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entitled '2013 Tax Filing Season: IRS Needs to Do More to Address the 
Growing Imbalance between the Demand for Services and Resources' which 
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United States Government Accountability Office: 
GAO:  

Report to Congressional Committees:  

December 2013:  

2013 Tax Filing Season:  

IRS Needs to Do More to Address the Growing Imbalance between the 
Demand for Services and Resources:  

GAO-14-133:  

GAO Highlights:  

Highlights of GAO-14-133, a report to congressional committees.  

Why GAO Did This Study:  

The tax filing season is when IRS processes most tax returns and 
provides services including telephone, correspondence, and website 
assistance for tens of millions of taxpayers. IRS budgeted more than 
$2 billion for these activities in 2013. The filing season is also 
when IRS begins collecting delinquent taxes by, for example, approving 
installment agreements and checking for non-filers. GAO was asked to 
review the 2013 tax filing season. This report (1) assesses IRS’s 
performance in processing tax returns and providing services to 
taxpayers; (2) describes the installment agreement process and 
assesses its efficiency; and (3) describes the process for detecting 
and notifying non-filers. To conduct the analyses, GAO obtained and 
compared IRS data from 2007 through 2013, reviewed pertinent IRS 
documents, observed IRS operations, and interviewed IRS officials and 
experts in tax administration, including tax preparation firms.  

What GAO Found:  

Despite efficiency gains from processing more tax returns 
electronically, adding website services, and shifting resources from 
enforcement, the Internal Revenue Service (IRS) was unable to keep up 
with demand for telephone and correspondence services. Access to IRS’s 
telephone assistors remained at 68 percent from 2012. The percentage 
of overage paper correspondence (over 45 days old) increased to 47 
percent from 40 percent in 2012. In the face of similar trends, last 
year GAO reported that a dramatic revision in IRS’s taxpayer service 
strategy was needed and recommended IRS take steps to better balance 
demand for services with available resources. GAO acknowledged this 
may require IRS to consider difficult tradeoffs, such as limiting some 
services. In response, IRS has proposed eliminating or reducing some 
services for 2014 such as answering basic tax law questions only 
during the filing season. However, IRS officials told GAO the proposed 
cuts may not be sufficient to stop the deterioration in services. 
Until IRS develops a strategy, it risks not communicating expectations 
about the level of services it can provide based on the resources 
available. IRS could use the strategy to facilitate a discussion with 
Congress and other stakeholders about the appropriate mix of service, 
level of performance, and resources.  

Table: IRS Return Processing, Telephone Service, and Correspondence, 
2008 through 2013 Filing Seasons:  

Return processing (fiscal year):  

Returns processed (in millions): 
2008: 151; 
2009: 139; 
2010: 137; 
2011: 140; 
2012: 142; 
2013: 142.  

Percent e-filed: 
2008: 59%; 
2009: 67%; 
2010: 71%; 
2011: 78%; 
2012: 82%; 
2013: 84%.  

Telephone service (end of June, each year):  

Percentage of callers seeking live assistance who receive it: 
2008: 57%; 
2009: 68%; 
2010: 76%; 
2011: 72%; 
2012: 68%; 
2013: 68%.  

Average wait time (in minutes): 
2008: 8.6; 
2009: 8.4; 
2010: 9.5; 
2011: 11.7; 
2012: 17; 
2013: 15.5.  

Paper correspondence (end of fiscal year):  

Percentage of overage correspondence: 
2008: n/a; 
2009: 25%; 
2010: 27%; 
2011: 35%; 
2012: 40%; 
2013: 47%.  

Source: GAO analysis of IRS data. Legend: n/a = not applicable.  

[End of table]  

IRS offers options for installment agreements (IAs) to taxpayers who 
cannot fully pay their taxes when due. Taxpayers can enter into these 
agreements online, by phone, and by mail. In fiscal year 2012, IRS 
approved about 3.2 million new agreements and collected almost $10 
billion. IRS devotes about 1,800 full-time equivalent staff to the 
program but it is not as efficient as it could be. GAO found 
opportunities to standardize account entries and reduce redundancy by 
eliminating dual entry of the same data on paper forms and into IRS’s 
computers. IRS officials agreed that opportunities did exist to 
streamline the process. More standardized and less redundant data 
entry could reduce resource needs.  

IRS detects non-filers by matching third party information (i.e., Form 
W-2s) with tax returns. The first match is done in October, well after 
the mid-April tax filing deadline from the previous year, because of 
the time it takes to receive the third party information and process 
it. IRS sends notices to non-filers in November and December. 

What GAO Recommends:  

GAO recommends that IRS develop standardized account entries and 
eliminate unnecessary redundancy in the installment agreement process. 
IRS did not state whether it concurred with our recommendation. GAO 
believes the recommendation remains valid as discussed in this report. 
In addition, GAO continues to believe the prior recommendation that 
IRS develop a strategy that defines appropriate levels of telephone 
and correspondence services based on an assessment of demand and 
resources among other things remains valid and should be addressed.  

View [hyperlink, http://www.gao.gov/products/GAO-14-133]. For more 
information, contact James R. White at (202) 512-9110 or 
whitej@gao.gov.  

[End of section]  

Contents:  

Letter:  

Background:  

IRS Achieved Processing Efficiency Gains, but Continues to Face 
Challenges in Providing Service to Taxpayers:  

IRS Recently Expanded the Installment Agreement Program, but Some Case 
Handling Practices Lack Standardization and are Unnecessarily 
Redundant:  

IRS's Identification of and Notification to Potential Non-Filers Takes 
Months after Filing Deadlines:  

Conclusions:  

Recommendation for Executive Action:  

Agency Comments and Our Evaluation:  

Appendix I: Installment Agreement Types and Characteristics:  

Appendix II: Weekly Toll-Free Calls and Percentage of Callers Seeking 
and Receiving Live Assistance:  

Appendix III: Use of IRS Website and Online Services:  

Appendix IV: Services Offered at Walk-In and Volunteer Sites:  

Appendix V: Installment Agreement Process:  

Appendix VI: Comments from the Department of the Treasury:  

Appendix VII: GAO Contact and Staff Acknowledgments:  

Tables:  

Table 1: Individual Income Tax Returns Processed from 2008 through 
2013:  

Table 2: IRS Call Volume, Telephone Service Goals and Performance, 
2008 through 2013 Filing Seasons:  

Table 3: IRS Taxpayer Correspondence Performance, Fiscal Years 2009 
through 2013:  

Table 4: Total Installment Agreement Inventory and Tax Liability, 
Fiscal Years 2009 through 2012:  

Table 5: Potential Individual Non-filer Cases Identified and Number 
and Percentage of Cases Selected for Review, Tax Years 2007 through 
2010:  

Table 6: Types and Characteristics of Installment Agreements:  

Table 7: Website Use from the 2008 through 2013 Filing Seasons:  

Table 8: Services Performed at IRS Taxpayer Assistance Centers and 
Sites Staffed by Volunteers, 2010 through 2013:  

Figures:  

Figure 1: Weekly Toll-Free Calls and Percentage of Callers Seeking and 
Receiving Live Assistance for the Week Ending January 5 through June 
29, 2013:  

Figure 2: Example of Streamlined Installment Agreement Application and 
Payment Process:  

Abbreviations:  

CADE2: Customer Account Data Engine 2:  

CSR: Customer Service Representative:  

e-file: electronic filing:  

FTE: Full-Time Equivalent:  

IMF: Individual Master File:  

IA: Installment Agreement:  

IRS: Internal Revenue Service:  

LOS: Level of Service:  

MeF: Modernized e-File:  

TE: Tax Examiner:  

TAC: Taxpayer Assistance Center:  

TIGTA: Treasury Inspector General for Tax Administration:  

UBA: Unpaid Balance of Assessment:  

[End of section]  

GAO:
United States Government Accountability Office: 
441 G St. N.W. 
Washington, DC 20548:  

December 18, 2013:  

The Honorable Max Baucus: 
Chairman: 
The Honorable Orrin Hatch: 
Ranking Member: 
Committee on Finance: 
United States Senate:  

The Honorable Charles W. Boustany: 
Chairman: 
The Honorable John Lewis: 
Ranking Member: 
Subcommittee on Oversight: 
Committee on Ways and Means: 
House of Representatives:  

Each tax filing season is an enormous undertaking. In the 2013 filing 
season, the Internal Revenue Service (IRS) processed over 140 million 
individual income tax returns, issued more than 100 million refunds 
worth over $280 billion, and received over 90 million telephone calls. 
In fiscal year 2013, IRS budgeted more than $2 billion for processing 
such returns and providing taxpayer services. During the filing 
season, IRS also begins its efforts to verify that tax returns are in 
compliance with income reporting requirements. Two examples of 
compliance issues that typically surface during the filing season are 
(1) failure to pay a balance due on time, and (2) failure to file a 
return. Taxpayers who are unable to pay a balance due on time can make 
payments through an installment agreement (IA)--which allows taxpayers 
to pay their tax debt in scheduled (usually monthly) payments. Since 
failure to file a return cannot be detected until after the tax filing 
deadline and IRS determines that the taxpayer may have a filing 
obligation, timely notification of taxpayers can be a challenge. IRS 
last estimated that non-filers accounted for $28 billion of the $385 
billion net tax gap in tax year 2006.[Footnote 1] 

In this context, you asked us to review IRS's 2013 tax filing season 
performance. Specifically, this report (1) assesses IRS's performance 
in processing returns, delivering refunds, and providing telephone, 
online, and face-to-face assistance compared to its 2013 goals and 
prior years' performance; (2) describes IRS's IA process and assesses 
the efficiency of the process; and (3) describes IRS's process for 
detecting non-filers, including the time it takes to notify them. 

