GAO 

United States Government Accountability Office

Report to Congressional Requesters

2009 TAX FILING 

SEASON 

IRS Met Many 2009 

Goals, but Telephone 

Access Remained 

Low, and Taxpayer 

Service and 

Enforcement Could 

Be Improved 

December 2009 

GAO-10-225 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

December 2009

2009 TAX FILING SEASON

IRS Met Many 2009 Goals, but Telephone Access

Remained Low, and Taxpayer Service and 

Highlights of GAO-10-225, a report to Enforcement Could Be Improved 

congressional requesters 

The Internal Revenue Service’s 

(IRS) filing season is an enormous 

undertaking that includes 

processing tax returns, issuing 

refunds, and responding to 

taxpayer questions. IRS’s efforts to 

ensure compliance begin during the 

filing season. GAO was asked to 

assess IRS’s 2009 filing season 

performance, identify ways to 

reduce taxpayers’ use of shortterm, high-interest refund 

anticipation loans (RAL) offered by 

paid preparers or banks, and 

identify ways to enhance 

compliance during processing. 

GAO analyzed IRS performance 

data, reviewed IRS operations, 

interviewed IRS officials, and 

reviewed its compliance programs 

and relevant statutes. 

What GAO Recommends

GAO suggests that Congress 

provide IRS authority to 

automatically verify the number of 

years the Hope education tax credit 

is claimed. 

GAO makes 7 recommendations 

including that IRS develop a plan to 

analyze its telephone data, work 

with the other entities involved in 

issuing refunds to improve 

timeliness, determine the feasibility 

of offering debit cards for refunds, 

and revise the Form 1098-T to 

improve its usefulness to taxpayers 

and IRS. 

In response, the IRS Deputy 

Commissioner agreed with five 

recommendations and described 

some steps the agency is taking on 

the other two. 

IRS processed 139 million returns and issued $298 billion in refunds as of 

October 2, 2009. Electronic filing, which provides IRS with significant cost 

savings and taxpayers with faster refunds, increased to 68 percent of all 

returns filed. While taxpayers’ access to telephone assistors was better than 

last year, it remained lower than in 2007 in part because of calls about tax law 

changes. Compared to 2005 through 2007, IRS reduced its goal for assistor 

answered calls in 2009 and set its 2010 goal at 71 percent. Despite heavy call 

volume, the accuracy of IRS responses to taxpayers’ questions remained 

above 90 percent. IRS started a major data collection effort on why taxpayers 

call, but lacks a plan to analyze the data and improve telephone service. 

Filing Season Workload and Performance Indicators, 2007 to 2009 

Amounts in millions 

2007 2008a 2009

Individual tax returns processed 

Electronic returns 79 88 94

Paper returns 56 54 45

Total 135 142 139

Refunds

Total refunds 104 105 109

Dollar amount of refunds (in billions) $234 $247 $298

Refund anticipation loans 10 10 8

Source: GAO analysis of IRS data. 

a

Excludes 9 million stimulus-only returns. 

According to IRS, issuing refunds faster reduces taxpayers’ use of RALs, highinterest loans made by paid tax preparers or banks in anticipation of a refund. 

Issuing refunds is a joint effort by IRS, Treasury’s Financial Management 

Service, which checks for non-tax debt owed to the federal government, and 

the Automated Clearing House, which distributes funds. However, IRS has not 

coordinated extensively with them to expedite refunds. Further, IRS has not 

studied the use of debit cards for unbanked taxpayers, which could also 

reduce taxpayers’ use of RALs by providing faster and more secure refunds. 

IRS automatically identifies and corrects select types of errors while 

processing tax returns. It could also correct tax returns that claim the Hope 

credit, a tax credit to help offset qualified education expenses, for longer than 

the number of years allowed. However, IRS lacks the authority to use prior 

years’ tax return information for this purpose. Also, information reported by 

education institutions to taxpayers and IRS about qualifying educational 

expenses on the Form 1098-T is confusing for taxpayers and not useful for 

IRS. Many institutions report the total amount billed to students, but not what 

is actually paid after taking into account scholarships and grants. This results 

in some taxpayers under-claiming benefits, while others over-claim. Finally, 

because Form 1098-T can show the amount billed, which may not be the 

amount paid, IRS is unable to use the information to automatically verify 

taxpayers’ claims for the credit through its computerized matching program. 

View GAO-10-225 or key components.

For more information, contact James White at 

(202) 512-9110 or whitej@gao.gov. 
Page i GAO-10-225 

Contents 

Letter 1

Scope and Methodology 3 

Background 4 

Access to Telephone Assistors Remained Low, and IRS Has a 

Limited Understanding of Why Taxpayers Call and Has Not 

Clearly Integrated TAB into Its Planning Documents 7 

RAL Usage Declined in 2009 and IRS Could Further Reduce Usage 

by Issuing Faster Refunds 18 

During Returns Processing IRS Could Reduce Taxpayer Confusion 

and Better Ensure Compliance with Higher Education Tax 

Benefits 24 

Conclusions 26 

Matters for Congressional Consideration 27 

Recommendations for Executive Action 27 

Agency Comments and Our Evaluation 28 

Appendix I Comments from the Internal Revenue Service 30 

Appendix II IRS’s Existing and Suggested Math Error Authority 

for Enhancing Compliance 37 

Appendix III IRS’s Processing Performance Relative to 2004 

Through 2008 and 2009 Goals 39 

Appendix IV IRS Toll-Free Calls and Percentage of Callers Seeking 

and Receiving Live Assistance for 2009 and 2008 41 

Appendix V Key Facts on Selected Tax Benefits for Higher Education

42 

Appendix VI GAO Contact and Staff Acknowledgments 44 

 IRS's 2009 Filing Season 
Tables 

Table 1: Individual Income Tax Returns and Refunds Processed, 

2005 through 2009 7

Table 2: Individual Income Tax Returns and Refunds Processed on 

CADE, 2006 through 2009 9

Table 3: IRS Telephone Service Goals and Performance, 2005 

through 2010 Filing Seasons 11

Table 4: Calls to IRS by Call Type, 2005 through 2009 12

Table 5: IRS Telephone Assistor Accuracy Performance, 2005 

through 2009 13

Table 6: IRS Web Site Use, 2005 through 2009 15

Table 7: RALs and RACs Requested by Taxpayers, 2007 through 

2009 19

Table 8: IRS’s Existing and Suggested MEA 37

Table 9: IRS Processing Performance, Fiscal Years 2005 through 

2009 39

Table 10: Select Tax Benefits for Higher Education—Tax Year 2008 42

Figures 

Figure 1: Income Tax Refund Processing Time line for 

Electronically Filed Returns with Direct Deposit by 

Processing Component 21

Figure 2: Weekly Toll-free Calls and Percentage of Callers Seeking 

and Receiving Live Assistance from January 1 to June 28, 

2009, and June 30, 2009 41

Page ii GAO-10-225 IRS's 2009 Filing Season
Abbreviations 

ACH Automated Clearing House 

AGI adjusted gross income 

BSM Business System Modernization 

EITC Earned Income Tax Credit 

FDIC Federal Deposit Insurance Corporation 

FMS Financial Management Service 

IMF individual master file 

IRA Individual Retirement Accounts 

ITLA Interactive Tax Law Assistant 

IRS Internal Revenue Service 

MEA math error authority 

PIN personal identification number 

QSS Quality Statistical Sample 

RAC refund anticipation check 

RAL refund anticipation loan 

TAB Taxpayer Assistance Blueprint 

TIGTA Treasury Inspector General for Tax Administration 

TIN taxpayer identification number 

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Page iii GAO-10-225 IRS's 2009 Filing Season
Page 1 GAO-10-225 

 

United States Government Accountability Office

Washington, DC 20548 

 

December 10, 2009 

The Honorable Max Baucus 

Chairman 

The Honorable Charles E. Grassley 

Ranking Member 

Committee on Finance 

United States Senate 

The Honorable John Lewis 

Chairman 

The Honorable Charles W. Boustany, Jr. 

Ranking Member 

Subcommittee on Oversight 

Committee on Ways and Means 

House of Representatives 

The Internal Revenue Service’s (IRS) 2009 filing season is an enormous 

and critical undertaking.1

 Last filing season, IRS processed over 140 

million individual income tax returns and issued over 100 million refunds. 

IRS also answered tens of millions of taxpayer questions through 

telephone, Web site, and face-to-face assistance. During each of the last 

two filing seasons, IRS has been called upon to quickly implement 

complex tax law changes, including economic stimulus policies that have 

resulted in unexpected increases in call volume and created new taxpayer 

compliance challenges and workload.2

IRS’s filing season performance also has indirect effects on taxpayers. For 

example, timely issuance of refunds can reduce taxpayer demand for 

1

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. 

2

Millions of taxpayers qualified for the recovery rebate credit contained in the Economic 

Stimulus Act of 2008, Pub. L. No. 110-185, 122 Stat. 613 (2008). Taxpayers who did not 

receive the full economic stimulus payment in 2007 can claim some or all of the unpaid 

credit on their 2008 return. The Housing and Economic Recovery Act of 2008 included a 

first-time homebuyer credit of up to $7,500 for homes purchased in 2008 that must be paid 

back over 15 years, Pub. L. No. 110-289, 122 Stat. 2654 (2008). The American Recovery and 

Reinvestment Act of 2009 increased the maximum credit to $8,000 and eliminated the 

payback provision for homes purchased before December 1, 2009, Pub. L. No. 111-5, 123 

Stat. 115 (2009). 

