction InstructIons for Form 2210 2210 IO.- 244 1 Credit for Child and Deoendent Care Exoenses 0 3468~- Computation of Investment Crerjlt 4 -____ (continued) Page 98 GAO/GGD4@34 Distribution of Tax Materials Appendix I Listing of Tax Items Required to Be Stocked at Walk-111 Sites and Number of Times Each Item Was Missing During 96 GAO Visits Number of times Item Title missing Instructron lnstructrons for Form 3468 Form 3468 3 __- 3903 Movrng Expense Adlustment 2 lnstructlon lnstructrons for Form 3903 Form 3903 2 4506 Request for Copy of Tax Return or lndivrdual Tax Account lnformatton 4562 Deprecratron and Amortrzatron Instructron lnstructrons for Form 4562 Form 4562 --- 4684 Casualttes and Thefts 2 Instructron lnstructrons for Form 4684 Form 4684 2 __- 4797 Supplementafschedule of Gains and Loss&- -~-~~--~- 1 Instructron Instructtons for Form 4797 4797 n 4868 Appkatron for Automatrc Extensw of Time to Frle U.S. lndrvidual Income Tax Return 7 6251 Alternatrve Mrnrmum Tax Computatron ~- 3 Instructron Instructrons for Form 6251 Form 6251 9 8283 Noncash Chantable Contrrbutrons 8 Instructron lnstructrons for Form 8283 Form 8283 15 8582 Passive Actrwty Loss Lrmttatrons 8 Instructron lnstructrons for Form 8582 Form 8582 15 8606 Nondeductrble IRA Contrrbutrons, IRS Basrs and Nontaxable IRA Drstributrons 8615 Computatron of Tax for Chrldren Under Age 14 Who Have Investment Income of More Than $1,000 Publrcatron 15 Crrcular E Emplover‘s Tax Gurde Publrcatron 17 Your Federal IncomeTax 4 Pubkatron 334 Tax Gurde for Small Business 6 Publrcatron 463 Travel Entertarnment, and Grft Taxes 6 Publtcatron 505 Tax Wrihholdlng and Estrmated Tax 11 Publrcatron 521 Moving Expenses 8 Publrcatron 523 Tax lnformatron on Sellrng or Buytng Your Home -~~~--------~~~ ~-.~~ 2 Publrcatlon 524 Credit for The Elderly 3 Publrcatron 526 Charrtable Contrlbutrons 1 Publrcatron 527 Rental Property 5 Publrcatron 529 Mtscellaneous Deductrons 5 Publrcatron 530 Tax lnformatron for Homes. Condomrnums, and Cooperatwe Apartments 5 Pubkatton 533 SelVtmployment Tax 2 Publrcatlon 534 Deprecratron 7 (continued) Pagr JY GAO/GGB90.34 Distribution of Tax Materials Appendix I Listing of Tax Items Required to Be Stocked at Walk-In Sites and Number of Times Each Item Was Missing During 96 GAO Visits Number of times Title missing Publlcatlon 535 Business Expenses 9 Publlcatlon 545 lnt&est Expense 6 Publication 553 Hlghllghts of 1988 Tax Changes 20 Publlcatlon 575 - Pension and Annutty Income 20 Publication 590 Ta&formatlon on lndlwdual Retirement Arrangements 18 Publlcatlon 910 - Guide to Free Tax Services IO Publication 916 Information Returns 9 Publlcatlon 917 Business Use of a Car 13 Publlcatlon 919 Is My WithholdIng Correct? 11 Publlcatlon 929 Tax Rules for Children and Dependents 39 Publication 934 Supplemental Medlcare Preml\lm ~~ ~ .-~ ~~~~ 22 - Publlcatlon 935 Some Facts About the%upplementa~~~~carePr&m~ ~.~- 84 Publlcatlon InformatIon and Order Blank for Preparers of Federal Income Tax Returns 1045 25 Total 533 Page 40 GAO/GGD-9034 Distribution of Tax Materials Appendix II Comments From the Internal Revenue Service C’EPARTMENT OF THE TREASlJRY ‘NTERNAL REVENUC bER‘.‘iCE WAS~,NGTOlrl, 0 c 211271 "Ir . Richard L. Fogel Assistant Comptroller General United States General Accountinq Office Washington, DC 20548 Dear “Ir. Fo~el: ‘de have reviewed your recent draft report entitled “TAX Administration: IV Needs to Improve Distribution oE Tax tiaterials to the Pub1 ic” and believe that it represents a thorough evaluation of the forms distribution process. we are in agreement witi- its findings and recommendations and corrective .actions have already been taken. IRS recognizes the importance of making its forms, schedules, instruct ion% and puhl ications readily available to taxpayers as early as possible. To help ensure a successful 1990 filing season, we have taken several steps to improve the distribution p-cocesr;, including xaking more tiinely distributions tn 1Rq walk-in sites and automatically including all required tax itelns in the initial shipment to these sites. ‘Je \ave improved our forms flanageaent and ordering training for tialk-in site personnel t.dho are responsible for maintaining the tax material inventories and re will also substantially increase quality rzvieus at our distribution centers during the (upcoming filing se15on. Addit ional information on the actions we have taken is clclosed. Yest reRards, Sincerely, Page 41 GAO,&GD-90-34 Distribution of Tax Materials Appendix II Comments From the Internal Revenue Service - IRS CDMMLNTS ON RECOMMENDATlONS CONTAINED IN GAO DRAFT REPORT ENTITLED “TAX ADMINISTRATION. IRS NEEDS TO IMPROVE DISTRIBUTION OF T4>. MATERIALS TO THE PUBLIC” Recommendation: Make initial shlpmvnts of pax materials to walk-in sites within 48 hours of their receipt at the distribution centers. Comment : The problems encountered last filing season do call for corrective action. In J,lnuary, the distribution centers will beqin making weekly cnns<)lidated shipments to the walk-in siies of all items received that week. If ,i situation arises where an urgently needed item is received late, we will ask the distribution cen~crs to deviate from the consolidation plan and immediately rhio that single item to walk-in sites (i.e. within 48 hour?). 