To assess IRS's filing season performance, we:  

* obtained and analyzed IRS documents and data, including performance 
and workload data, for return processing and taxpayer services, and 
used this information to compare IRS's performance in 2013 to prior 
years (2008 through 2012) and agency goals to identify trends and 
anomalies. 

* visited IRS facilities in Austin, Texas, and the Joint Operations 
Center (which manages IRS's telephone operations) in Atlanta, Georgia, 
to view return processing, telephone service, and other operations. 

* interviewed IRS officials and tax administration experts to obtain 
contextual information about IRS's performance, including the effect 
of late tax law changes, and efforts to improve taxpayer services. 

To describe IRS's IA process and assess its efficiency, we:  

* obtained and reviewed IRS documentation, such as the Internal 
Revenue Manual and the IA lifecycle and default processes, and 
analyzed IRS data to summarize key information about IAs from fiscal 
years 2009 to 2012. 

* observed tax examiners working IA cases at IRS facilities in 
Atlanta, Georgia and Austin, Texas. 

* interviewed IRS officials to obtain contextual information about the 
IA program. 

To describe IRS's processes for detecting non-filers including the 
time it takes to notify them, we:  

* obtained and analyzed IRS data from tax years 2007 through 2010 and 
documentation on its non-filer program. 

* observed tax examiners working non-filer cases at IRS facilities in 
Austin, Texas. 

* interviewed IRS officials to obtain contextual information about the 
non-filer program. 

To identify limitations and assess data reliability, we reviewed IRS 
data and documentation, interviewed IRS officials about computer 
systems and data limitations (including a more detailed assessment of 
telephone performance data), and compared those results to our data 
reliability standards. We interviewed IRS collection and research 
staff, as well as Treasury Inspector General for Tax Administration 
(TIGTA) staff who worked on past reports relevant to our work to 
identify data sources and better interpret IRS's data. We consider the 
data presented in this report to be sufficiently reliable for our 
purposes. 

We conducted this performance audit from January 2013 through December 
2013 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

Background:  

IRS Processing and Taxpayer Services:  

* Processing: IRS processes millions of paper and electronically-filed 
(e-filed) tax returns and validates key pieces of information during 
the tax filing season.[Footnote 2] The overwhelming majority of 
returns are e-filed through IRS's Modernized e-File (MeF) system. 
[Footnote 3] Beginning last filing season, IRS and taxpayers benefited 
from IRS's switch from weekly to daily tax return processing on its 
Individual Master File (IMF) legacy system which allowed for faster 
refund processing for more taxpayers. IRS is continuing to transition 
from its antiquated IMF legacy system to a more modern return 
processing system known as the Customer Account Data Engine 2 (CADE 
2).[Footnote 4] 

* Telephone: Taxpayers can call to speak directly with an IRS customer 
service representative (CSR) to obtain information about their 
accounts or ask tax law questions. Taxpayers can also listen to 
recorded tax information using automated telephone menus. Automated 
services are provided on IRS's 149 Tele-tax lines for tax law topics 
and 71 phone lines for account information. 

CSRs are also responsible for responding to paper correspondence from 
taxpayers. IRS tries to respond to paper correspondence within 45 days 
of receipt, and considers correspondence that is not addressed within 
that time to be overage. Minimizing the amount of overage 
correspondence is important because delayed responses may prompt 
taxpayers to write again or call IRS. 

* Website: On IRS.gov, taxpayers can download forms, instructions, and 
publications and research tax law issues using interactive tools. 
Taxpayers can use interactive tools to check the status of their 
refunds, request transcripts (which are copies of a taxpayer's account 
information), and apply for IAs. 

* Face-to-Face Assistance: Taxpayers can obtain face-to-face 
assistance at IRS's 390 Taxpayer Assistance Centers (TAC) or at more 
than 13,000 sites staffed by volunteer partners. At TACs, IRS staff 
provide answers to basic tax law questions, review and adjust taxpayer 
accounts, take payments, authenticate Individual Taxpayer 
Identification Number applicants and identity theft victims, and 
prepare returns for qualified taxpayers.[Footnote 5] At the sites 
staffed by volunteers, taxpayers can receive return preparation 
assistance as well as financial literacy information. 

Installment Agreements:  

Taxpayers can enter into IAs to pay their tax debts after filing their 
return with a balance due.[Footnote 6] IAs are an important tool for 
IRS to collect revenue. IRS assesses and collects billions of dollars 
each year through IAs. IAs can be established, paid off, defaulted on, 
reinstated, or terminated at any time during the year. IRS provides 
four types of IAs--Guaranteed, Streamlined, Regular/Routine, and 
Partial Payment--with different eligibility and payment requirements. 
IAs allow taxpayers to pay off their tax liabilities gradually over 
time and can encompass multiple years. Failure to adhere to the terms 
of the IA can cause default, termination, and more expensive 
collection actions.[Footnote 7] The most common type of IA by far is 
the streamlined agreement, which provides taxpayers with flexibility 
in paying off liabilities. Appendix I provides additional information 
on the types and characteristics of IAs. 

Individual Non-filers:  

IRS defines a non-filer as a taxpayer who has a legal obligation to 
file a return, but fails to file a return by the filing deadline 
(either April or October depending on whether the taxpayer filed for 
an extension). IRS is authorized to issue a notice requesting a 
delinquent return and it can send up to four notices to taxpayers. 
[Footnote 8] 

IRS Achieved Processing Efficiency Gains, but Continues to Face 
Challenges in Providing Service to Taxpayers:  

Electronic Filing Continued to Grow:  

Despite late tax law changes which delayed the start of filing season 
and compressed the time that IRS had available to process tax returns, 
IRS officials and external stakeholders such as large tax preparation 
firms reported relatively smooth processing, with a few exceptions. 
[Footnote 9] IRS usually begins processing tax returns in early to mid-
January; this year, it started processing most returns January 30, 
2013. 

Table 1 shows that IRS achieved an 84 percent e-file rate for 
individual returns, and processed 11 percent fewer paper returns 
compared to last year. Continued increases in e-filing are important 
because processing costs are lower for e-filed returns. According to 
IRS, in fiscal year 2012, it cost 23 cents to process an e-filed 
return, as opposed $3.36 for returns filed on paper. IRS relied solely 
on MeF this filing season, and attributed this success to expanded 
testing of the system which improved the MeF's stability and 
facilitated return processing. External stakeholders confirmed IRS's 
assertion about the reason for MeF's success. 

Table 1: Individual Income Tax Returns Processed from 2008 through 
2013:  

Number of individual tax returns processed (in millions); 
2008[A]: 151; 
2009: 139; 
2010: 137; 
2011: 140; 
2012: 142; 
2013: 142; 
Percent change from 2012 to 2013[B]: -0.1%. 

Electronic (in millions); 
2008[A]: 89; 
2009: 94; 
2010: 97; 
2011: 109; 
2012: 116; 
2013: 119; 
Percent change from 2012 to 2013[B]: 2%. 

Paper (in millions); 
2008[A]: 62; 
2009: 45; 
2010: 40; 
2011: 30; 
2012: 26; 
2013: 23; 
Percent change from 2012 to 2013[B]: -11%. 

Percentage e-filed; 
2008[A]: 59%; 
2009: 67%; 
2010: 71%; 
2011: 78%; 
2012: 82%; 
2013: 84%; 
Percent change from 2012 to 2013[B]: 2%. 

Number of refunds issued (in millions); 
2008[A]: 105; 
2009: 109; 
2010: 107; 
2011: 107; 
2012: 108; 
2013: 107; 
Percent change from 2012 to 2013[B]: -0.8%. 

Amount of refunds issued (dollars in billions); 
2008[A]: $248; 
2009: $298; 
2010: $312; 
2011: $303; 
2012: $295; 
2013: $287; 
Percent change from 2012 to 2013[B]: -3%. 

Source: GAO analysis of IRS data. 

Notes: Data on the number of returns processed are from January 1 
through October 3, 2008; January 1 through October 2, 2009; January 1 
through October 1, 2010; January 1 through September 30, 2011; January 
1 through September 28, 2012; and January 1 through September 27, 
2013. Data cover equivalent periods for each fiscal year. 

[A] The Economic Stimulus Act of 2008 mandated that IRS send stimulus 
payments to over 100 million households, many of which would not 
otherwise have needed to file a tax return. 

[B] The numbers in the table are rounded, but the percent change was 
calculated using exact values. Therefore, in some cases, the percent 
change is slightly different than it would be if it were calculated 
using the rounded values in the table.  

[End of table]  

Although operations were relatively smooth, IRS and others reported 
issues that delayed processing for tax returns filed with Form 8863 
(Education Credits), and with Form 5405 (First-time Homebuyer Credit). 
While IRS was able to resolve processing delays for about 700,000 tax 
returns filed with the Form 8863, multiple class action suits have 
been filed against a large tax preparation firm regarding the issues 
involved in the processing delays.[Footnote 10] IRS also quickly 
resolved processing issues with about 88,000 returns filed with Form 
5405 that were caused by a compliance filter that resulted in 
additional scrutiny. 