 IRS's 2009 Filing Season
 

refund anticipation loans (RAL), which are short-term, often high-interest 

loans offered by tax preparers or banks that allow taxpayers to receive 

their refund cash quickly, sometimes within the same day.3

 The filing 

season is also the time IRS begins its enforcement efforts with its math 

error program, in which IRS uses its computers to identify errors during 

processing, such as calculation mistakes or omitted or inconsistent 

entries. Where IRS has the statutory authority, also known as math error 

authority (MEA), it corrects certain errors before interest is owed by 

taxpayers, and helps taxpayers and IRS avoid burdensome audits.4

Earlier this year, we provided an interim assessment of IRS’s 2009 filing 

season performance, made recommendations to improve IRS’s 2010 filing 

season performance, and made suggestions to Congress to better ensure 

compliance, when tax returns are being processed, with the first-time 

homebuyer tax credit.5

 In light of its importance, the Chair and Ranking 

Member of Subcommittee on Oversight, Committee on Ways and Means, 

House of Representatives, and the Chair and Ranking Members of the 

Senate Finance Committee asked us to provide an overall assessment of 

IRS’s 2009 filing season performance. For this report, our objectives were 

to 

1. assess IRS’s filing season performance compared to 2009 goals and 

prior years’ performance; 

2. identify opportunities for IRS to reduce taxpayers’ reliance on RALs 

and Refund Anticipation Checks (RAC); and 

3. identify opportunities, based on prior GAO reports such as those on 

higher education tax benefits, for IRS to enhance taxpayer compliance 

during returns processing. 

 

3

GAO, Refund Anticipation Loans, GAO-08-800R (Washington, D.C.: June 5, 2008). 

4

IRS is granted MEA in 26 U.S.C. § 6213(b). It can only be used for certain purposes 

specified by the Congress in 26 U.S.C. § 6213(g)(2). If it is not specified in the statute, IRS 

cannot pursue assessment and collection activities without issuing a statutory notice of 

deficiency. 

5

See GAO, Tax Administration: Interim Results of IRS’s 2009 Filing Season, GAO-09-640 

(Washington, D.C.: June 3, 2009); GAO, Tax Administration: Opportunities Exist for IRS 

to Enhance Taxpayer Service and Enforcement for the 2010 Filing Season, GAO-09-1026 

(Washington, D.C.: Sept. 23, 2009); and GAO, First-time Homebuyer Tax Credit: 

Taxpayers’ Use of the Credit and Implementation and Compliance Challenges, 

GAO-10-166T (Washington, D.C.: Oct. 22, 2009). 

Page 2 GAO-10-225 IRS's 2009 Filing Season
 

To meet our three objectives, we took the following steps. 

• Reviewed and analyzed IRS reports, testimonies, budget submissions, 

and other documents and data, including performance and workload 

data, and compared these to IRS’s goals and past performance to 

identify trends and anomalies in performance. We also tested for 

statistically significant differences between annual performance rates 

based on IRS sample data. 

Scope and 

Methodology 

• Observed operations at the Joint Operations Center (which manages 

IRS’s telephone services) and IRS’s walk-in sites in Atlanta, Ga. and 

Baltimore, Md. and a volunteer site in Washington, D.C. We selected 

these particular offices for a variety of reasons, including the location 

of key IRS managers; 

• Analyzed staffing data for paper and electronic filing, telephone 

assistance, and walk-in assistance. 

• Reviewed information from other organizations who compile 

information pertinent to our objective, such as Keynote Systems, which 

evaluates Internet performance. 

• Reviewed IRS reports and analyzed IRS data on RALs and RACs to 

identify trends and opportunities to reduce taxpayers’ reliance on 

them. 

• Reviewed IRS data and analyzed methods IRS currently employs to 

identify taxpayer compliance with eligibility requirement for higher 

education tax benefits. 

• Reviewed MEA-related statutes to determine IRS’s existing and 

possible new authorities. 

• Interviewed IRS officials about current operations, trends, and 

significant factors and initiatives that affected performance; efforts to 

reduce reliance on RALs and RACs; and monitoring and oversight of 

compliance issues, including higher education credit claims. 

• Interviewed representatives of some of the larger private and nonprofit 

organizations that prepare tax returns, including H&R Block and trade 

organizations that represent both individual paid preparers, tax 

preparation companies, and professional associations, including the 

American Institute of Certified Public Accountants. 

• Reviewed Treasury Inspector General for Tax Administration (TIGTA) 

reports and interviewed a TIGTA official about IRS’s performance and 

initiatives. 

• Reviewed prior GAO reports and followed up on our recommendations 

made in filing season and related reports. 

This report discusses numerous filing season performance measures and 

data covering the quality, accessibility, and timeliness of IRS’s services 

that, based on our prior work, we consider sufficiently objective and 

reliable for purposes of this report. To the extent possible, we 

Page 3 GAO-10-225 IRS's 2009 Filing Season
 

corroborated information from interviews with documentation and data 

and where not possible, we attribute the information to IRS officials in our 

report. We reviewed IRS documentation, interviewed IRS officials about 

computer systems and data limitations, and compared those results to our 

standards of data reliability.6

 Data limitations are discussed where 

appropriate. Finally, we conducted our work primarily at IRS headquarters 

including at the Small Business/Self-Employed Division in Washington, 

D.C., and the Wage and Investment Division headquarters in Atlanta, Ga. 

as well as the other sites mentioned earlier. We conducted this 

performance audit from January 2009 through December 2009 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. 

We received technical and written comments on a draft of this report, 

which we addressed. A letter from the IRS Deputy Commissioner for 

Services and Enforcement providing those comments is reprinted in 

appendix I. In that letter, the Deputy Commissioner explicitly agreed with 

five of our recommendations and described the steps IRS is taking with 

respect to our two other recommendations. 

Most taxpayers file their individual income tax returns electronically, 

although millions still mail paper returns. Compared to paper, electronic 

filing allows taxpayers to receive refunds faster, is less prone to 

transcription and other errors, and provides IRS with significant cost 

savings. Last year we reported that IRS estimated it used 39 percent fewer 

staff years for processing tax returns in 2007 than in 1999 for a savings of 

$85 million.7

Background 

• The Free File program provides taxpayers below an income ceiling 

with access to a consortium of tax preparation companies that offer 

free on-line tax preparation and filing services for qualifying taxpayers.8

 

6

GAO, Assessing the Reliability of Computer-Processed Data, GAO-02-15G (Washington, 

D.C.: Sept.1, 2002). 

7

See GAO, Internal Revenue Service: Fiscal Year 2009 Budget Request and Interim 

Performance Results of IRS’s 2008 Tax Filing Season, GAO-08-567 (Washington, D.C.: 

Mar. 13, 2008). 

8

Taxpayers with an adjusted gross income of $56,000 or less in 2008 can access the Free 

File program offered through IRS’s Web site. 

Page 4 GAO-10-225 IRS's 2009 Filing Season
 

• CADE, part of IRS’s high-risk Business System Modernization program 

(BSM), is intended to eventually replace IRS’s antiquated Master File 

legacy processing system and facilitate faster refund processing and 

provide IRS with more up-to-date account information.9

Primarily through its telephone, Web site, and, to a much lesser extent, 

through its face-to-face assistance, IRS also provides tax law and account 

assistance, limited return preparation, tax forms and publications, and 

outreach and education. 

• IRS staff provides assistance at 401 walk-in sites where taxpayers can 

receive basic tax law assistance, receive assistance with their accounts, 

and have returns prepared by IRS if their annual income is $42,000 or 

less. 

• IRS also has volunteer partners that staff over 12,000 sites, which help 

serve traditionally underserved taxpayer segments, including elderly, 

low-income, and disabled taxpayers, and taxpayers with limited 

English proficiency. 

IRS developed the Taxpayer Assistance Blueprint (TAB), a 5-year plan 

designed to assist the agency in providing, evaluating, and improving 

taxpayer services at lower cost. TAB also provided estimates of the costper-service contact for different types of taxpayer services and conducted 

preliminary research about the effect of taxpayer service on compliance. 

IRS delivered an update of TAB to Congress in October 2009. 

Millions of taxpayers who do not want to wait for their tax refunds from 

IRS choose to obtain RALs, which are offered by paid preparers or banks 

to taxpayers in connection with federal and/or state tax refunds. 

• RALs are short-term, high interest rate bank loans. We found that the 

annual percentage rate on RALs can be over 500 percent, RALs offer 

taxpayers the benefit of receiving cash quickly based on an expected 

refund.10 Combined with tax preparation fees, RALs may considerably 

 

9

IRS’s highly complex, multibillion-dollar Business System Modernization (BSM) program 

is critical to (1) transforming the agency’s manual paper-intensive business operations, (2) 

fulfilling its obligations under the IRS Restructuring and Reform Act, and (3) providing 

more reliable and timely financial management to allow IRS to better justify resource 

allocation decisions and budgetary requests. Despite progress in improving modernization 

management controls and capabilities and addressing long-standing financial management 

weaknesses, significant challenges and serious risks remain. (See GAO, High-Risk Series: 

An Update, GAO-09-271 (Washington, D.C.: January 2009). 

10GAO-08-800R. 

Page 5 GAO-10-225 IRS's 2009 Filing Season
 

reduce a taxpayer’s refund. However, RALs remain popular, especially 

among low-income taxpayers. 