1n order to standardize a 48 hour turnaround time it wo~11~~ he necessary to package and ship each line item individu.31 ly. Ye have neither the staff resources nor transpi,rt.>t ion budget to support such an operation. we believe rhnl. our revised plan will be adequate to remzdy the problemi $l<perienced last year. Recommendation Automatically in\,l.ldr all required tax items in the initial shipmenLc. 1.0 each walk-in site. comment: Last year, walk-jr> sites were required to maintain 79 tax items. This year. hosed on the results of our field S!lr”f?yS, we have incre.iscd Lhe number of required tax items to 83. For the upcoming ‘-iling season, each site will automatically receive III of these items. Recommendation: Train all walk-i1 site personnel responsible for tax Imaterial inventories in reordering procedures and inventory management techniques and monitor walk-in site operations to malit, sure the procedures and techniques are implementrd. Page 42 GAO/GGB9034 Distribution of Tax Materials Appendix II Comments From the Internal Revenue Service -2- Comment: --- Last year was the i I -31 year that reference and training materials were developed suec>Eically Eor walk-in personnel. We believe this represented rg significant step forward. This year we have undertaken t.he following efEorts to further enhance out training proi!r urn A task force was c::wened in July 1989 to revise and strengthen the conte.~t of the Procedures on Ordering Forms rrainine rn,~texr ,il. The task force was made up of representatives frnrn both National Office and field taxpaver service awl puttlishing activities. Revised training II,,‘, rials were printed and distributed to field offices .:I rroher 1989. The training COUT’F or Taxpayer Service Representatives now contains this .*l,i.erisl on forms inventory management .And ordering. A memorandum was CWTI lo all Regional Commissioners on September 28, 1984 f convey the list of tax items required to he rna~n~ 1nr1 and to provide expectations nbouL training and i*L;trict oEfice evaluations. A memorandum was semi to all Assistant Kegional Commissioners (DJL 3 I roc?ssing) and (Resources Management) on Sept ,~ber 28, 1989 to request that all appropriate walk-i 3 ers*>nnel receive instruction. Recommendal ion: We recommend that I I!, supplement the distribution centers quality ~ev~i’nis to specifically assess performance on ordiz . i’lt:re errors are [most likely to occur and help idtv iy Ihe need for additional Lraining .ind 5upervision. Distribution Ccnto, 3 ~rlxl~lans cal 1 Eor substantially increased quality review-, :Jrirq the filing season. Sampling of telephone ordering tahm-r: .lnd processing lines will be increased in order Lo pin!l<linl specific problems. Employees responsible for errors wi 11 ht, provided prompt feedback by Lheir supervisors. The rii? Cbution centers will also be conducting Lraining for ih I’.arvisocs, new employees and wasonal recalls which $4: I in< lude promotion of quality. 1.4e w i 1 1 R 1 so em p h ,I c. ,’ I c the distribution centers the i,np?rtence of monitorine v rf,quently ordered i terns where the rish of error is grente-. Pa@? 43 GAO/GGB99.34 Distribution of Tax Materials Appendix III Major Contributors to This Report David J. Attianese, Assistant Director, Tax Policy and Administration General Government Issues Division, Washington, D.C. Robert I. Lidman, Issue Area Manager Cincinnati Regional Homer N. Carrington. Evaluator-in-Charge Daniel J. Meadows, Evaluator Marvin E. Bonner. Evaluator Dallas Regional Office Larry P. Lannen, EvillllalOr Tobie W. Davis, Evaluator New York Regional Office - James E. Hampton, Evaluator San Francisco Regional Office (268369) Page 44 GAO/XI%9034 Distribution of Tax Materials :
Tax Administration: IRS Needs to Improve Distribution of Tax Materials to the Public
Published by the Government Accountability Office on 1990-01-10.
Below is a raw (and likely hideous) rendition of the original report. (PDF)