Access to Telephone Service Remained the Same as Last Year, and 
Correspondence Service Continues to Deteriorate Due to the Imbalance 
between Demand and Resources:  

Table 2 shows that, in 2013, IRS received 93.5 million calls--a 5 
percent decrease from 2012 but higher than 2009 through 2011. Compared 
to 2012, IRS answered almost 9 percent fewer calls using automated 
services. Officials attributed some of the reduction in automated 
calls answered to fewer e-file personal identification number 
requests. Answering as many calls as possible through automation is 
important because IRS estimates that it costs 38 cents per call to 
provide an automated answer, but about $33 per call to use a live 
assistor.[Footnote 11] 

Table 2 also shows that callers experienced a shorter average wait 
time to speak to an IRS assistor this year compared to the same period 
last year, but the time was still much longer than 2008 through 2011. 
The percentage of callers seeking live help who received it stayed the 
same as 2012 at 68 percent. 

In 2010, we found that IRS sets its annual goal based on factors such 
as resource availability, the expected number and complexity of calls, 
and anticipated volume of taxpayer correspondence, but not on an 
analysis of what taxpayers would consider to be good service. 
[Footnote 12] At that time, we recommended that IRS determine a 
telephone standard based on the quality of service provided by 
comparable organizations, what matters most to the customer, and 
resources required to achieve this standard based on input from 
Congress and other stakeholders. IRS disagreed saying its current 
process of developing a planned level of telephone service takes into 
consideration many factors, including its budget and assumptions about 
call demand. We noted, however, that such a standard would allow IRS 
to communicate to Congress what it believes constitutes good service. 
Further, since 2010, the IRS Oversight Board has said than an 
acceptable level of service (LOS) should be about 80 percent.[Footnote 
13] However, IRS has yet to set such a standard. 

Table 2: IRS Call Volume, Telephone Service Goals and Performance, 
2008 through 2013 Filing Seasons:  

Total calls to IRS (in millions)[C]; 
2008[A]: 118.0; 
2009: 77.6; 
2010: 77.4; 
2011: 83.1; 
2012: 98.4; 
2013: 93.5; 
Percent change from 2012 to 2013[B]: -5.0%. 

Automated calls answered (in millions); 
2008[A]: 43.0; 
2009: 25.3; 
2010: 31.6; 
2011: 36.7; 
2012: 50.1; 
2013: 45.8; 
Percent change from 2012 to 2013[B]: -8.6%. 

Assistor answered calls (in millions); 
2008[A]: 27.0; 
2009: 25.7; 
2010: 24.1; 
2011: 22.6; 
2012: 19.4; 
2013: 20.4; 
Percent change from 2012 to 2013[B]: 5.2%. 

Abandoned, busies, and disconnects (in millions); 
2008[A]: 48.0; 
2009: 26.7; 
2010: 21.7; 
2011: 23.8; 
2012: 28.9; 
2013: 27.3; 
Percent change from 2012 to 2013[B]: -5.6%. 

Access measures:  

Percentage of callers seeking live help who receive it (LOS);  

Goal; 
2008[A]: 82%; 
2009: 77%[D]; 
2010: 71%; 
2011: 71%; 
2012: 61%; 
2013: 70%; 
Percent change from 2012 to 2013[B]: 14.8%. 

Actual; 
2008[A]: 57%; 
2009: 68%; 
2010: 76%; 
2011: 72%; 
2012: 68%; 
2013: 68%; 
Percent change from 2012 to 2013[B]: 0.2%. 

Average wait time (in minutes);  

Goal; 
2008[A]: 4.5; 
2009: 10.4[E]; 
2010: 11.6; 
2011: 11.6; 
2012: 19.0; 
2013: 15; 
Percent change from 2012 to 2013[B]: -20.4%. 

Actual; 
2008[A]: 8.6; 
2009: 8.4; 
2010: 9.5; 
2011: 11.7; 
2012: 17; 
2013: 15.5; 
Percent change from 2012 to 2013[B]: -7.4%. 

Accuracy measures[F]:  

Tax law rate (in percent)[G]; 
2008[A]: 90.3; +/-0.9; 
2009: 92.5; +/-0.8; 
2010: 92.4; +/-0.8; 
2011: 92.9; +/-0.6; 
2012: 92.5; +/-0.7; 
2013: 95.6; +/-0.7. 

Account accuracy rate (in percent); 
2008[A]: 93.5; +/-0.4; 
2009: 95.1; +/-0.4; 
2010: 95.6; +/-0.4; 
2011: 96.0; +/-0.3; 
2012: 95.4; +/-0.3; 
2013: 95.8; +/-0.4. 

Source: GAO analysis of IRS data. 

Note: Unless otherwise noted, data are cumulative from January 1 of 
each year to June 30, while goals are for the entire fiscal year. We 
believe comparing performance during the filing season to fiscal year 
goals is appropriate as IRS's filing season performance is an 
indicator of its performance for the entire year. 

[A] According to IRS officials, IRS received an unprecedented number 
of calls in 2008 primarily related to economic stimulus package 
payments. 

[B] The numbers in the table are rounded, but the percent change was 
calculated using exact values. Therefore, in some cases, the percent 
change is slightly different than it would be if it were calculated 
using the rounded values in the table. 

[C] The numbers in the table are the total automated, assistor 
answered, abandoned, busy and disconnected calls, and do not reflect 
the total number of attempted calls to IRS. 

[D] IRS revised its original fiscal year goal of 77 percent down to 70 
percent because of high call volume from taxpayers requesting e-filing 
authentication information and asking stimulus-related questions. 

[E] IRS determines its wait time goals based on anticipated call 
volume and resource availability. IRS significantly raised its wait 
time goal for 2009 compared to 2008 in light of anticipated increased 
call volume related to tax law changes. 

[F] IRS calculation based on representative samples of phone calls 
from January 1 through June 30. 

[G] The percentage of calls in which CSRs provided accurate answers 
for the call type and took the appropriate actions, with a 90 percent 
confidence interval.  

[End of table]  

There is considerable weekly variation around the annual averages for 
telephone access shown in Table 2. For example, prior to the filing 
deadline of April 15 weekly levels of service ranged from a low of 53 
percent to a high of 77 percent. After the filing deadline, weekly 
service levels were lower. They ranged from a low of about 40 percent 
to a high of 69 percent. See Appendix II for additional information on 
weekly call volume and levels of service. 

IRS officials stated that reduced funding levels stemming from multi-
year and sequestration-related budget cuts resulted in fewer than 
planned CSR resources to handle telephone calls and paper 
correspondence. IRS devoted about 13,200 full-time equivalent (FTE) 
employees in 2013 to telephones and correspondence compared to almost 
13,800 in 2012 (a decline of 4 percent). These FTE numbers for 2013 do 
not include about 300 staff that IRS shifted from its collection 
activities to answer telephone calls. IRS estimated the costs and 
foregone revenue associated with this shift to be in excess of $202 
million. Using IRS's estimate, which we did not verify, the costs and 
foregone revenue per FTE shifted would be in excess of $674,000. 

Almost Half of All Taxpayer Correspondence is Overage, and IRS Has 
Plans to Conduct More Evaluations of Taxpayer Correspondence:  

As shown in Table 3, the amount of correspondence received between 
2009 and 2013 increased from 19 to 21 million (a 10.5 percent 
increase) and the percentage of overage correspondence nearly doubled 
to 47 percent in 2013 from 25 percent in 2009. As noted earlier, IRS 
generally considers paper correspondence that is not resolved within 
45 days to be overage. 

Table 3: IRS Taxpayer Correspondence Performance, Fiscal Years 2009 
through 2013:  

Correspondence received (in millions); 
Fiscal Year[A]: 
2009: 19; 
2010: 20; 
2011: 20; 
2012: 21; 
2013: 21; 
Percent change from fiscal year 2012 to 2013[B]: 0. 

Percentage of taxpayer overage correspondence; 
Fiscal Year[A]: 
2009: 25; 
2010: 27; 
2011: 35; 
2012: 40; 
2013: 47; 
Percent change from fiscal year 2012 to 2013[B]: 18%. 

Source: GAO analysis of IRS data. 

Note: Aggregate data are from Accounts Management and Submission 
Processing, which jointly responds to IRS's taxpayer correspondence. 

[A] Data cover equivalent periods for each fiscal year with slight 
variation in the exact dates depending on the year and data source. 

[B] The numbers in the table are actual numbers reported by IRS, and 
the percent change was calculated using those values.  

[End of table]  

In December 2010, we concluded that providing timely responses to 
paper correspondence remains critical to taxpayer service because if 
IRS's responses take too long taxpayers may write again or call IRS 
for additional assistance. We recommended that IRS establish a 
performance measure that includes providing timely correspondence 
service to taxpayers. IRS agreed to this recommendation, and is 
beginning to take steps to implement it.[Footnote 14] Since we made 
that recommendation, the percentage of overage correspondence has 
continued to increase. IRS officials attribute the increase in the 
percentage of overage correspondence to budget constraints (less 
overtime for CSRs who provide both telephone assistance and work paper 
correspondence), and more complex taxpayer inquiries such as 
correspondence related to identity theft cases which can be more time 
consuming to address. 