• RAL providers might also offer RACs, which are not loans, but instead 

are a refund delivery option where IRS direct deposits a refund into a 

temporary account set up by a financial institution, which withdraws 

the tax return preparation fee, and then makes the remaining funds 

available to the taxpayer. RALs and RACs allow taxpayers to pay return 

preparation and fees out of their refunds. 

IRS uses its many tools to identify and correct noncompliance, whether 

intentional or unintentional. 

• Over the years, Congress granted IRS statutory authority to cover 

specific areas so that the agency could correct tax return errors during 

processing, including calculation errors and entries that are 

inconsistent or exceed statutory limits, without having to issue the 

taxpayer a statutory notice of deficiency (see app. II for details). Math 

error checks are automated and low-cost relative to audits. Prompt 

compliance checks, such as math error checks, increase the likelihood 

of IRS collecting all or part of the amount owed.11 However, IRS must 

be granted MEA from Congress by statute for specific purposes, and as 

noted above, we recently suggested areas where IRS could benefit from 

new authorities. 

• IRS gets most of the information returns during the filing season. These 

returns are provided by third parties, such as employers, banks, or 

educational institutions, file returns with IRS and taxpayers that 

provide information on a variety of taxpayer transactions. IRS tries to 

match information from the information returns filed by third parties 

against taxpayers’ income tax returns to see if taxpayers have filed 

returns and reported their income and expenses. This approach tends 

to lead to high levels of taxpayer compliance. 

 

11GAO, Tax Administration: IRS’s 2008 Filing Season Generally Successful Despite 

Challenges, although IRS Could Expand Enforcement during Returns Processing, 

GAO-09-146 (Washington, D.C.: Dec. 12, 2008). 

Page 6 GAO-10-225 IRS's 2009 Filing Season
 

As of October 2, 2009, IRS processed 139 million individual income tax 

returns. As shown in table 1, 94 million taxpayers (68 percent) 

electronically filed their returns compared to 88 million (62 percent) last 

year, excluding the 9 million stimulus-only returns.12 Electronic filing 

provides IRS with significant cost savings—IRS estimates the cost savings 

of electronic filing to be $2.71 per return over the costs in 2008. It helps 

taxpayers to receive their refunds faster and aids IRS in achieving the 

electronic filing goal of having 80 percent of all federal tax and 

information returns filed electronically by 2012.13 IRS issued approximately 

109 million refunds, up 4 million from last year, for $298 billion. 

Approximately 66 percent of all refunds were directly deposited, 9 percent 

more than last year. This increase is important, because direct deposit is 

faster, more convenient for taxpayers, and less expensive for IRS than 

mailing paper checks. 

Access to Telephone 

Assistors Remained 

Low, and IRS Has a 

Limited 

Understanding of Why 

Taxpayers Call and 

Has Not Clearly 

Integrated TAB into 

Its Planning 

Documents 

Table 1: Individual Income Tax Returns and Refunds Processed, 2005 through 2009 

Amounts in millions 

2005 2006 2007 2008a2009

Percentage 

change 

from 2008 

to 2009

Individual tax returns 

processed 

Electronic returns 65 72 79 88 94 6

Paper returns 62 59 56 54 45 -16

Total 127 131 135 142 139 -2

Refunds 

Total refunds 99 99 104 105 109 4

Dollar amount of refunds 

(in billions) 

$210 $219 $234 $247 $298 20

Average refund amountb $2,126 $2,206 $2,259 $2,347 $2,735 16

Number of direct deposits 53 56 61 66 72 9

Source: GAO analysis of IRS data. 

 

12The Economic Stimulus Act of 2008 mandated that IRS send stimulus payments to 

millions of households. Many taxpayers that were exempt from filing a tax return did file in 

2008 to receive the stimulus payment. See GAO-09-146. 

13The original goal was 80 percent by 2007, but Congress revised the time frame to 2012. 

Pub. L. No. 105-206 (1998). See, for example, GAO, Tax Administration: Most Filing 

Season Services Continue to Improve, but Opportunities Exist for Additional Savings, 

GAO-07-27 (Washington, D.C.: Nov. 15, 2006). 

Page 7 GAO-10-225 IRS's 2009 Filing Season
 

Note: Data from January 1 through September 30, 2005, September 29, 2006, September 28, 2007, 

September 26, 2008, and October 2, 2009. 

a

Excludes the 9 million stimulus-only returns processed by IRS as of September 26, 2008. 

b

Actual dollar amount, not in millions. 

IRS attributes the increase in electronic filing, in part, to a 19 percent 

increase in people filing from home computers, which may be related to 

the elimination of separate fees for electronic filing.14 According to IRS, the 

elimination of fees by some paid preparers also contributed to the decline 

in the Free File program—as of September 20, 2009, the number of 

taxpayers who filed through Free File decreased to 3 million, down 37 

percent from last year. IRS also attributed part of the decrease to the 

migration of taxpayers to other free offers in the marketplace. The Free 

File program offered a new option this year, fillable forms, that allow 

taxpayers to download forms from IRS and fill them in on a home 

computer without using tax preparation software. About 270,000 

taxpayers used this option. 

Finally, IRS met or exceeded its goals for six out of eight of the processing 

measures (see app. II for details). For example, IRS exceeded its goals for 

refund timeliness, and deposit timeliness and accuracy. The one measure 

where performance was significantly below IRS’s goal and last year’s level 

was the correspondence error rate, which is the percentage of incorrect 

notices and letters issued to taxpayers. According to IRS officials, this 

resulted from a high number of erroneous notices sent to taxpayers during 

the filing season related to the recovery rebate credit.15 In our interim 

report, we noted that millions of tax returns had these types of errors, 

which resulted in a delay in refund timeliness from 1 day to a week. IRS 

took actions to address the errors, including developing an automated tool 

to correct the errors more quickly.16

 

14GAO, Tax Administration: Many Taxpayers Rely on Tax Software and IRS Needs to 

Assess Associated Risks, GAO-09-297 (Washington, D.C.: Feb. 25, 2009). 

15During the 2009 filing season, the recovery rebate credit was available to taxpayers who 

did not receive the economic stimulus payment or who were entitled to an additional 

payment based on information on their tax year 2008 tax return. Millions of taxpayers made 

errors calculating credit amounts and received math error notices notifying them of the 

change(s) made to the return. 

16GAO-09-640. 

Page 8 GAO-10-225 IRS's 2009 Filing Season
 

IRS’s CADE processed 40 million tax returns and 35 million refunds worth 

$59 billion. This accounts for about 29 percent of all returns processed. 

CADE processes returns and refunds between 1 and 8 days faster than 

legacy systems. Additionally, for the first time this year, CADE processed 

returns with payments to IRS—7 million returns with payments of $9 

billion. 

Work to Increase CADE 

Functionality Has Been 

Suspended While IRS 

Develops a New Strategy 

for Modernizing Taxpayer 

Accounts 

Table 2: Individual Income Tax Returns and Refunds Processed on CADE, 2006 

through 2009 

Amounts in millions 

2006 2007 2008 2009

Percentage 

change 

from 2008 

to 2009

Returns processed 7 13 31 40 31

Refunds issued 7 11 29 35 21

Dollar amount of refunds issued 

(in billions) 

3 12 44 59 33

Payments receiveda NA NA NA 7 NA

Source: GAO analysis of IRS data. 

Note: Data from January 1 through mid-September. NA means not applicable. 

a

Beginning in 2009, CADE has the capability of processing certain returns with payments. 

After over 5 years and $400 million, CADE is only processing about 15 

percent of the functionality originally planned for completion by 2012.17 In 

addition, each successive release of the system was expected to process 

more complex returns and several technical challenges had not been 

addressed. Given this, IRS estimated that full implementation of CADE 

would not be achieved until at least 2018 or possibly as late as 2028. As a 

consequence, IRS decided to stop development of new CADE functionality 

and rethink its strategy for modernizing individual taxpayer accounts to 

determine whether an alternative approach could deliver improvements 

sooner. IRS also stopped its plans for adding new functionality to a CADErelated system that allows its telephone assistors to access and work with 

taxpayer accounts. According to IRS officials, the need to enhance 

computer security and the availability of new technologies also influenced 

the decision to rethink the CADE strategy. 

 

17This is based on the percentage of functions, forms, and transactions IRS reports having 

delivered to date. 

Page 9 GAO-10-225 IRS's 2009 Filing Season
 

Stopping CADE development has trade-offs in that IRS will not be able to 

materially increase the number of returns processed on CADE during the 

2010 filing season, which, in turn, means that the number of taxpayers 

benefiting from faster refund processing will not increase.18

On the other hand, IRS’s new strategy for modernizing individual taxpayer 

accounts is intended to address the risks and challenges of the initial 

approach. Importantly, IRS officials responsible for implementing this new 

strategy told us that they expect to provide all taxpayers with faster refund 

processing by the 2012 filing season. IRS plans to do this by continuing 

daily processing of the roughly 40 million taxpayer accounts currently on 

CADE while converting the legacy Individual Master File system from 

weekly to daily processing for the roughly 100 million remaining accounts. 

IRS also plans to develop a new database that would be the single 

authoritative source of taxpayer account information and use the new 

database for daily processing by 2014. 

