..I -. -I..-. .. _.. .-___-___..._____ ._-- M;Ilr-c*llI !I!)0 TAX SYSTEM - MODERNIZATION IRS’ Efforts to Improve Taxpayer Correspondence ?h \ lllllII 141175 United States General Accounting Office ” , Washington, D.C. 20548 Information Management and Technology Division B-227683 March 22,199O The Honorable J.J. Pickle Chairman, Subcommittee on Oversight Committee on Ways and Means Houseof Representatives Dear Mr. Chairman: This report responds to your September 29,1989, request for informa- tion on how the Internal RevenueService’s(IRS) Tax System Moderniza- tion program will improve IRS’handling of its large taxpayer correspondenceinventory. Specifically, you wanted to know the extent to which the Tax System Modernization will provide quicker and more accurate responsesto taxpayer correspondence.You also wanted infor- mation on the modernization time frames for delivering automated improvements to better handle correspondenceat the service centers’ adjustment/correspondence branches.1We have included other actions taken by IRSto provide you a more complete description of IRS’ attention to its large correspondenceinventory. IRS’ 1989 monthly inventories of unanswered correspondenceranged Rehlts in Brief between 323,000 and 740,000 piecesof correspondence.The ability of IRS’ alljustment/correspondence branches to provide timely, accurate, and responsive answers to taxpayer correspondencehas been the sub- ject of much discussion ., in recent years2 The Automated Inventory Control System has been identified by IRS as a planned part of its Tax System Modernization program. This system is intended to improve IRS’ ability to provide more timely and accurate responsesto taxpayer inquiries. However, the system has not yet been designed and the master plan for the modernization identifying this and other specific systems and their functions has not been completed. Until the plan’s completion this September,definitive answers about the mod- ernization’s role in improving correspondenceare not available. There- fore, it does not appear likely that any significant improvement will lAdjustment/correspondence branches ln each of IRS 10 service centers are responsible for respond- ing to taxpayer correspondence. For example, the branches explain an action taken by IRS, respond to questions about a taxpayer’s account balance, decide whether a penalty should be abated, or adjust a taxpayer’s account by revlslng the amount of tax, penalty, or interest due. 2Tax Administration: IRS’ Service Centers Need to Improve Handling of Taxpayer Correspondence (GAO/~88-101, July 13,lQM). Page 1 GAO/IMTECXO-26 IRS’ Efforta to Improve Taxpayer Cmreepondence I \. I occur as a result of the modernization program until after 1992 when IRS’Automated Inventory Control System is expected to be in operation. In the meantime, a number of activities not part of the modernization effort, such as using facsimile equipment and expanding telephone usageby examiners, are underway or planned to help the timeliness and accuracy of responsesto taxpayer correspondence.We did not deter- mine the impact of these activities on handling taxpayer correspondence. Correspondencefrom taxpayers arrives at IRS service centers and is Background routed to appropriate units within the centers, including the adjust- ment/correspondencebranches. Figure 1 shows the increase and gradual reduction of the inventory handled by all branches during 1989. The inventory is divided according to the length of time each piece of corre- spondencehas been in the inventory. IRSusesthese aged inventories to help manageits responsesto the correspondence.For example, IRS con- siders correspondencein the inventory for more than 45 days to be “overage,” and has a goal of maintaining no more than 20 percent of its inventory in this category. Page 2 GAO/IMTJ%XO-20 IRS’ Efforts to Improve Taxpayer Correspondence 5227682 Figur Monthly Adjustment/Correspondence inventory Levels, 1989 800 llJstmonvcormp~~o~-) ltm in lnventoy 45 days or more Item8 In inventory 15 to 44 daya ftems In inventory 14 days or fewer According to IRS, the size of the inventory at the branches causesprob- lems in making timely and accurate responsesto taxpayers. As exam- ples, IRS stated that taxpayer correspondenceis sometimeslost or misrouted, responsesto taxpayers are late and/or inaccurate, and inap- propriate computer-generatednotices from IRS units are sent to taxpay- ers while their accountsare active in the branches3These problems exacerbate the inventory problem by stimulating further correspon- dencefrom taxpayers. In our July 1988 report, we found that 31 percent of the casesclosed by branches in three service centers had critical problems involving incor- rect adjustments and incorrect or unresponsive letters to taxpayers’ “Taxpayer accounts are active when examiners in the agjustment/correspondence branch are work- ing to resolve a problem with the account, either in response to a letter of inquiry from a taxpayer or aa a r&ult of an IRS-generated problem for which the account was referred to the branch for resolution. Page 3 GAO/IMTEG!hS20 IRS Efforts to Improve Taxpayer Correspondence , ‘I I 