IRS has taken some steps to identify why taxpayers write in. Based on 
a recent small, judgmental sample of correspondence cases, IRS found 
that the top three most common reasons taxpayers write in are: balance 
due payoffs, penalty abatements, and miscellaneous account inquiries. 
In that same sample, IRS found that its own processes, such as the 
wording of notices or requirements for a paper signature, influenced 
taxpayers to write in. IRS officials told us they are currently 
analyzing a statistically valid sample of correspondence to identify 
additional factors that influence the level of correspondence. 

Website Use Has Increased, While Some Face-to-Face Services Continue 
to Decline:  

Use of IRS.gov continues to increase, with IRS receiving approximately 
374 million visits to its website through July 2013, an increase of 
nearly 26 percent over the same period in 2012. IRS officials 
attribute this increase to the launch of the redesigned website, 
introduction of new online tools such as Where's My Amended Return, 
and implementation of the Patient Protection and Affordable Care Act. 
[Footnote 15] We previously recommended that IRS develop a long-term 
strategy to improve web services provided to taxpayers that includes 
studies of leading practices at a strategic level, measurable goals 
for taxpayer satisfaction, business cases for new online services that 
describe potential benefits and costs and prioritized projects, and 
links to investments in security.[Footnote 16] IRS reported that it is 
planning to update its long-term web services strategy to include our 
recommended changes in early 2014. See Appendix III for additional 
information on website use from 2008 through 2013. 

IRS received about 2.6 million visits to its TACs, a decline of 
approximately 5 percent from 2012. Additionally, the number of returns 
prepared continues to decline--in 2013, IRS prepared nearly 125,000 
returns at TACs, about a 16 percent decline from 2012. IRS attributes 
the decline to its efforts to manage demand, and increased taxpayer 
awareness of online tools and services. In contrast, the number of 
returns prepared at the roughly 13,000 volunteer sites increased 5 
percent between 2012 and 2013, to nearly 3.3 million in 2013. See 
Appendix IV for additional information on services and taxpayer use of 
TACs and volunteer sites since 2010. 

IRS Has Proposed Eliminating Some Services in 2014, but the Cuts May 
Not Stop the Deterioration in Performance or Address GAO's 
Recommendation from Last Year:  

In 2012, we noted that IRS needs to dramatically revise its strategy 
for providing telephone and correspondence services and recommended 
that it define appropriate levels of telephone and correspondence 
services based on an assessment of demand and resources among other 
things.[Footnote 17] IRS neither agreed nor disagreed with our 
recommendation, saying it already has an objective of providing 
taxpayers with access to accurate services while managing demand. 
However, IRS's efforts to date have not reversed the declines in 
taxpayer service. We noted, and IRS officials acknowledged, that 
incremental efficiency gains of the type IRS has realized in recent 
years would not be enough to combat the imbalance between taxpayer 
demand for services and available resources. We concluded that, with 
expected levels of resources, reversing the declines in telephone and 
correspondence services may require IRS to consider difficult 
tradeoffs such as limiting the types of phone calls that would be 
answered. 

Given expected budget levels for the 2014 filing season, IRS has 
identified six services for elimination or reduction, which officials 
told us were chosen because taxpayers had other options. IRS officials 
reported that they have discussed these options within IRS, with 
external stakeholders, and with Congressional committees that oversee 
IRS operations. 

IRS's proposed service eliminations or reductions are:  

1. Limiting tax law inquiries to answer only basic tax law questions 
during the filing season, and reassigning CSRs to work account-related 
inquiries; 

2. Launching the "Get Transcript" tool, which will allow taxpayers to 
obtain a viewable and printable transcript online on [hyperlink, 
http://www.irs.gov], and redirecting taxpayers to this and other 
automated tools for getting a transcript; 

3. Redirecting refund-related inquiries to automated services and not 
answering refund inquiries until 21 days after the tax return has been 
filed, except for refunds held for potential fraud; 

4. Limiting access to the Practitioner Priority Services line to only 
those practitioners working tax account issues; 

5. Limiting live assistance and redirecting requests for domestic 
Employer Identification Numbers to IRS's online tool; and:  

6. Eliminating free return preparation at IRS's TAC sites and 
directing taxpayers to free alternatives including at IRS partner 
sites staffed by volunteers. 

The proposed elimination or reductions in services are examples of the 
difficult choices that we recommended need to be made if more timely 
access to telephone service and handling of correspondence is going to 
be achieved from the available IRS resources. While these cuts 
represent initial steps consistent with our recommendation from last 
year, they do not fully address it. Furthermore, even with these 
reductions, officials in IRS's Wage and Investment Division 
responsible for the filing season told us they are anticipating that 
the level of telephone service could be 61 percent in 2014.[Footnote 
18] IRS reported that it is working on final approval to implement the 
service options and bring about a better balance between demand for 
service and resources. However, the continued deterioration in 
taxpayer service in 2013, high cost of shifting staff from collections 
work to the telephones and correspondence, and anticipated level of 
telephone service for 2014 all highlight the importance of continuing 
to address the recommendation we made last year based on the need for 
a dramatic revision in IRS's strategy. The choice may be between 
providing a broader range of services at a low level of performance or 
a narrower range of services at a higher level of performance. Until 
IRS develops a strategy, it risks not communicating expectations about 
the level of services it can provide based on the resources available. 
IRS could then use the strategy to facilitate a discussion with 
Congress and other stakeholders about the appropriate mix of service, 
level of performance, and resources. 

IRS Recently Expanded the Installment Agreement Program, but Some Case 
Handling Practices Lack Standardization and are Unnecessarily 
Redundant:  

Taxpayers can apply for IAs online, by phone, in person, or by 
completing and mailing Form 9465, Installment Agreement Request. 
[Footnote 19] Depending on the type of IA, taxpayers can make their 
monthly payments via check or money order, direct debit, payroll 
deduction, online, or credit card. If a taxpayer fails to make monthly 
payments on time or incurs a new tax liability, the taxpayer is 
considered to be in default on the IA with a few exceptions. Appendix 
V shows the process for taxpayers entering into and making payments on 
IAs. 

Table 4 shows that, in fiscal year 2012, IRS approved more than 3 
million new IAs and collected $9.8 billion. At the end of fiscal year 
2012, IAs represented nearly $28 billion in unpaid balances. The 
difference between the amount of unpaid balance of assessment and 
amount collected is due to the fact that IAs can be paid off over 
multiple years. According to IRS officials, the increases in IA 
inventory since 2009 are due to a variety of factors, such as more 
taxpayers entering into IAs because of expanded eligibility and 
payment terms discussed below, and changes in the economy. 

Table 4 also shows, in fiscal year 2012, taxpayers defaulted on 
approximately 1.2 million IAs. In 2012, we found that, of those 
taxpayers that had a balance due at the filing deadline, almost two-
thirds eventually paid in full or entered into IAs, and about 18 
percent of taxpayers defaulted on IAs in fiscal year 2012.[Footnote 
20] Therefore, we recommended that IRS pilot risk-based approaches for 
contacting taxpayers who have a balance with the goal of reducing the 
default rate. IRS agreed with the recommendation, but has not funded 
the related research project. Until IRS tests and implements more 
advanced risk-based approaches, it may be challenged to deal with the 
default problem. 

Table 4: Total Installment Agreement Inventory and Tax Liability, 
Fiscal Years 2009 through 2012:  

IA Inventory: New IAs Entered Into During FY; 
FY 2009: 3,107,932; 
FY 2010: 3,226,203; 
FY 2011: 3,241,096; 
FY 2012: 3,168,853. 

IA Inventory: Number of Full Paid IAs by End of FY; 
FY 2009: 1,337,095; 
FY 2010: 1,724,908; 
FY 2011: 1,912,324; 
FY 2012: 1,850,606. 

IA Inventory: Number of Defaulted IAs by End of FY; 
FY 2009: 966,231; 
FY 2010: 1,169,109; 
FY 2011: 1,152,420; 
FY 2012: 1,211,600. 

IA Inventory: IA Inventory by End of FY[A]; 
FY 2009: 3,246,169; 
FY 2010: 3,558,757; 
FY 2011: 3,724,866; 
FY 2012: 3,827,824. 

IA Inventory: Unpaid Balance of Assessments (UBA) at End of FY[C]; 
FY 2009: $19,144,476,513; 
FY 2010: $21,876,520,273; 
FY 2011: $25,696,713,649; 
FY 2012: $27,974,831,425. 

IA Inventory: Amount Collected During FY[D]; 
FY 2009: $6,580,411,267; 
FY 2010: $7,913,483,261; 
FY 2011: $8,830,789,983; 
FY 2012: $9,812,942,707. 

Legend: FY = Fiscal Year. 

Source: IRS Collection Activity Report data. 

[A] The total numbers of new, full paid, and defaulted IAs will not 
equal the total inventory at the end of a given fiscal year because 
IAs can be entered into, paid off, defaulted on, reinstated, or 
terminated at any given time during repayment schedule which can span 
several years. 

[B] The amount collected is the amount collected for all IA cases that 
were in Collection status during the period. IAs for which a payment 
was received during the period but were either full-paid or defaulted 
on during that same period will be included in the amount collected 
but not in the Unpaid Balance of Assessment (UBA). 

[C] UBA includes taxes, penalties, and interest less any payments (not 
including any accrued amount) . 