IRS established a program management office to guide the implementation 

of the new strategy and developed a preliminary road map and high-level 

cost estimates for the effort. It also defined the overall business benefits 

the strategy is expected to provide. IRS officials also stated that they are 

working on a more detailed plan for the strategy, including milestones, 

deliverables, and detailed costs for the first phase of the strategy and 

expect to have them completed in December. These documents as well as 

plans for fully implementing the new strategy are critical to justifying IRS’s 

change in direction and we plan to evaluate them as part of the review of 

IRS’s fiscal year 2010 Business Systems Modernization expenditure plan, 

which we recently initiated.19

 

18The changes to CADE for the 2010 filing season will primarily be legislative changes and 

improvements to existing functions. 

19Business Systems Modernization funds (except labor costs) are unavailable until IRS 

submits a modernization expenditure plan to the congressional appropriations committees 

and obtains their approval. The appropriation that funds IRS requires GAO to review this 

plan. We have also initiated a more detailed review of the new strategy at the request of the 

House Appropriations Subcommittee on Financial Services and General Government and 

plan to report on the results of this review within the next year. 

Page 10 GAO-10-225 IRS's 2009 Filing Season
 

As shown in table 3, taxpayers’ access to IRS’s telephone assistors was 

better than last year, but was below IRS’s original goal for 2009 and 

remains well below 2005 through 2007 performance. 

Table 3: IRS Telephone Service Goals and Performance, 2005 through 2010 Filing 

Seasons 

Access to Telephone 

Assistors Remained Low 

for the Second Year in a 

Row and IRS Decreased Its 

2010 Access Goal 

2005 2006 2007 2008 2009

Fiscal 

year 2010

Percentage of callers seeking Actual 82 81 81 57 68 NA

live assistance who received 

it Goal 82 82 82 82a

77b71

Average wait time goal 

(minutes) 

2.8 5 4.3 4.4 10 NA

Actual average wait time 

(minutes) 

4.3 3.9 4.6 8.6 8.4 NA

Source: GAO analysis of IRS data. 

Note: Data from January 1 through June 30. NA means not applicable. 

a

IRS revised its original goal of 82 percent down to 74 percent because of high call volume due to 

stimulus-related questions. 

b

IRS revised its original filing season goal of 77 percent down to 67.8 percent because of high call 

volume from taxpayers requesting electronic filing authentication information and asking stimulusrelated questions. 

IRS reduced its 2009 goal for providing assistor services from the goals for 

2005 through 2008, as shown in table 3. IRS initially set the fiscal year 2009 

goal for the percentage of taxpayers seeking assistor service who actually 

received it at 77 percent.20 Perhaps more importantly, IRS reduced the goal 

for 2010 to 71 percent. According to IRS officials, the goals were reduced 

because of resource trade-offs related to call volume increases starting in 

2008. 

As shown in table 4, IRS’s call volume in 2008 and 2009 was substantially 

higher than in prior years. Although IRS received 40 million fewer calls in 

2009 than in 2008, the volume was still well above earlier years.21 While 

 

20IRS subsequently reduced this goal to 68 percent in April 2009 due largely to increased 

call volume related to electronic filing authentication and stimulus-related questions. IRS 

also increased its wait time goal, and the average time a taxpayer waits to speak with an 

assistor remains over 8 minutes, nearly twice the average wait times between 2005 and 

2007. 

21Unlike last year, when so many calls came in after the filing season, between April and 

June, this year call volume was heaviest during February (see app. IV for graphic 

illustrations of weekly call volume). 

Page 11 GAO-10-225 IRS's 2009 Filing Season
 

IRS’s automated call systems answered an increasing number of calls, the 

number of calls abandoned by taxpayers, busy signals, and calls 

disconnected by IRS also went up substantially. This may have limited 

many taxpayers from reaching IRS assistors with questions. 

Table 4: Calls to IRS by Call Type, 2005 through 2009 

Amounts in millions 

2005 2006 2007 2008 2009

Percentage 

change from 

2008 to 2009

Assistor calls answered 22 21 22 27 26 -4

Abandoned calls 11 12 13 34 21 -38

Busies and IRS disconnects 1 2 1 14 5 -64

Automated calls answered 23 22 21 43 25 -42

Total calls received 58 57 57 118 78 -34

 Source: GAO analysis of IRS data. 

Note: Data from January 1 through June 30. 

IRS attributed the heavier-than-anticipated call volume in part due to 

stimulus-related questions and taxpayers needing authentication 

information. Taxpayers had to provide their last year’s adjusted gross 

income (AGI) or personal identification number (PIN) to authenticate 

their identity in order to electronically file. Taxpayers who did not know 

their AGI or PIN and tried to get it from IRS had to call an assistor or visit 

an IRS walk-in site. While IRS took actions to minimize the effect of these 

calls, heavy volume continued through the filing season. According to IRS, 

its assistors answered 3 million calls from taxpayers needing their AGI, 

nearly 10 percent of all assistor calls, at a cost of $36 million through June 

2009. 

We recently reported that IRS is developing an automated Web and phone 

application to provide taxpayers with authentication information for 

electronic filing in the 2010 filing season.22 In that report, we also made 

recommendations to improve telephone service by reducing the volume of 

telephone calls, which could improve taxpayer access to IRS assistors. For 

example, in addition to recommending ways to reduce the number of 

rejected returns, which often lead to taxpayers calling IRS, we 

 

22GAO-09-1026. 

Page 12 GAO-10-225 IRS's 2009 Filing Season
 

recommended that IRS develop a low-cost automated method to respond 

to taxpayer questions about volunteer site locations and hours of 

operation. IRS is in the process of addressing those recommendations. 

Despite the heavy call volume, the accuracy of the telephone assistors’ 

responses to tax law and account questions was higher by a statistically 

significant amount compared to the same period last year and exceeded 

IRS’s fiscal year 2009 goals (see table 5). Since 2005, IRS has maintained a 

level of accuracy of about 90 percent or more. According to IRS officials, 

the high accuracy is due to training and the introduction of new tools, 

particularly the Interactive Tax Law Assistant (ITLA), which is a Webbased probe and response guide to help assistors provide more accurate 

and consistent responses to specific tax law questions. 

Table 5: IRS Telephone Assistor Accuracy Performance, 2005 through 2009 

2005 

actual

2006 

actual

2007 

actual

2008 

actual 

2009 

actual 

Fiscal year 

2009 goals 

Accuracy measuresa

Tax law accuracy 

rate (in percent)b

89.5 

+/-0.6 

90.6 

+/-0.6 

90.7

+/-.9

90.3 

+/-.9 

92.5

+/-0.8

91.0

Accounts accuracy 

rate (in percent)b

91.3 

+/-0.4

93.3 

+/-0.3

93.2

 +/-0..5

93.5 

+/-0.4 

95.1

+/- 0.4

93.5

Source: GAO analysis of IRS data. 

a

Based on representative samples from January through June. 

b

The percentage of calls in which telephone assistors provided accurate answers for the call type and 

took the appropriate action, with a 90 percent confidence interval. 

IRS has limited information on why taxpayers call to speak IRS assistors. 

To help obtain better information on why taxpayers call, IRS recently 

implemented a major data collection effort called Contact Analytics at all 

its 26 call sites. According to IRS, Contact Analytics is a significant 

investment that will allow IRS to search recorded telephone interactions 

between taxpayers and IRS assistors for key words or phrases. It is 

intended to improve service by providing IRS with a research tool to better 

understand why taxpayers are calling and take corrective action if 

IRS Has a Limited 

Understanding of Why 

Taxpayers Call 

Page 13 GAO-10-225 IRS's 2009 Filing Season
 

necessary as well as identify areas to reduce costs, such as identifying 

calls that can be moved to self-service.23

However, the agency does not have a comprehensive and detailed analysis 

plan for effectively using Contact Analytics data to determine how to 

improve taxpayer service or reduce costs. According to IRS officials, 

because Contact Analytics is a new program and data is only beginning to 

be collected, IRS has not yet considered a plan to analyze the data 

produced by the program. IRS officials recently indicated that now that 

Contact Analytics has been implemented, they intend to eventually 

develop an analysis plan. However, a standard approach for major data 

collection efforts is to develop a research plan before data collection 

begins. Such a plan helps ensure that necessary data is collected and that 

resources are not wasted collecting information that will not be needed.24

Now that IRS is actually collecting the data, the lack of a research plan 

delays the time when improvements to taxpayer service, based on the 

results of the research, could be implemented. Having a comprehensive 

and detailed analysis plan that includes, for example, a research design, 

dissemination of results, and involvement of relevant stakeholders, 

provides a number of benefits, perhaps most importantly, increasing the 

likelihood that the analysis will yield methodologically sound results, 

thereby supporting effective policy decisions.25

While many taxpayers require service from live assistors, diverting calls to 

automated services is also important because of the costs involved—IRS 

assistors answered about 26 million calls between January 1, 2009 and 

June 30, 2009 at a cost of $25.75 per call, for a total of $670 million. Also, 

taxpayers would benefit from reduced wait times and having the capability 

to obtain information immediately and without having to speak to an 

assistor. 

 

23Contact Analytics is one of the 55 initiatives outlined in the Taxpayer Assistance Blueprint 

(TAB), and is directly linked to the Improving Taxpayer Services goal as well as the 

Electronic Interaction Enablement and Telephone Service Enhancements objectives. 

24See GAO, Quantitative Data Analysis: An Introduction, GAO-10.1.11 (Washington D.C.: 

May 1992). 

25GAO, Earned Income Tax Credit: Implementation of Three New Tests Proceeded 

Smoothly, but Tests and Evaluation Plans Were not Fully Documented, GAO-05-92 

(Washington, D.C.: Dec. 2004). 

