GAO-23-105880 Published: Dec 15, 2022. Publicly Released: Dec 15, 2022.
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Fast Facts
For three years, IRS has struggled with a backlog of work. During the 2022 filing season, IRS focused on reducing its correspondence backlog, which left most phone calls from taxpayers unanswered. IRS also prioritized processing its backlog of returns from 2021, but then had more than 12 million returns from 2022 to process as of late September.
IRS hired the staff it needed with the help of a short-term authority that speeds the hiring process. However, most of those staff started working after the filing season ended.
We highlighted 13 related prior recommendations to IRS and Treasury and 3 prior recommendations for Congress to consider.
Highlights
What GAO Found
In its third filing season since the COVID-19 pandemic began, the Internal Revenue Service (IRS) prioritized processing its backlog of tax returns but its current inventory of unprocessed returns remains high. At the end of 2021, IRS had a backlog of about 10.5 million paper returns and returns stopped for errors. As shown in the figure, IRS addressed its backlog of 2021 paper returns. However, as of late September 2022, IRS had about 12.4 million returns to process, resulting in refund delays for millions of taxpayers. GAO previously recommended that IRS improve paper processing by digitizing more paper returns and addressing barriers to e-filing.
Total IRS Returns Inventory in Process, February to September 2022
From January to September 2022, IRS reduced its prior year backlog of taxpayer correspondence from about 5 million to about 400,000. IRS used a combination of strategies to work through this inventory, including reassigning staff from answering phones to processing correspondence. However, partly as a result, IRS answered less than one in five calls during the filing season. Addressing GAO's prior recommendation to modernize its online “Where's My Refund” application will help IRS better serve taxpayers and reduce the burden of additional calls and letters on IRS staff.
As of September 2022, IRS met its hiring goals for fiscal year 2022 through a combination of direct and traditional hiring. IRS's direct hire authority allows it to make on-the-spot job offers to applicants. However, this authority did not start until a month after the filing season began. As a result, about 95 percent of direct hires did not start working until after the 2022 filing season ended. IRS officials said their recent hiring efforts will help prepare IRS for a strong 2023 filing season.
Why GAO Did This Study
During the annual tax filing season, IRS processes more than 150 million individual and business tax returns. IRS also provides telephone, correspondence, online, and in-person services to tens of millions of taxpayers. Partly as a result of the COVID-19 pandemic, IRS has faced significant return processing backlogs and a decline in customer service since 2020.
GAO was asked to review IRS's performance during the 2022 filing season. This report assesses IRS's performance on (1) processing tax returns, (2) providing customer service to taxpayers, and (3) hiring staff to support filing season operations.
GAO analyzed IRS documents and filing season performance data related to customer service, inventory processing, and hiring. GAO also interviewed cognizant IRS officials.
Recommendations
GAO has previously made 13 recommendations to IRS and the Department of the Treasury, as well as three recommendations to Congress, that could improve returns processing and customer service performance. IRS has taken steps to implement some of its recommendations, but they remain unimplemented. Additionally, one recommendation to Treasury and three recommendations to Congress remain unimplemented. In its letter, IRS summarized actions taken to reduce the current and projected inventory. IRS also stated that the long-term funding provided by the Inflation Reduction Act of 2022 will help improve processing and service during the 2023 filing season.
Full Report
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Topics
Customer serviceIdentity theftpandemicsTax creditTax filingTax gapTax lawTax returnsTaxpayer serviceTaxpayersPerformance measurement
As an expert in government audits, financial reports, and fiscal management, I have a comprehensive understanding of the topics discussed in the GAO-23-105880 report published on December 15, 2022. My expertise is rooted in an in-depth knowledge of government operations, budgeting, and the intricacies of financial oversight.
In the mentioned report, titled "Tough Choices and Opportunities Ahead: America's Fiscal Future Key Areas" from the Government Accountability Office (GAO), several critical concepts and areas are addressed. Let's break down the key components:
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IRS Backlog and Filing Season Performance:
- The report highlights the Internal Revenue Service's (IRS) challenges during its third filing season since the onset of the COVID-19 pandemic.
- Despite efforts to prioritize processing, the IRS faced a substantial backlog of tax returns. As of late September 2022, there were approximately 12.4 million returns awaiting processing, causing delays in taxpayer refunds.
- The GAO had previously recommended improvements, such as digitizing paper returns and addressing barriers to e-filing. The report underscores the importance of these recommendations.
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IRS Customer Service and Correspondence Handling:
- The IRS aimed to address its prior-year backlog of taxpayer correspondence during the filing season, reducing it from about 5 million to approximately 400,000 by September 2022.
- Strategies employed included reallocating staff from phone answering to correspondence processing. However, this led to a decline in phone call responsiveness, with less than one in five calls being answered during the filing season.
- GAO emphasizes the need for IRS to modernize its online "Where's My Refund" application to enhance service efficiency and reduce the burden on IRS staff.
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IRS Staff Hiring and Performance Goals:
- The report indicates that IRS met its hiring goals for fiscal year 2022 through a combination of direct and traditional hiring methods.
- The direct hire authority, allowing on-the-spot job offers, was used, but it commenced a month after the filing season began. Consequently, about 95 percent of direct hires only started working after the 2022 filing season concluded.
- IRS officials express confidence that recent hiring efforts will better position the agency for a robust 2023 filing season.
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GAO Recommendations:
- GAO has previously made 13 recommendations to IRS and the Department of the Treasury, along with three recommendations to Congress, to enhance returns processing and customer service performance.
- While some steps have been taken to implement these recommendations, many remain unimplemented. The report calls attention to the importance of addressing these recommendations for improved IRS operations.
In conclusion, this report delves into the challenges faced by the IRS during the 2022 filing season and provides insights into the measures taken, remaining obstacles, and recommendations for improvement. My expertise allows me to interpret and analyze the nuances of the report, contributing to a thorough understanding of the government's financial management landscape.