[D] IAs give taxpayers the opportunity to repay their tax liabilities 
over several years. As a result, IA payments would be received in 
subsequent years and be added to the total amount collected over time.  

[End of table]  

In 2012, IRS expanded its Fresh Start Initiative to assist struggling 
taxpayers in meeting their tax obligations.[Footnote 21] Specifically, 
the threshold for requesting a streamlined IA was raised from $25,000 
to $50,000 and the maximum term for streamlined IAs was increased from 
60 to 72 months for repayment. The expanded eligibility for 
streamlined IAs in particular allowed more people to qualify for the 
program and potentially pay taxes owed. Also under Fresh Start, IRS is 
encouraging taxpayers with IAs to sign up for direct debit agreements 
which generally have lower default rates. IRS said it is difficult to 
pinpoint which specific aspects of the Fresh Start initiative are 
effective. IRS is currently conducting an analysis of the initiative's 
benefits in terms of collection and default prevention. As of November 
2013, that analysis has not been completed. 

IRS allocated about 1,800 FTEs to the IA program in fiscal year 2012, 
which is over a 10 percent increase since fiscal year 2009. The level 
of and growth in this area highlights the importance of testing and 
implementing risk-based approaches for collecting balances due 
including through IAs. 

Some IA Case Handling Practices Lack Standardization and Include 
Unnecessary Redundancy:  

IRS recently made process improvements to help streamline and 
standardize its IA program operations. For example, IRS introduced 
automated tools, known as the Compliance Suite, which provides tax 
examiners (TEs) with online tools such as helping the TE determine 
which letter to send to the taxpayer. However, despite these process 
improvements, we observed some inefficiency. For example, we observed 
that some TEs had developed their own extensive sets of prewritten, 
standardized case notes that allowed them to quickly update a 
taxpayer's account because the Compliance Suite lacked that capability. 

IA program managers were aware of this practice, said it gives TEs 
flexibility in writing case notes, but agreed that automated case 
notes may yield efficiencies. They also noted that the Compliance 
Suite was only introduced a few months ago, and its full capabilities 
were being explored. We agree that flexibility is desirable but 
providing an extensive set of standardized notes in the Compliance 
Suite would give all TEs the option of using them. This could lower 
the cost of making account entries. 

In addition, we found unnecessary redundancy. We observed TEs 
handwriting case notes on paper copies of IAs and then typing those 
same notes into IRS's computer systems. IRS managers agreed this 
practice is redundant, and TEs noted this is the way it has always 
been done. Such redundant data entry increases the time it takes TEs 
to handle each IA case. Furthermore, GAO's internal control guidance 
states that control activities should be regularly evaluated to ensure 
their appropriateness in intended function.[Footnote 22] 

By not developing a more standardized comprehensive set of case notes 
and not reducing redundant data entry, IRS is missing opportunities to 
reduce resources devoted to handling IA case files. With 1,800 FTEs 
devoted to the program, small gains in the efficiency of each TE could 
add up to substantial savings. 

IRS's Identification of and Notification to Potential Non-Filers Takes 
Months after Filing Deadlines:  

Beginning in October, IRS uses prior year tax returns, third-party 
reports, such as W-2s and Forms 1099, and applications for automatic 
extensions of time to file to identify taxpayers who appear to have 
missed the mid-April tax return filing deadline. In June 2013, we 
found that most information reports are not received by IRS until well 
after the April tax return filing deadline.[Footnote 23] 

IRS does a second match in March of the following year for taxpayers 
who filed an extension. According to IRS officials, not all potential 
non-filer cases identified are selected for notification and review; 
IRS prioritizes cases based on factors such as income, the potential 
to collect taxes due, and whether the taxpayer is an IRS or other 
federal employee. 

After the first match in October, IRS sends notices to non-filers in 
November and December requesting the return or a justification for not 
filing. IRS begins to send notices to cases from the second match 
between March and July.[Footnote 24] 

Table 5 shows that, in tax year 2010 (the year for which the most 
current data are available), IRS identified over 7.4 million potential 
non-filer cases. Of these, IRS selected more than 3.2 million cases 
for review and sent notices to those non-filers requesting the return. 
IRS officials said the percentage of cases selected for review 
fluctuates based on resources and selection criteria, such as income 
and potential balance due amounts, which vary from year-to-year. 

Table 5 also shows in tax year 2008 (the year for which the most 
complete data are available), IRS received approximately 1.4 million 
delinquent returns, which is about 39 percent of the non-filers 
selected for review and notification. IRS officials attribute the 
relatively low number of returns filed in response to notices to 
taxpayers that have stopped filing for unknown reasons, those that do 
not have the resources to pay the potential balance due, and taxpayers 
who do not file until more extensive collection actions are taken. 
Securing the delinquent return as soon as possible as part of IRS's 
notification process is important because taxpayers continue to incur 
penalties and interest until they file a return and IRS undertakes 
increasingly expensive enforcement actions against the taxpayer. 

Table 5: Potential Individual Non-filer Cases Identified and Number 
and Percentage of Cases Selected for Review, Tax Years 2007 through 
2010:  

Potential non-filer cases identified; 
TY 2007: 6,305,323; 
TY 2008: 7,610,026; 
TY 2009: 7,119,652; 
TY 2010: 7,427,534. 

Number of non-filer cases selected for review and notices sent; 
TY 2007: 2,973,144; 
TY 2008: 3,473,818; 
TY 2009: 3,288,560; 
TY 2010: 3,224,601. 

Percent of cases selected for review; 
TY 2007: 47%; 
TY 2008: 46%; 
TY 2009: 46%; 
TY 2010: 43%. 

Number of Delinquent Returns Filed[A]; 
TY 2007: 1,222,800; 
TY 2008: 1,371,619; 
TY 2009: 1,043,019; 
TY 2010: 606,873. 

Source: IRS. 

Legend: TY = Tax Year.  

[A] IRS is still pursuing non-filers for all tax years. As a result, 
the number of returns filed is likely to increase particularly for tax 
years 2009 and 2010.  

[End of table]  

In addition to taxpayers who do not respond to notices, IRS's existing 
non-filer strategy notes that IRS also has a significant problem with 
repeat non-filers. For fiscal year 2012, IRS data shows that 43 
percent of closed cases were repeat non-filers that did not file for 
more than 1 tax year. 

As of November 2013, IRS is waiting on executive approval for its 
updated non-filer strategy which it expects to receive by the end of 
the year and should address how IRS plans to improve non-filer 
compliance including notice response and repeater rates. IRS is 
currently analyzing data on the characteristics of non-filers, such as 
filing status, income, and other key characteristics, and their 
response rates to the notifications to determine the best approach, 
and expect this effort to be completed in January 2014. IRS officials 
also are considering several initiatives for improving the 
notification process once its updated non-filer strategy is approved. 

Conclusions:  

Despite efficiency gains in processing returns, additional website 
services, and shifting employees from working collections cases to 
handling telephone calls and correspondence, the gap between 
taxpayers' demand for service and IRS resources widened. As a result, 
taxpayer access to IRS's telephone assistors remained at a low level 
and the percentage of overage correspondence grew. The widening gap 
highlights the importance of fully implementing our recommendation 
made last year for a dramatic revision in managing taxpayer service 
that defines an appropriate level of service and recognizes both the 
demand for services and resources available. We stressed that this 
would mean making difficult tradeoffs. Consistent with our 
recommendation, IRS has proposed eliminating or reducing some 
services. By eliminating or reducing some services IRS should be able 
to devote more resources to its continuing services. However, IRS 
officials told us that the cuts proposed so far may not reverse the 
decline in telephone and correspondence performance. As a consequence, 
the cuts may only be a down payment on the difficult choices needed 
and our recommendation needs to be fully addressed. Fully addressing 
our recommendation would result in a strategy that could be used to 
facilitate a discussion with Congress and other stakeholders about the 
appropriate mix of service, level of performance, and resources. 

The imbalance between the demand for services and resources also puts 
a higher priority on scrutinizing existing processes for possible 
further efficiency gains. We identified opportunities in the 
processing of installment agreements where the existing process could 
be further streamlined to reduce resources by standardizing case notes 
and reducing unnecessarily redundant data entry. 

Recommendation for Executive Action:  

We recommend that the Commissioner of Internal Revenue develop a set 
of standardized account entries and eliminate unnecessary redundancy 
when entering installment agreement data into accounts. 

Agency Comments and Our Evaluation:  

We provided a draft of this report to the Acting Commissioner of 
Internal Revenue. IRS provided written comments on a draft of the 
report, which are reprinted in Appendix VI. IRS also suggested 
technical changes to the report, which we incorporated where 
appropriate. 

IRS did not state whether it concurred with the recommendation. 
However, IRS acknowledged that standardized account entries can 
sometimes lead to increased efficiencies and lower costs, and 
taxpayers and IRS can benefit by the elimination of redundancy in its 
processes. IRS stated that as it continues to evaluate the Compliance 
Suite to determine its full capabilities, it will (1) explore whether 
the introduction of standardized account entries into the IA process 
will yield increased efficiencies and lower costs; and (2) evaluate 
whether there are unnecessary redundancies in its current processes 
that can be eliminated without adversely affecting tax administration. 
GAO believes the recommendation remains valid as discussed in the 
report. 