Page 14 GAO-10-225 IRS's 2009 Filing Season
 

IRS Added Features to Its 

Web Site that Potentially 

Diverted Calls 

IRS continues to launch new features on its Web site to provide better 

access to information and reduce taxpayer burden, including 

• the “How Much Was My 2008 Stimulus Payment” application and the 

recovery rebate check calculator that used the economic stimulus 

payment amount from 2008 along with several other factors to 

determine eligibility for recovery rebate credit and the appropriate 

amount to claim; 

• the Online Payment Agreement application that provides taxpayers 

with an online, interactive payment agreement process that reduces the 

need for contact with an assistor and eliminates paper processing. 

• a “What if” page on IRS.gov that describes different scenarios for 

taxpayers on the possible impact of, for example, loss of job or house, 

on the taxpayers ability to pay taxes; and 

• information on the new tax credits provided in the Recovery Act with 

details on, for example, claiming the first-time homebuyer credit and 

tax breaks for vehicle purchases. 

As table 6 shows, compared to before 2008, visits to IRS’s Web site are 

substantially higher than in the last 4 years with the exception of 2008. The 

year 2008 was anomalous, in part, because of the high number of visits to 

stimulus-related features on IRS’s Web site in 2008. 

Table 6: IRS Web Site Use, 2005 through 2009 

Amounts in millions 

2005 2006 2007 2008a2009

Percentage 

change 

from 2008 

to 2009 

Total visits 148 161 178 304 246 -19

Downloads 125 170 128 145 150 3

Searchesb 166 128 146 175 184 5

Where’s My Refund? 22 25 32 39 53 36

Recovery Rebate Check 

Calculatorb 

NA NA NA NA 7 NA

How Much Was My 2008 Stimulus 

Payment?c 

NA NA NA NA 55 NA

Online Payment Agreement 

(in thousands)d

NA NA NA 4,763 49,233 NA

Source: GAO analysis of IRS data. 

Note: NA means not applicable. 

a

Data from October through December 2008. 

b

Includes visits and page views. 

Page 15 GAO-10-225 IRS's 2009 Filing Season
 

c

Data from January 1 through June. 

d

IRS launched the Online Payment Agreement application in 2008. 

One measure of the quality of IRS’s Web site is its ranking in the Keynote 

Systems top 40 government Web sites. During each week of the 2009 filing 

season, IRS ranked fourth and fifth in response time out of the top 40 

government Web sites in the Keynote Government Index weekly ratings, 

compared to ranging between first or second last filing season.26

Finally, IRS is working on a Web portal strategy to expand taxpayers’ 

access to self-assistance tools for account and tax law issues. Both the 

TAB and IRS’s 2009-2013 strategic plan focus on enhancing features on 

IRS’s Web site. 

IRS Improved Its Ability to 

Assess the Quality of 

Assistance at Volunteer 

Sites and Accuracy 

Improved at IRS’s Walk-in 

Sites 

As of June 28, 2009, IRS’s volunteer partners prepared 3 million tax 

returns, a slight increase of 1 percent over last year. IRS provides training 

and certification for volunteer staff to help ensure quality. However, 

assessing the quality of assistance at volunteer sites is a challenge for IRS 

because of the large number of volunteer sites and staff providing return 

assistance. IRS officials stated that the agency partnered with communitybased organizations to run 12,160 sites in 2009, 320 sites more than last 

year, staffed with nearly 83,000 volunteers.27

Despite these challenges, IRS conducted several types of quality reviews, 

including site and tax return reviews as well as mystery shopping reviews 

in both 2008 and 2009.28 For 2009, IRS combined site and return reviews 

into its Quality Statistical Sample (QSS) reviews. According to IRS 

 

26The Keynote Government Index measures and benchmarks the performance of the home 

pages of 40 major U.S. federal government Web sites from the 10 largest U.S. metropolitan 

areas. 

27Volunteer sites are located in a variety of locations, such as community and neighborhood 

centers, schools, and other locations, some of which may be fairly remote. Further, many 

sites operate only for a few days and limited hours. 

28Mystery shopping involves IRS officials visiting volunteer sites posing as taxpayers to 

assess the experience of the preparers. Site reviews assess whether volunteer preparers 

were adhering to minimum quality standards required by all sites. Return reviews 

determine whether the tax law was applied properly for critical items and resulted in an 

accurate return based on the taxpayer interview and supporting documentation. However, 

because IRS’s site and return reviews were based on a non statistical selection of returns 

prepared during visits to volunteer sites prior to the 2009 filing season, the results were not 

statistically valid or reliable. 

Page 16 GAO-10-225 IRS's 2009 Filing Season
 

officials, QSS reviews were based on a statistically valid sample of sites.29

IRS reported that it collected data from 240 site reviews and 679 return 

reviews, generally reviewing 3 tax returns per site visit. As of mid-April, 

return preparation accuracy was 78 percent. In contrast, IRS’s mystery 

shopping reviews resulted in a 68 percent accuracy rate. However, IRS 

officials stated that the QSS reviews are statistically valid and, therefore, 

provide a better overall assessment of return accuracy than mystery 

shopping. Consequently, IRS officials reported they will not conduct 

mystery shopping in 2010. 

While we acknowledge that the QSS reviews represent an important 

advancement in IRS’s assessment of the accuracy of return assistance at 

volunteer sites, it is important to consider how the data are collected and 

how the results will be used. The results of the QSS return reviews could 

be biased because of volunteers’ awareness of the presence of IRS 

officials. According to IRS officials, since site visits were unannounced, 

volunteer staff may have been unaware of IRS’s presence while observing 

the first return, but were likely to have noticed IRS’s presence by the 

second and third return. As a result, volunteers could be more quality 

conscious while preparing the later returns, adhering to the quality 

process encouraged by IRS more than they might have been otherwise. 

IRS officials stated that they understand the limitations of how the results 

were obtained. 

In contrast to a slight increase at volunteer sites, as of April 30, 2009, the 

total number of taxpayers’ contacts at IRS’s 401 walk-in sites was 2.7 

million, down 12 percent compared to previous year.30 Further, as of June 

30, 2009, 

• the accuracy of account assistance improved to 88 percent compared 

to 83 percent last year, and 

• the accuracy of tax law assistance also improved to 76 percent from 67 

percent last year. According to IRS officials, this increase is due in 

large part to management’s focus on the consistent use of IRS tools 

available to assistors. They identified IRS’s ITLA in particular, for the 

 

29According to IRS officials, IRS used a group of 22 specially trained tax specialists to visit a 

statistically valid sample of volunteer sites and generally perform three return reviews at 

each site in order to determine the overall accuracy of tax returns prepared at the 

volunteer sites. 

30In fiscal year 2008, IRS reverted back to its old methodology in an effort to capture the 

number of taxpayers assisted rather than, as in prior years, capturing services provided. 

Page 17 GAO-10-225 IRS's 2009 Filing Season
 

increase in accuracy in tax law and return assistance, which is used by 

both IRS’s telephone and walk-in site assistors to provide more 

accurate and consistent answers to taxpayers’ questions. While IRS 

officials acknowledged that using ITLA may take longer to get the 

answer, assistors properly using the tool will provide the right 

answer(s) to customer specific tax law questions more often than when 

ITLA is not used. 

The Relationship between 

TAB and IRS’s Budget and 

Strategic Plan Is Not Clear 

TAB is IRS’s 5-year strategic plan for improving service to taxpayers and 

helping guide the agency’s budget and resource allocation decisions. 

However, the linkage between TAB and the 2010 budget request for IRS or 

IRS’s agency wide 2009–2013 strategic plan is not clear. TAB is mentioned 

once in the budget document and not at all in IRS’s strategic plan. This 

lack of transparency obscures the link between TAB and IRS’s overall 

strategic plan and budget. IRS officials acknowledged that while TAB is 

not specifically included and integrated in IRS’s budget and other planning 

documents, IRS considers TAB to be a guiding principle. 

According to the Office of Management and Budget and our own work, it 

is important to link general goals communicated in strategic plans with 

cross-cutting initiatives, such as those listed in TAB because they work 

together to form a budget and implementation framework.31 Without more 

explicit connections between TAB and IRS’s planning documents, 

Congress and other stakeholders may not be able to understand the 

priority that IRS places on improving taxpayer service. 

According to IRS, depending on the tax refund amount, RAL and RAC fees 

may range from $39 to over $600, which includes the account set-up fee, 

tax preparation, and interest. In a recent report, we noted that these 

charges may amount to an annual percentage interest rate of over 500 

percent.32 IRS officials told us that IRS’s continued efforts to reduce RALs 

and RACs focus on increasing electronic filing with direct deposit, and 

improving refund timeliness. 

RAL Usage Declined 

in 2009 and IRS Could 

Further Reduce Usage 

by Issuing Faster 

Refunds 

Table 7 shows that 8 million taxpayers applied for RALs from banks or 

other financial institutions, a decline of 20 percent compared to last year. 

 

31GAO, Agencies’ Strategic Plans Under GPRA: Key Questions to Facilitate Congressional 

Review, GAO/GGD-10.1.16 (Washington, D.C.: May 1997). 

32GAO-08-800R. 