0227083 inquiries. An additional 16 percent had noncritical problems involving unclear or incomplete letters to taxpayers and incomplete actions by the branches. The Automated Inventory Control System is a planned Tax System Mod- ernization project to help IRS manageand track incoming correspon- dence.It is scheduled for introduction in late 1992. Its purpose is to automate the tracking and control of all incoming mail to IRS service cen- ters, including taxpayer correspondenceand tax returns. IRS expects the system to reduce its inventory of unanswered correspondencethrough timely and accurate acknowledgment of taxpayer inquiries which, in turn, is expected to reduce subsequentletters from the sametaxpayers. IRSalso expects the system to help eliminate erroneous computer-gener- ated notices sent to taxpayers by providing better control of active accounts. The system, while part of IRS’ tax modernization effort, has not yet been designed.As discussedin our February 1990 report4 IRS’ master plan for the modernization is scheduledto be completed in September 1990. At that time, specific systems are to be identified and their functions described, Consequently, until the master plan is completed, definitive answers about how Tax System Modernization will improve responses to taxpayer correspondenceare not available. According to IRS, it has taken a number of actions to correct problems IRS Has Other and improve responsivenessto taxpayer correspondence.These actions Activities in Place or were described by IRS in its March 1989 testimony before another sub-’ Plqnned to Help committee.” The actions taken by IRS include (1) developing and using statistics to measure IRS’ effectiveness in responding to taxpayer con- Htidle the terns, (2) using custom software developed within IRSto support exam- Cotrespondence iners in composing appropriate and accurate responsesto taxpayers, (3) Inventory using facsimile equipment to transmit documentsto and from taxpayers and other IRS offices for quicker information exchanges,and (4) increas- ing the number of telephones available to examiners to handle taxpayer concernsimmediately, thereby reducing the need for written correspondence. 4Ta.x System Modernization: IRS’ Challenge for the 21st Century (GAO/IMTEC-90-13, Feb. 8, 1990). “Treasury, Postal Service, and General Government Appropriations for Fiscal Year 1990: Hearings Before a Subcommittee of the Committee on Appropriations, House of Representatives. Page 4 GAO/IMTEG!+O-20 IRS’ Efforts to Improve Taxpayer Correspondence IRS is also planning to reevaluate how it measuresthe volume of unan- swered correspondence.According to a June 1989 document sent to regions and service centers, IRS is considering changesto its inventory- reporting criteria to distinguish between internal (m&generated) and external (taxpayer-generated) correspondenceto help accurately assess the timeliness of IRS’ responsesto taxpayer correspondence.As of November 1989, the changesto its inventory-reporting criteria were still under consideration by IRS. We did not assessthe impact of the above activities on IRS’ handling of its correspondenceinventory. Our review was performed during October and November 1989 at IRS’ national office in Washington, DC., and its service center in Andover, Massachusetts,in accordancewith generally acceptedgovernment auditing standards. We interviewed officials at these locations, reviewed available documentation concerning taxpayer correspondence,and gath- ered information on the Tax System Modernization programs to identify any activities related to taxpayer correspondence. We discussedthe contents of this report with IRS’ Assistant Commis- sioner for Returns Processing,and have included his comments where applicable. As agreed with your office, unless you publicly announcethe contents of this report sooner, we plan no further distribution until 30 days from the date of this letter. At that time, we will send copiesto the Secretary of the Treasury, the Commissionerof Internal Revenue,and the Director of the Office of Managementand Budget. Copies will also be made Page 6 GAO/IMTECXO-26 IRS Efforts to Improve Taxpayer Chrespondence B-227683 available to other interested parties upon request. This report was pre- pared under the direction of Howard G. Rhile, Director, General Govern- ment Information Systems.He can be reached at (202) 275-3465.Other major contributors are listed in the appendix. Sincerely yours, Ralph V. Carlone Assistant Comptroller General Page 6 GAO/IMTEG!W26 IRS’ Efforts to Improve Taxpayer Correspondence , Page 7 GAO/IMTJSGBO-26 IRS’ Efforts to Improve Taxpayer timspondence Aphndix I Nfajor Contributors to This Report Hazel E. Edwards, Assistant Director Iniformation Alan J. Hoffman, Evaluator-in-Charge M’ agement and Tr chnology Division, qashington, DC. ston Regional Office Teresa D. Dee,Evaluator (610492) Page 8 GAO/IMTJCGBO-M IRS’ Efforts to Improve Taxpayer Correspondence , I / !
Tax System Modernization: IRS' Efforts to Improve Taxpayer Correspondence
Published by the Government Accountability Office on 1990-03-22.
Below is a raw (and likely hideous) rendition of the original report. (PDF)