We plan to send copies of this report to the Chairmen and Ranking 
Members of other Senate and House committees and subcommittees that 
have appropriation, authorization, and oversight responsibilities for 
IRS. We will also send copies to the Acting Commissioner of Internal 
Revenue, the Secretary of the Treasury, the Chairman of the IRS 
Oversight Board, and the Deputy Director for Management of the Office 
of Management and Budget. In addition, the report will be available at 
no charge on the GAO website at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-9110 or whitej@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made key contributions to 
this report are listed in Appendix VII. 

Signed by:  

James R. White: 
Director, Tax Issues: 
Strategic Issues:  

[End of section]  

Appendix I: Installment Agreement Types and Characteristics:  

Of the four types of IAs available to individual taxpayers, the most 
common type of IA by far is the streamlined. 

Table 6: Types and Characteristics of Installment Agreements:  

Type of Installment Agreement (IA): Guaranteed; 
Amount Owed: $10,000 or less; (Total assessed balance of income tax 
not including penalty or interest); 
Maximum Payment Term: 3 years; 
Required Payment Method[B]: All methods available; 
User Fee[C]: $105; ($52 for direct debit); 
Collection Information Statement Requirement[D]: No; 
Management Approval Requirement[E]: No. 

Type of Installment Agreement (IA): Streamlined; 
Amount Owed: $50,000 or less; (Unpaid balance of assessments)[A]; 
Maximum Payment Term: 6 years; 
Required Payment Method[B]: Direct debit or payroll deduction if 
unpaid balance of assessment is greater than $25,000; 
User Fee[C]: $105; ($52 for direct debit); 
Collection Information Statement Requirement[D]: No; 
Management Approval Requirement[E]: No. 

Type of Installment Agreement (IA): Regular/Routine; 
Amount Owed: Any amount; 
Maximum Payment Term: Collection Statute Expiration Date[F]; 
Required Payment Method[B]: All methods available; 
User Fee[C]: $105; ($52 for direct debit); 
Collection Information Statement Requirement[D]: Yes; 
Management Approval Requirement[E]: Yes. 

Type of Installment Agreement (IA): Partial Payment; 
Amount Owed: Any amount; 
Maximum Payment Term: Collection Statute Expiration Date (with option 
for extension); 
Required Payment Method[B]: All methods available; 
User Fee[C]: $105; ($52 for direct debit); 
Collection Information Statement Requirement[D]: Yes; 
Management Approval Requirement[E]: Yes. 

Source: IRS. 

[A] Unpaid balance of assessment includes taxes, penalties, and 
interest less any payments (not including any accrued amount). 

[B] Payment methods include check, money order, direct debit, payroll 
deduction, online, or credit card. 

[C] Taxpayers with income at or below 250 percent of the Department of 
Health and Human Services poverty guidelines may apply for a reduced 
user fee of $43 through Form 13844, Application for Reduced User Fee 
For Installment Agreements. IRS also systematically determines if 
taxpayers qualify for a reduced user fee based on the most recently 
filed tax return. If the taxpayer qualifies, the taxpayer will 
automatically be charged the reduced fee. The user fee for 
restructuring or reinstating an established installment agreement is 
$45 regardless of income levels or payment method. 

[D] IRS requires financial statements that must be submitted by the 
taxpayer to determine eligibility and payment amounts. 

[E] IRS requires managerial approval of IAs over $50,000 or partial 
payments. 

[F] The Collection Statute Expiration Date is a statutory 10-year 
period for collection of the assessed tax liability.  

[End of table]  

[End of section]  

Appendix II: Weekly Toll-Free Calls and Percentage of Callers Seeking 
and Receiving Live Assistance:  

Figure 1 shows that during the 2013 filing season, the Internal 
Revenue Service (IRS) received most of its calls in the period leading 
up to and including the April 15th filing deadline, with the heaviest 
volume of calls in the early to mid-February timeframe. Importantly, 
the figure below shows that access to live assistance begins to 
decline sharply in the weeks following the filing deadline. 

Figure 1: Weekly Toll-Free Calls and Percentage of Callers Seeking and 
Receiving Live Assistance for the Week Ending January 5 through June 
29, 2013:  

[Refer to PDF for image: combined stacked vertical bar and line graph]  

Weekly calls on IRS's tax law and account assistance lines:  

Report date: 5 January; 
Caller abandons: 302,523; 
IRS disconnects or busies: 4,213; 
Automated calls answered: 169,885; 
Assistor calls answered: 316,655; 
Percentage of callers seeking and receiving live assistance: 66%.  

Report date: 12 January; 
Caller abandons: 531,775; 
IRS disconnects or busies: 4,529; 
Automated calls answered: 388,340; 
Assistor calls answered: 512,944; 
Percentage of callers seeking and receiving live assistance: 72%.  

Report date: 19 January; 
Caller abandons: 469,207; 
IRS disconnects or busies: 4,260; 
Automated calls answered: 418,508; 
Assistor calls answered: 545,219; 
Percentage of callers seeking and receiving live assistance: 77%.  

Report date: 26 January; 
Caller abandons: 474,271; 
IRS disconnects or busies: 4,917; 
Automated calls answered: 631,635; 
Assistor calls answered: 516,874; 
Percentage of callers seeking and receiving live assistance: 73%.  

Report date: 2 February; 
Caller abandons: 1.1 million; 
IRS disconnects or busies: 10,505; 
Automated calls answered: 2.5 million; 
Assistor calls answered: 858752; 
Percentage of callers seeking and receiving live assistance: 71%.  

Report date: 9 February; 
Caller abandons: 1.7 million; 
IRS disconnects or busies: 22,770; 
Automated calls answered: 5.2 million; 
Assistor calls answered: 1.0 million; 
Percentage of callers seeking and receiving live assistance: 71%.  

Report date: 16 February; 
Caller abandons: 1.8 million; 
IRS disconnects or busies: 47,336; 
Automated calls answered: 5.3 million; 
Assistor calls answered: 1.1 million; 
Percentage of callers seeking and receiving live assistance: 69%.  

Report date: 23 February; 
Caller abandons: 1.7 million; 
IRS disconnects or busies: 646,331; 
Automated calls answered: 4.9 million; 
Assistor calls answered: 1.1 million; 
Percentage of callers seeking and receiving live assistance: 53%.  

Report date: 2 March; 
Caller abandons: 1.5 million; 
IRS disconnects or busies: 130,135; 
Automated calls answered: 3.7 million; 
Assistor calls answered: 1.2 million; 
Percentage of callers seeking and receiving live assistance: 70%.  

Report date: 9 March; 
Caller abandons: 1.4 million; 
IRS disconnects or busies: 78,449; 
Automated calls answered: 3.0 million; 
Assistor calls answered: 1.2 million; 
Percentage of callers seeking and receiving live assistance: 70%.  

Report date: 16 March; 
Caller abandons: 1.2 million; 
IRS disconnects or busies: 73,316; 
Automated calls answered: 2.5; 
Assistor calls answered: 1.1 million; 
Percentage of callers seeking and receiving live assistance: 76%.  

Report date: 23 March; 
Caller abandons: 1.1 million; 
IRS disconnects or busies: 35,369; 
Automated calls answered: 2.1 million; 
Assistor calls answered: 985,799; 
Percentage of callers seeking and receiving live assistance: 74%.  

Report date: 30 March; 
Caller abandons: 1.0 million; 
IRS disconnects or busies: 33,284; 
Automated calls answered: 1.7 million; 
Assistor calls answered: 877,281; 
Percentage of callers seeking and receiving live assistance: 72%.  

Report date: 6 April; 
Caller abandons: 1.1 million; 
IRS disconnects or busies: 27,985; 
Automated calls answered: 1.6 million; 
Assistor calls answered: 979,978; 
Percentage of callers seeking and receiving live assistance: 73%.  

Report date: 13 April; 
Caller abandons: 1.1 million; 
IRS disconnects or busies: 307,54; 
Automated calls answered: 1.6 million; 
Assistor calls answered: 1.1 million; 
Percentage of callers seeking and receiving live assistance: 76%.  

Report date: 20 April; 
Caller abandons: 1.1 million; 
IRS disconnects or busies: 183,614; 
Automated calls answered: 1.8 million; 
Assistor calls answered: 961,311; 
Percentage of callers seeking and receiving live assistance: 69%.  

Report date: 27 April; 
Caller abandons: 936,549; 
IRS disconnects or busies: 20,454; 
Automated calls answered: 1.2 million; 
Assistor calls answered: 732,715; 
Percentage of callers seeking and receiving live assistance: 67%.  

Report date: 4 May; 
Caller abandons: 875,383; 
IRS disconnects or busies: 16,774; 
Automated calls answered: 1.1 million; 
Assistor calls answered: 680,401; 
Percentage of callers seeking and receiving live assistance: 66%.  

Report date: 11 May; 
Caller abandons: 829,944; 
IRS disconnects or busies: 14,423; 
Automated calls answered: 960,216; 
Assistor calls answered: 646,813; 
Percentage of callers seeking and receiving live assistance: 66%.  

Report date: 18 May; 
Caller abandons: 817,532; 
IRS disconnects or busies: 13,677; 
Automated calls answered: 889,116; 
Assistor calls answered: 653,962; 
Percentage of callers seeking and receiving live assistance: 66%.  

Report date: 25 May; 
Caller abandons: 641,564; 
IRS disconnects or busies: 10,510; 
Automated calls answered: 740,128; 
Assistor calls answered: 508,238; 
Percentage of callers seeking and receiving live assistance: 66%.  