Page 18 GAO-10-225 IRS's 2009 Filing Season
 

One reason for this decline may have been reluctance by some lenders to 

offer RALs early in the filing season due to taxpayer errors related to 

recovery rebate credit claims.33 Because taxpayer’s anticipated refund is 

the collateral for a RAL, lenders could not be certain the collateral existed 

when many refund claims were in error. In contrast, the number of RAC 

requests increased by 10 percent to 11 million. RACs are less risky for the 

return preparer because the taxpayer receives no money until the preparer 

receives the refund and deducts associated fees. 

Table 7: RALs and RACs Requested by Taxpayers, 2007 through 2009 

Amounts in millions 

2007 2008 2009 

Percentage change 

from 2008 to 2009

RALs 10 10 8 -20

RACs 9 10 11 10

 Source: GAO analysis of IRS data. 

Note: Data from January 1 through April 15. 

IRS’s 2006 RAL report to Congress provides valuable information on 

• taxpayer use of RALs and RACs, 

• benefits of improving refund timeliness on reducing taxpayers’ reliance 

on RALs and RACs, 

• the cost associated with RALs and RACs, and 

• information on RAL alternatives offered by both IRS and tax 

preparers.34

However, IRS has not released this report to the public nor has IRS 

updated it. Further, according to IRS officials, there is no requirement to 

do so. By not public releasing and updating the report, IRS is missing an 

opportunity to provide Congress and taxpayers with important 

information on how tax law changes, such as the economic stimulus 

package, might have affected taxpayers’ reliance on RALs and RACs and 

potentially reduce taxpayers’ reliance on them. 

 

33GAO, Tax Administration: Interim Results of IRS’s 2009 Filing Season, GAO-09-640 

(Washington, D.C.: June 3, 2009). 

34Report to Congress (2006). The report was submitted in response to a directive from 

Congress in the fiscal year 2006 Treasury Appropriation Act conference report. 

Page 19 GAO-10-225 IRS's 2009 Filing Season
 

Most refunds are claimed on electronically filed returns and then 

electronically deposited because taxpayers and preparers know that 

electronic filing and depositing speeds up refund processing. Refunds take 

5 to 15 days, as shown in figure 1. Figure 1 also shows that 

• refund processing time varies by day of the week and is shorter for 

refunds processed on CADE than on IRS’s legacy individual master file, 

IRS and Other Entities 

Share Responsibility for 

Issuing Refunds, and More 

Could Be Done to Improve 

Refund Timeliness 

• three entities--IRS, Treasury’s Financial Management Service (FMS) 

and Automated Clearing House (ACH)—share responsibility for issuing 

refunds (see table 8 below).35 IRS runs pre-refund tax law compliance 

checks, FMS checks for non tax debt owed to the federal government, 

and ACH distributes the funds. 

• IRS accounts for a varying proportion of the total processing time. In a 

number of cases, IRS accounts for less than half the time it takes to 

process and issue a refund. 

 

35Treasury’s Financial Management Service is the primary disburser of payments to 

individuals and businesses on behalf of federal agencies. The Automated Clearing House 

network is a funds transfer system governed by a specific set of rules that provides for the 

interbank clearing of electronic entries for participating institutions. 

Page 20 GAO-10-225 IRS's 2009 Filing Season
 

Figure 1: Income Tax Refund Processing Time Line for Electronically Filed Returns with Direct Deposit by Processing 

Component 

Source: GAO analysis of IRS data.

Direct deposit

ACH processing time

FMS processing time

IRS processing time

Day of submission for electronically filed returns received by 11:00 a.m.

Processing

system

Number of day

s to process a refund

CADE IMF

Monday

CADE IMF

Thusday

CADE IMF

Wednesday

CADE IMF

Thursday

CADE IMF

Friday

CADE IMF

Saturday

CADE IMF

Sunday

5

15

14

13

12

11

10

9

8

7

6

5

4

3

2

1

12

777 7 7

6

13

14

15

9

10

11

Improving refund timeliness is a goal of IRS, with the effort focused on 

shifting tax return processing to CADE. Figure 1 suggests that another 

approach would be to try to reduce the time taken by the other two 

entities involved in issuing refunds, particularly ACH. While IRS officials 

reported that they meet at least annually with FMS officials to discuss 

issues related to refunds and communicate intermittently to address issues 

as needed, they also said that they have not aggressively explored with the 

Page 21 GAO-10-225 IRS's 2009 Filing Season
 

other two entities whether opportunities exist to shorten refund 

processing time.36 This is a timely issue because as IRS has shifted 40

million of tax returns to CADE, the IRS proportion of overall refund 

processing time has decreased. 

ng 

taxpayers may not have the benefit of faster refunds associated with direct 

 

While IRS offers paper check and direct deposit options for delivering

refunds to taxpayers, it has not studied the feasibility of distributi

refunds electronically through debit cards.37 Further, IRS has not 

determined the costs of issuing debit cards nor the benefit for taxpayers. 

Although tens of millions of taxpayers receive paper checks, they are less

secure than electronic distribution of benefits. Further, many unbanked 

IRS's 2009 Filing Season

Unbanked Taxpayers 

IRS Has Not Studied the

Use of Debit Cards for

36FMS provides a variety of options to federal agencies for collecting and issuing payments. 

While IRS uses ACH to deliver most individual tax refunds, which takes 2 to 4 days, it uses 

FedWire to deliver refunds of more than $1 million, which are processed and delivered 

within the same day. While issuing refunds through FedWire costs slightly more per refund 

than ACH, the often high interest rates for RALs and RACs may make the increased cost of 

using FedWire a viable option for taxpayers. In addition to FedWire and ACH, FMS 

provides debit cards and other electronic methods that agencies use to process payments. 

However, IRS officials stated that because of the high costs involved, FMS discourages 

issuing FedWire payments less than $1 million. These costs occur because IRS must 

manually key enter the information to arrange FedWire payments and there is no large 

volume processing capability for payments. However, IRS officials reported that there is 

potential to automate and work with FMS to enhance the manual refund process for 

Fedwire. 

37In 2009, IRS partnered with JP Morgan Chase and other partners to pilot a refund debit 

card program at a limited number of volunteer sites. IRS did not cosponsor the Chase debit 

card program, nor did it advocate for any specific financial institution or debit card, but did 

share information with Chase to target cities with high RAL and RAC use. Further, 

individual volunteer sites had the option of not participating in the program. According to 

IRS officials, while the pilot program was characterized as a success--with 6 partners 

participating and 958 debit cards issued at 19 volunteer sites—no additional data about the 

program’s success were collected. Further, the program will not be expanded. Instead, IRS 

reported that it will provide outreach and education, but it will be the responsibility of the 

partnering sites to establish and maintain relationships with financial institutions and IRS 

will not facilitate any kind of program nor advocate for any particular product. 

Page 22 GAO-10-225 
 

deposit and, instead, receive their tax refund by checks, often incurring 

transaction costs, such as check cashing fees.38

Debit card programs are well established in a variety of state and federal 

government programs. For example, FMS’s Direct Express debit cards 

allow beneficiaries to receive their benefits as quickly as direct deposit 

while avoiding transaction fees associated with receiving check payments. 

Similarly, debit cards could provide taxpayers with a low- or no-cost 

refund option for receiving refunds quickly. According to a recent survey 

conducted by TIGTA, 63 percent of RAL applicants indicated a preference 

for receiving a debit card from IRS instead of purchasing a RAL. Finally, in 

its RAL report to Congress, IRS noted that transitioning unbanked 

taxpayers to debit cards would allow them to receive their refund in the 

same amount of time as taxpayers that have direct deposit.39

Without researching the benefits and costs of debit cards, IRS does not 

know whether direct distribution of cards is a viable option to distribute 

refunds, improve refund timeliness and reduce taxpayer reliance on RALs, 

and provide electronic payment options for unbanked taxpayers. 

We have previously reported that Treasury’s role as the federal 

government’s leader for payments and its experience with electronic 

payment methods suggests that it could provide valuable information and 

assistance to IRS, particularly when working with other entities to 

improve service.40 However, without aggressively collaborating with FMS 

and ACH to improve refund timeliness and explore other refund options, 

 

38Currently, individuals without an account at a bank, savings and loan, credit union or 

other financial institutions, sometimes referred to as the “unbanked,” receive their tax 

refunds by checks mailed to their homes. While IRS has no plans to develop or deploy a 

debit card system, it has reported that payments made to debit cards could be sent over the 

same electronic network and direct deposits and thus would move at the same speed. 

However, to be as fast as direct deposit, debit cards would need to be in the possession of 

and activated by taxpayers at the time their refunds are made. Further, debit cards could 

offer unbanked taxpayers some of the same benefits of having a bank account. The balance 

of the taxpayer’s refund after fees could be accessed by using the debit card at ATM 

machines and points of sale. Just before our report was issued, the Federal Deposit 

Insurance Corporation (FDIC) published an estimate of the number of unbanked 

households. FDIC estimated that 9 million households were unbanked (see FDIC, National 

Survey of Unbanked and Underbanked Households (Washington, D.C.: December 2009). 

39Report to Congress (2006). 

40GAO, Electronic Payments: Many Programs Electronically Disburse Federal Benefits, 

and More Outreach Could Increase Use, GAO-08-645 (Washington, D.C.: June 23, 2008). 

Page 23 GAO-10-225 IRS's 2009 Filing Season
 

IRS may be missing an opportunity to further reduce the time taxpayers 

wait for refunds and taxpayers’ reliance on RALs. 