Report date: 1 June; 
Caller abandons: 732,732; 
IRS disconnects or busies: 20,298; 
Automated calls answered: 780,338; 
Assistor calls answered: 548,376; 
Percentage of callers seeking and receiving live assistance: 66%.  

Report date: 8 June; 
Caller abandons: 809,691; 
IRS disconnects or busies: 124,097; 
Automated calls answered: 749,815; 
Assistor calls answered: 786,624; 
Percentage of callers seeking and receiving live assistance: 66%.  

Report date: 15 June; 
Caller abandons: 612,232; 
IRS disconnects or busies: 35,229; 
Automated calls answered: 590,795; 
Assistor calls answered: 535,312; 
Percentage of callers seeking and receiving live assistance: 66%.  

Report date: 22 June; 
Caller abandons: 739,946; 
IRS disconnects or busies: 75,583; 
Automated calls answered: 719,419; 
Assistor calls answered: 664,717; 
Percentage of callers seeking and receiving live assistance: 65%.  

Report date: 29 June; 
Caller abandons: 757,588; 
IRS disconnects or busies: 378,522; 
Automated calls answered: 590,590; 
Assistor calls answered: 463,033; 
Percentage of callers seeking and receiving live assistance: 40%.  

[End of figure]  

[End of section]  

Appendix III: Use of IRS Website and Online Services:  

Table 7 shows that in 2013 use of IRS.gov increased by 26 percent 
compared to 2012. Use of the online tools such as the volunteer site 
locator, Where's My Refund, electronic personal identification number 
requests, and interactive tax assistance tools continued to increase 
in 2013. IRS attributes declines in downloading forms and 
publications, and generally searching the website, to changes in how 
IRS tracks website use in these areas. 

Table 7: Website Use from the 2008 through 2013 Filing Seasons:  

Total visits to IRS.gov (in millions)[B]; 
2008: 292; 
2009: 235; 
2010: 239; 
2011: 250; 
2012: 297; 
2013: 374; 
Percent change from 2012 to 2013[A]: 26%. 

Taxpayer forms, publications, and instructions downloads (in millions); 
2008: 136; 
2009: 137; 
2010: 157; 
2011: 166; 
2012: 259[C]; 
2013: 154; 
Percent change from 2012 to 2013[A]: [Empty][D]. 

Searches (in millions); 
2008: 125; 
2009: 263; 
2010: 277; 
2011: 312; 
2012: 290; 
2013: 60; 
Percent change from 2012 to 2013[A]: [Empty][E]. 

Volunteer site list (in thousands)[F]; 
2008: n/a; 
2009: n/a; 
2010: 48[G]; 
2011: 152[H]; 
2012: 152; 
2013: 350[I]; 
Percent change from 2012 to 2013[A]: 130%. 

Self-Service Tools:  

Where's My Refund? (completion in millions); 
2008: 38; 
2009: 53; 
2010: 64; 
2011: 73; 
2012: 126; 
2013: 193; 
Percent change from 2012 to 2013[A]: 53%. 

Electronic Filing Pin Request (completion in millions); 
2008: n/a; 
2009: n/a; 
2010: 5; 
2011: 10; 
2012: 12; 
2013: 15; 
Percent change from 2012 to 2013[A]: 25%. 

Online Payment Agreement (completion in thousands); 
2008: 19; 
2009: 34; 
2010: 43; 
2011: 26[J]; 
2012: 64; 
2013: 63; 
Percent change from 2012 to 2013[A]: -2%. 

Interactive Tax Assistance Tools (completion in thousands)[K]; 
2008: n/a; 
2009: n/a; 
2010: 42[L]; 
2011: 212; 
2012: 388; 
2013: 454; 
Percent change from 2012 to 2013[A]: 17%. 

Legend: n/a = not applicable:  

Source: GAO analysis of IRS data. 

Note: Data are from January 1 to July 31 for each year unless 
otherwise noted. 

[A] Numbers in the table are rounded, and the percent change has been 
calculated using the rounded values presented in the table. 

[B] A visit is a series of actions that begins when a visitor views 
their first page from the server, and ends when the visitor leaves the 
site. 

[C] Data is for January 1 to June 30, 2012. 

[D] For 2012, IRS reported that an issue with an external user script 
artificially inflated the number of actual downloads for this year. 
Also, for 2013, IRS revised its methodology for tracking downloads of 
forms, publications and instructions. Therefore, the figures reported 
for these years are not comparable. 

[E] Page views include both successful search results and search 
results not found. In 2013, IRS revised its methodology for tracking 
taxpayer searches on IRS.gov. Previously, IRS tracked the total number 
of page views for all searches during a single visit. For 2013, IRS 
began tracking total unique searches, which does not include multiple 
searches for the same information in a single visit. This change 
accounts for some of the variances in website traffic between 2012 and 
2013, and therefore the figures reported for these years are not 
comparable. 

[F] 2010's listing was on 1 page, with an index at the top. 2011's 
listing was split into 52 pages; one for each state, the District of 
Columbia, and Puerto Rico. For 2012, IRS created a volunteer site 
locator tool for searches using zip codes. 

[G] Page views data are for February 12 through July 31, 2010. 

[H] Data are from January 1 through June 30, 2011. 

[I] Data represents the number of visits to the disclaimer page where 
users leave IRS.gov to use the volunteer site locator application, 
hosted by the Department of Treasury. 

[J] A programming error led to a decrease in the number of completed 
agreements. 

[K] IRS introduced the interactive tax assistance tools in March 2010 
and added more tools in 2011 and 2012. As a result, the time frames 
and available services are not comparable. 

[L] Data are from March 7 through July 31, 2010.  

[End of table]  

[End of section]  

Appendix IV: Services Offered at Walk-In and Volunteer Sites:  

Face-to-face service remains an important component of IRS's efforts 
to serve taxpayers, particularly those with low incomes or limited 
proficiency in English. Table 8 shows that, for 2013, the total number 
of contacts at walk-in sites, Taxpayer Assistance Centers (TAC) 
staffed by IRS employees, is the lowest level for the 4 year period 
shown. Further, return preparation has steadily declined since 2010 
due to IRS's continuing efforts to reduce expensive return preparation 
services. Conversely, the total number of returns prepared at sites 
staffed by volunteers has increased since 2010. 

Table 8: Services Performed at IRS Taxpayer Assistance Centers and 
Sites Staffed by Volunteers, 2010 through 2013:  

TAC:  

Total contacts; 
2010: 2,777,478; 
2011: 2,847,221; 
2012: 2,772,044; 
2013: 2,644,822; 
Percent change from 2012 to 2013: -5%. 

Return preparation[A]; 
2010: 222,624; 
2011: 201,413; 
2012: 148,075; 
2013: 124,797; 
Percent change from 2012 to 2013: -16%. 

Tax law questions; 
2010: 177,002; 
2011: 153,398; 
2012: 128,746; 
2013: 110,115; 
Percent change from 2012 to 2013: -14%. 

Account work notices[B]; 
2010: 1,217,383; 
2011: 1,327,406; 
2012: 1,446,413; 
2013: 1,462,844; 
Percent change from 2012 to 2013: 1%. 

Forms; 
2010: 440,417; 
2011: 457,839; 
2012: 378,051; 
2013: 334,147; 
Percent change from 2012 to 2013: -12%. 

Other[C]; 
2010: 720,052; 
2011: 707,165; 
2012: 670,759; 
2013: 612,919; 
Percent change from 2012 to 2013: -9%. 

Sites Staffed by:  

Return preparation; 
2010: 2,951,952; 
2011: 3,077,687; 
2012: 3,149,197; 
2013: 3,294,305; 
Percent change from 2012 to 2013: 5%. 

Percent of returns e-filed; 
2010: 95; 
2011: 96; 
2012: 97; 
2013: 98; 
Percent change from 2012 to 2013: 1%. 

Source: GAO analysis of IRS data. 

Note: Data for each calendar year are for January 1 through April 30. 

[A] TAC return preparation counts include both individual and business 
contacts. 

[B] Account work notices includes assistance to taxpayers who need to 
pay taxes owed. 

[C] Other contacts include responding to correspondence, scheduling 
appointments, and providing self-assistance services, which do not 
fall into the defined categories.  

[End of table]  

[End of section]  

Appendix V: Installment Agreement Process:  

Figure 2: Example of Streamlined Installment Agreement Application and 
Payment Process:  

[Refer to PDF for image: process illustration]  

Step 1: 
A taxpayer files a balance due return with IRS.  

Step 2: 
Upon receipt, IRS issues a notice or tax bill to the taxpayer for the 
unpaid amount (including fees, penalties, and interest).  

Step 3: 
If the taxpayer is unable to pay the full amount immediately, he can 
apply for a streamlined installment agreement (IA) with IRS.  

Step 4: 
The application for a streamlined IA is accepted. IRS establishes IA 
payment terms and conditions based on the taxpayer’s proposal for 
repayment.  

Step 5: 
IRS sends a monthly statement to the taxpayer for the amount due.  

Step 6: 
The taxpayer sends his monthly payment to IRS via direct debit.  

Step 7: 
IRS verifies and records the payment information and credits the 
taxpayer’s account.  

Step 8: 
The taxpayer is considered to be in default of the IA if: 
* full monthly payment is not received on time, 
* additional liability is accrued, or, 
* financial information is not provided when requested.  