We identified higher education tax benefits as one area where an 

expansion of MEA and revisions to information returns might reduce 

taxpayer confusion and increase compliance (see app. V). Millions of 

taxpayers claim the Hope and Lifetime Learning tax credits to offset 

qualified education expenses. However, these tax provisions are 

complicated and may lead taxpayers to under claim benefits or 

unknowingly claim more benefits than they are entitled to claim.41

IRS faces challenges ensuring compliance with the eligibility requirements 

of the higher education credits. IRS relies on audits and limited MEA to 

ensure compliance. However, audits may not be an efficient method for 

enforcement in this case. Audits are labor intensive, and therefore costly, 

for IRS. According to IRS officials, the maximum amount most taxpayers 

can claim per student each year—$1,800 per student for the Hope credit 

and $2,000 per return for the Lifetime learning credit for tax year 2008—

may not yield sufficient revenue to justify expanded enforcement.42

Because of the relatively high costs and small revenue gain, IRS does 

relatively few audits of the millions of education credit claims. 

During Returns 

Processing IRS Could 

Reduce Taxpayer 

Confusion and Better 

Ensure Compliance 

with Higher 

Education Tax 

Benefits 

IRS has MEA to verify compliance with some of the higher education 

credit eligibility requirements. However, IRS lacks the statutory authority 

to use MEA to verify compliance with the limit on the number of years that 

taxpayers can claim the Hope credit.43 If IRS had authority to use 

information from prior years’ returns to check taxpayers’ eligibility, it 

could correct claims during processing, before refunds are issued, and 

enhance compliance. 

 

41On taxpayers under claiming tax benefits, see, for example, GAO, Student Aid and 

Postsecondary Tax Preferences: Limited Research Exists on Effectiveness of Tools to 

Assist Students and Families through Title IV Student Aid and Tax Preferences, 

GAO-05-684 (Washington, D.C.: July 29, 2005). 

42Special rules apply to students attending qualified education institutions in a Midwestern 

disaster area. Also, under the Recovery Act of 2009, for tax years 2009 and 2010, the Hope 

credit the maximum allowable amount most taxpayers can claim is increased from $1,800 

to $2,500. 

43Under the Recovery Act of 2009, for tax years 2009 and 2010, the Hope credit was 

expanded from a 2-year to a 4-year limit (see app. V for details). 

Page 24 GAO-10-225 IRS's 2009 Filing Season
 

Eligible educational institutions are required to report information on 

qualified expenses for higher education to both taxpayers and IRS so that 

taxpayers can determine the amount of educational tax benefits that can 

be claimed (see app. V).44 However, the information currently reported by 

educational institutions on tuition statements sent to IRS and taxpayers 

(on Form 1098-T) may be confusing for taxpayers who use the form to 

prepare their tax returns and not very useful to IRS.45

IRS requires institutions to report on Form 1098-T either the (1) amount of 

payments received, or (2) amount billed for qualified expenses. IRS 

officials stated that most institutions report the amount billed and do not 

report payments. However, the amount billed may not equal the amount 

that can be claimed as a credit.46 For example, the amount billed may not 

account for all scholarships or grants the student received. In such cases, 

the Form 1098-T may overstate the amount that can be claimed as a credit, 

confusing taxpayers. Conversely, if institutions are not providing 

information on other eligible items, such as books or equipment, taxpayers 

might be understating their claims.47

In addition to confusing taxpayers, the existing Form 1098-T is not very 

useful to IRS in its enforcement efforts. According to IRS officials, because 

the amount billed may not be the amount taxpayers are eligible to claim as 

a credit, IRS does not compare tuition statement information to the 

information reported on a tax return. IRS officials stated that a change in 

legislation, which TIGTA recommended in a recent report, would be 

 

44Qualified expenses are tuition and fees a student must pay to be enrolled at or attend an 

eligible educational institution, and other course-related fees and expenses only if the fees 

and expenses must be paid to the institution as a condition of enrollment or attendance. 

4526 U.S.C. § 6050S requires educational institutions to provide information to taxpayers 

and IRS to assist both in determining the amount of qualified tuition and related expenses 

for which an education tax benefit is allowable. 

46Currently, educational institutions are required to report information on the form 1098-T 

for qualified tuition expenses as well as information on the institution itself and the 

student. These requirements include, for example, reporting name, address, and taxpayer 

identification number (TIN) of the institution; name, address, and TIN of the student; and 

amount of payments received or the amount billed for qualified expenses during the 

calendar year. 

47Under the Recovery Act of 2009, for tax years 2009 and 2010, the Hope credit was 

expanded to include as qualified tuition and related expenses any expenditures for course 

materials. These expenditures include books, supplies, and equipment needed for a course 

of study whether or not the materials are purchased from the educational institution as a 

condition of enrollment or attendance. 

Page 25 GAO-10-225 IRS's 2009 Filing Season
 

needed to require institutions to report only the amount paid. However, 

IRS does not currently use some of the more basic information from the 

tuition statement to verify eligibility for the credit.48 For example, a tuition 

statement includes the student’s SSN that could be matched to tax return 

information. Additionally, IRS does not use the location of the institution 

to determine whether it is located in a federal disaster area, which 

substantially increases the amount of the eligible credit. Using IRS’s 

compliance computer matching systems to automatically compare 

information on statements to taxpayers’ claims could be a low-cost 

enforcement tool for IRS to verify certain aspects taxpayers’ eligibility for 

of the credit. 

While changing the requirements for how higher education institutions 

report qualified expenses on tuition statements would likely impose some 

burden on those institutions, the additional burden could be low because 

the institutions are already required to fill out Form 1098-T. Further, this 

form could be revised to more clearly provide additional information 

about qualified expenses, such as for books, supplies, and equipment—

information institutions might already collect—and potentially reduce 

taxpayer confusion and noncompliance. 

IRS met many of its 2009 filing season goals. The major exception was 

telephone service, where, for a second year in a row, unanticipated 

increases in call volume significantly reduced performance, in part, 

because of inquires related to tax law changes. However, IRS does not 

have a research plan for conducting analyses of its telephone contacts that 

could identify areas for more automated services. The declines in 

telephone performance also highlight the importance of TAB, which is 

intended to provide the strategy for improving service to taxpayers, and 

how TAB is integral to IRS’s overall strategic plan. 

Conclusions 

Millions of taxpayers continue to use expensive RALs and RACs. By not 

coordinating more closely with FMS and ACH, IRS may be missing 

opportunities to improve refund timeliness and expand options for refund 

delivery, both of which might reduce taxpayers’ demand for RALs and 

RACs. Further, by not updating its RAL report and studying the feasibility 

 

48In a recent report, TIGTA recommended that IRS be provided with math error authority to 

disallow claims for the Hope Credit that are taken for more years than allowed by law. See 

TIGTA, Improvements Are Needed in the Administration of Education Credits and 

Reporting Requirements for Educational Institutions, Reference No. 2009-30-141 

(Washington, D.C.: Sept. 30, 2009). 

Page 26 GAO-10-225 IRS's 2009 Filing Season
 

of debit card options, IRS may be missing other opportunities to reduce 

the transaction costs imposed on taxpayers, particularly low income 

taxpayers, when they receive tax refund payments. 

Finally, steps could be taken by Congress to provide IRS with the statutory 

authority to automatically verify some aspects of higher education credits 

claims and by IRS to improve and better utilize information reported by 

higher education institutions. Without such steps, taxpayers may remain 

confused by the information reported to them, and IRS will not make use 

of some low-cost, less intrusive tools for helping ensure compliance. 

Congress should consider providing IRS with MEA to use prior years’ tax 

return information to automatically verify taxpayers’ compliance with the 

limit on the number of years the Hope credit can be claimed. 

Related to improving IRS’s performance during the filing season, the 

Commissioner of Internal Revenue should 

• Develop as soon as possible an analysis plan for using the data IRS 

captures through Contact Analytics; and 

Matters for 

Congressional 

Consideration 

Recommendations for 

Executive Action 

• Explicitly integrate the TAB in strategic planning documents. 

To further improve refund timeliness and reduce reliance on RALs and 

RACs, IRS should 

• Update and publicly release a report on RAL and RAC use; 

• Work more proactively with FMS and ACH to help improve refund 

timeliness; and 

• Determine the feasibility of offering debit cards for refunds. 

To reduce taxpayer confusion and enhance compliance with the eligibility 

requirements for higher education benefits, IRS should 

• Determine the feasibility of using current information reported on 

Form 1098-T, such as school location and taxpayer identification 

number or SSN, in IRS’s compliance programs; and 

• Revise Form 1098-T to improve the usefulness of information on 

qualifying education expenses. 

Page 27 GAO-10-225 IRS's 2009 Filing Season
 

In written comments on a draft of this report (which are reprinted in 

appendix I), the IRS Deputy Commissioner for Services and Enforcement 

explicitly agreed with five of our recommendations and described the 

steps IRS is taking with respect to our two other recommendations. IRS 

officials also provided technical comments which we incorporated as 

appropriate. 

Agency Comments 

and Our Evaluation 

IRS agreed to develop a comprehensive and detailed evaluation plan for 

Contact Analytics, work to define the scope and objectives for potentially 

updating and releasing a RAL/RAC report, and work with FMS and ACH to 

improve refund timeliness. IRS also agreed to consider the feasibility of 

using current information on Form 1098T in its compliance programs, and 

develop a plan to address possible changes to that form. 