Source: GAO analysis of IRS data.  

Note: There are other ways for taxpayers to enter the installment 
agreement (IA) process besides filing a balance due return, such as a 
new balance due as the result of either an amended return or a 
compliance assessment through IRS's enforcement programs. In addition, 
taxpayers can also request an IA before receiving a tax bill. IRS is 
required to enter into an IA in certain cases, but generally has the 
discretion to determine whether to enter into one.  

[End of figure]  

[End of section]  

Appendix VI: Comments from the Department of the Treasury:  

Deputy Commissioner: 
Department of The Treasury: 
Internal Revenue Service: 
Washington, D.C. 20224:  

December 5, 2013:  

Mr. James R. White: 
Director, Tax Issues: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548:  

Dear Mr. White:  

I have reviewed your draft report entitled 2013 Tax Filing Season: IRS 
Needs to Do More to Address the Growing Imbalance between the Demand 
for Services and Resources, and appreciate acknowledgment of our 
efficiency gains in processing returns in recent years. We delivered 
another successful filing season in 2013. The Modernized e-File (MeF) 
platform met all performance expectations and, in 2013, was the sole 
processing system for electronically filed individual income tax 
returns. All tax returns were properly processed and the majority of 
taxpayers received refunds in less than 21 days. The proven successful 
performance of the MeF as the sole platform for receiving electronic 
returns eliminates the need to maintain the legacy e-file system as a 
backup system in 2014, and will permit us to redirect Information 
Technology resources used for its maintenance to other vital projects.  

As noted in the report, the IRS faced the dual challenges of decreased 
resources attributable to continued reductions in funding and the 
effects of sequestration-related budget cuts. Although reduced 
resources had a commensurate impact on the level of customer support 
we were able to provide throughout the year, it is important to note
that actions were taken to maintain the highest levels of support 
possible throughout the filing season, when demand was at its highest 
levels. Staffing reductions and other sequestration-related cuts were 
forestalled until later in the year to minimize the impact to customer 
support. In 2014, we will continue to balance demand with available
resources to ensure services are provided, to the greatest extent 
possible, in an efficient and cost-effective manner.  

I appreciate your acknowledgment of the process improvements, 
including the introduction of the Compliance Suite, that we have made 
to help streamline the installment agreement program. As noted in your 
report, the Compliance Suite was introduced only a few months ago and 
we are continuing to evaluate this product to determine its full 
capabilities. Nevertheless, I believe that the Compliance Suite is 
already having a positive effect on the program and that, in the long-
term, it will have a significant role in making tax administration 
more effective and efficient.  

A response to your specific recommendation is enclosed. If you have 
any questions, please contact Kevin M. Morehead, Acting Director, 
Strategy and Finance, Wage and Investment Division, at (404) 338-8801.  

Sincerely,  

Signed by:  

John M. Dalrymple:  

Enclosure:  

Recommendation:  

We recommend that the Commissioner of Internal Revenue develop a set of
standardized account entries and eliminate unnecessary redundancy when 
entering installment agreement data into accounts.  

Comment:  

The IRS acknowledges that standardized account entries can sometimes 
lead to increased efficiencies and lower costs, and that taxpayers and 
the IRS can benefit by the elimination of redundancy in our processes. 
We have made improvements to our installment agreement program, 
including the recent introduction of the Compliance Suite. Because the 
Compliance Suite was introduced only a few months ago, we are 
continuing to evaluate this product to determine its full 
capabilities. As part of that evaluation, we will explore whether the 
introduction of standardized account entries into our installment 
agreement process will yield increased efficiencies and lower costs
without adversely impacting tax administration. We also will evaluate 
whether there are unnecessary redundancies in our current processes 
that can be eliminated without adversely impacting tax administration. 

[End of section]  

Appendix VII: GAO Contact and Staff Acknowledgments:  

GAO Contact:  

James R. White, (202) 512-9110, whitej@gao.gov:  

Staff Acknowledgments:  

In addition to the individual named above, Joanna Stamatiades, 
Assistant Director; Shilpa Grover; Emily Gruenwald; Lois Hanshaw; 
LaKeshia Allen Horner; Kirsten Lauber; Natalie Maddox; Karen O'Conor; 
Anna Maria Ortiz; Kelly Rubin; and John Zombro made key contributions 
to this report. 

[End of section]  

Footnotes:  

[1] The tax gap is the difference between taxes legally owed to the 
government and what taxpayers actually paid to the government.  

[2] Most taxpayers file their tax returns between January 1 and April 
15, which is the deadline for filing individual income tax returns. 
However, millions of taxpayers receive extensions from IRS, which 
allows them to delay filing until as late as October 15. 

[3] IRS cannot accept e-filed returns directly from taxpayers. Rather, 
IRS authorizes e-file providers to transmit returns to IRS 
electronically using the MeF system. 

[4] The Individual Master File (IMF) is IRS's primary repository for 
taxpayer account information. IRS refers to daily processing by the 
legacy system and its new relational database that will eventually 
fully replace the IMF legacy system as CADE 2. It is designed to allow 
IRS to provide still quicker refunds and conduct more and improved 
compliance checks before refunds are issued. IRS plans to run CADE 2 
and the IMF legacy system concurrently in 2014.  

[5] Taxpayers with annual incomes of $51,000 or less can have their 
returns prepared by IRS staff at TACs, or taxpayers can have returns 
prepared by volunteers at IRS partner sites.  

[6] Taxpayers also can apply for IAs after a notice of liability is 
received. Penalties, interest, and user fees are charged to taxpayers 
using IAs to pay their tax debts. In certain cases, IRS is required to 
enter into an IA, but generally IRS has the discretion to determine 
whether to enter into an IA.  

[7] GAO, 2012 Tax Filing: IRS Faces Challenges Providing Service to 
Taxpayers and Could Collect Balances Due More Effectively, [hyperlink, 
http://www.gao.gov/products/GAO-13-156] (Washington, D.C.: Dec. 18, 
2012). 

[8] 26 U.S.C. § 6001.  

[9] We previously reported on the effect of the compressed time frames 
on IRS due to the American Taxpayer Relief Act of 2012 (Pub. L. No. 
112-240), which made permanent many of the tax cuts enacted in 2001 
and 2003 and extended other many provisions. See GAO, Internal Revenue 
Service: 2013 Tax Filing Season Performance to Date and Budget Data, 
[hyperlink, http://www.gao.gov/products/GAO-13-541R] (Washington, 
D.C.: Apr. 15, 2013).  

[10] The cases generally allege breach of contract, negligence, and 
violation of state consumer protection laws. IRS is not a named party 
to the suits. 

[11] For 2013, IRS reported the cost for an assistor answer call is 
based on calls answered from October 1, 2012 through June 30, 2013. 

[12] GAO, 2010 Tax Filing Season: IRS's Performance Improved in Some 
Key Areas, but Efficiency Gains Are Possible in Others, [hyperlink, 
http://www.gao.gov/products/GAO-11-111] (Washington, D.C.: Dec. 16, 
2010).  

[13] The IRS Oversight Board is an independent body charged to provide 
the IRS with long-term guidance and direction.  

[14] [hyperlink, http://www.gao.gov/products/GAO-11-111].  

[15] GAO, Patient Protection and Affordable Care Act: IRS Managing 
Implementation Risks, but Its Approach Could Be Refined, [hyperlink, 
http://www.gao.gov/products/GAO-12-690] (Washington, D.C., June 13, 
2012). IRS is one of several agencies accountable for implementing 
provisions under the Patient Protection and Affordable Care Act. Among 
other things, IRS is responsible for providing guidance to taxpayers, 
employers, insurers, and others to ensure compliance with new tax 
aspects of the law. 

[16] GAO, IRS Website: Long-Term Strategy Needed to Improve 
Interactive Services, [hyperlink, 
http://www.gao.gov/products/GAO-13-435] (Washington, D.C.: Apr. 16, 
2013).  

[17] [hyperlink, http://www.gao.gov/products/GAO-13-156]. 

[18] The level of service realized in 2014 will depend on a variety of 
factors, including the actual volume and complexity of calls. 

[19] If a taxpayer owes more than $50,000, Form 433-F, Collection 
Information Statement, must also be completed and submitted.  

[20] [hyperlink, http://www.gao.gov/products/GAO-13-156].  

[21] In 2011, IRS announced new steps to help taxpayers with their tax 
liabilities known as the Fresh Start Initiative. Its main goal was to 
change IRS's lien filing practices to lessen the negative effect on 
taxpayers. Subsequent changes to the IA program are considered an 
expansion of Fresh Start. 

[22] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C: November 1999).  

[23] There are more than 40 different types of information returns 
received from third parties such as W-2s, 25 of which are directly 
matched against income tax returns filed by individuals, including 
Form W-2, Wage and Tax Statement, and Form 1099 series. We found that 
most information returns are received after their original due dates, 
which further delays IRS matching process. See GAO, Tax Refunds: IRS 
is Exploring Verification Improvements, but Needs to Better Manage 
Risks, [hyperlink, http://www.gao.gov/products/GAO-13-515] 
(Washington, D.C.: June 4, 2013).  

[24] According to IRS officials we met with, if the taxpayer does not 
respond, IRS can send the taxpayers up to three additional notices to 
request the delinquent return.  

[End of section]  

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