With respect to our recommendation to explicitly integrate TAB in 

strategic planning documents, the Deputy Commissioner said that 

although they are not repeated verbatim in IRS’s Strategic Plan, TAB’s 

guiding principles resonate throughout the document. We acknowledged 

IRS’s position in making our finding and recommendation. However, TAB 

is not mentioned once by name in IRS’s strategic plan. Without an explicit 

and transparent connection between TAB and IRS’s other planning 

documents, Congress and other stakeholders may not be able to 

understand the priority that IRS is giving to improving taxpayer service. 

Concerning our recommendation to determine the feasibility of offering a 

debit card option for refunds, the Deputy Commissioner said that the 

agency is exploring options for debit card use including an option to 

provide debit cards directly. Because the Deputy Commissioner’s letter 

does not provide any detail on what exploring options means, we want to 

reiterate the basis for our recommendation. A small debit card pilot 

program was conducted at several volunteer sites around the country, but 

that pilot did not provide information on the benefits or costs of IRS 

issuing debit cards directly. Given the large number of unbanked 

taxpayers, we believe IRS should determine the feasibility of directly 

issuing debit cards. 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies 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 Commissioner of Internal Revenue, the 

Secretary of the Treasury, the Chairman of the IRS Oversight Board, and 

Page 28 GAO-10-225 IRS's 2009 Filing Season
 

the Director of the Office of Management and Budget. The report also will 

be available at no charge on the GAO Web site at http://www.gao.gov. If 

you or your staff have any questions or wish to discuss the material in this 

report further, please contact me at (202) 512-9110 or at 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 

James R. White 

contributions are listed in appendix VI. 

Director, Tax Issues 

Strategic Issues Team 

Page 29 GAO-10-225 IRS's 2009 Filing Season
Appendix I: Comments from the Internal Appendix I: Comments from the Internal Revenue Service 

Revenue Service 

Page 30 GAO-10-225 IRS's 2009 Filing Season
Appendix I: Comments from the Internal 

Revenue Service 

Page 31 GAO-10-225 IRS's 2009 Filing Season
Appendix I: Comments from the Internal 

Revenue Service 

Page 32 GAO-10-225 IRS's 2009 Filing Season
Appendix I: Comments from the Internal 

Revenue Service 

Page 33 GAO-10-225 IRS's 2009 Filing Season
Appendix I: Comments from the Internal 

Revenue Service 

Page 34 GAO-10-225 IRS's 2009 Filing Season
Appendix I: Comments from the Internal 

Revenue Service 

Page 35 GAO-10-225 IRS's 2009 Filing Season
Appendix I: Comments from the Internal 

Revenue Service 

Page 36 GAO-10-225 IRS's 2009 Filing Season
Appendix II: IRS’s Existing and Suggested 

Math Error Authority for Enhancing Appendix II: IRS’s Existing and Suggested Compliance 

Math Error Authority for Enhancing 

Compliance 

Table 8 below summarizes the Internal Revenue Service’s (IRS) existing 

math error authority (MEA) as well as authorities we recently suggested 

that Congress provide to enhance compliance, including for certain tax 

credits. In addition, last year we recommended that the IRS Commissioner 

use existing MEA to identify and correct child and dependent care credit 

claims on “Married Filing Separately” returns and assess the effectiveness 

of combining the Federal Case Registry and other data on taxpayer 

characteristics to verify the eligibility of Earned Income Tax Credit claims 

from noncustodial parents.1

Table 8: IRS’s Existing and Suggested MEA 

IRS’s Existing Statutory Authorities for Math Error Checks 

An error in addition, subtraction, multiplication, or division shown on any return 

An incorrect use of any table provided by the IRS with respect to any return if other 

information in the return makes the incorrect use apparent 

An entry on a return of an item which is inconsistent with another entry of the same or 

different item on that return 

An omission of information which is required to be supplied on the return to substantiate 

an entry on that return 

An entry on a return of a deduction or credit in an amount which exceeds the statutory 

limit for that deduction or credit, if that limit is expressed as a specific monetary amount 

or as a percentage, ratio, or fraction, and if the component items of that limit appear on 

the return. 

A correct Taxpayer Identification Number (TIN) not provided on the return as required for 

the: (1) Earned Income Tax Credit (EITC); (2) child and dependent care credit; (3) 

personal or dependent exemption; (4) child tax credit; (5) Hope and Lifetime Learning 

credits 

A return claiming an EITC for net earnings from self-employment, where the self 

employment tax imposed by 26 IRC § 1401 on those net earnings has not been paid. 

An omission of information required for recertification of eligibility for the EITC. 

An entry on the return of a TIN required for the EITC, the child credit, and the child and 

dependent care credit, when information associated with that TIN indicates the child 

does not meet the age eligibility requirements for those credits. 

An entry on the return of a claim for the EITC where the Federal Case Registry of Child 

Support Orders indicates that the taxpayer is the non-custodial parent of that child. 

A failure to reduce Economic Stimulus Package credit on a return related to the 

Economic Stimulus Act of 2008 by amounts previously advanced. 

 

1

The Federal Registry of Child Support Orders database includes information on noncustodial parents and other taxpayer characteristics for determining program eligibility. 

Also see GAO-09-146. 

Page 37 GAO-10-225 IRS's 2009 Filing Season
Appendix II: IRS’s Existing and Suggested 

Math Error Authority for Enhancing 

Compliance 

GAO’s Suggested Statutory Authorities 

Verify taxpayers’ compliance with the 2008 first-time homebuyer credit payback 

provision.a

Claims for the first-time homebuyer credit in multiple years.a

“Catch-up” contributions to Individual Retirement Accounts (IRA) from taxpayers who are 

not eligible because of their age.b

Contributions to traditional IRAs from taxpayers who are ineligible because they are over 

the age of 70-1⁄2.b

Taxpayers’ compliance with the number of years the Hope credit can be claimed.c

Source: GAO analysis and reports. 

a

GAO-09-1026. 

b

GAO-09-146. 

c

Suggested in this report. 

Page 38 GAO-10-225 IRS's 2009 Filing Season
Appendix III: IRS’s Processing Performance Appendix III: IRS’s Processing Performance Relative to 2004 Through 2008 and 2009 Goals 

Relative to 2004 Through 2008 and 2009 

Goals 

As shown in table 9, the Internal Revenue Service (IRS) met or exceeded 

goals for six out of eight of its goals for the percentage of errors included 

in deposits and correspondence (which was separated into letter and 

notice errors in previous years); deposit and refund timeliness (i.e., 

interest foregone by previous years); productivity; and individual master 

file (IMF) efficiency. 

One measure where performance was significantly below IRS’s goal and 

below last year’s level was the correspondence error rate, the percentage 

of incorrect notices and letters issued to taxpayers. According to IRS 

officials, this resulted from a high number of erroneous notices sent to 

taxpayers claiming the recovery rebate credit early in the filing season.1

Table 9: IRS Processing Performance, Fiscal Years 2005 through 2009 

Measure Name Definition 

Fiscal year 

2005 actual

Fiscal year 

2006 actual

Fiscal year 

2007 actual

Fiscal year 

2008 actual 

Fiscal year 

2009 actual 

(through 

August)

Fiscal 

year 2009 

goal

Deposit error rate Percentage of payments 

applied in error by, for 

example, reimbursing a 

taxpayer who overpaid when 

the taxpayer wanted the 

overpayment credited to next 

year’s tax bill. 

2.2%

(+/-0.26%)

1.6%

(+/-0.24%)

1.3%

(+/-0.22%)

1.1% 

(+/-0.27%) 

.7%

(+/-0.20%)

1.0%

Deposit timeliness 

– paper – individual 

master file (IMF) 

Interest foregone by not 

depositing monies the 

business day after receipt, 

per $1 million in deposits. 

Measure assumes an 8 

percent interest rate. 

$390 $354 $331 $290 $204 $290

Correspondence 

error ratea

 (includes 

systemic errors)b

IMF 

The percentage of incorrect 

Submission Processing 

Masterfile notices and letters 

issued to taxpayers by the 

processing sites. 

NA NA 4.3

(+/-0.38%)

3.8% 

(+/-0.36%) 

5.41%

(+/-0.54%)

3.67%

 

1

During the 2009 filing season, the recovery rebate credit was available to taxpayers who 

did not receive the economic stimulus payment or who were entitled to an additional 

payment based on information on their Tax Year 2008 tax return. Millions of taxpayers 

made errors calculating credit amounts and received math error notices notifying them of 

the change(s) made to the return. 

Page 39 GAO-10-225 IRS's 2009 Filing Season
Appendix III: IRS’s Processing Performance 

Relative to 2004 Through 2008 and 2009 Goals 

Measure Name Definition 

Fiscal year 

2005 actual

Fiscal year 

2006 actual

Fiscal year 

2007 actual

Fiscal year 

2008 actual 

Fiscal year 

2009 actual 

(through 

August)

Fiscal 

year 2009 

goal

Refund error rate – 

individual (paper) 

(includes systemic 

errors) 

Percentage of refunds with 

IRS-caused errors in the 

entity information (e.g., 

incorrect name, Social 

Security number, or refund 

amount); includes systemic 

errorsb

5.0%

(+/-0.48%)

4.5%

(+/-0.46%)

2.8%

(+/-0.36%)

3.4% 

(+/-0.52%) 

1.95%

(+/-0.35%)

3.3%

Refund interest 

paid 

Amount of refund interest 

IRS paid per $1 million of 

refunds issued. 

$29.21 $30.12 $39.60 $24.16 $16.01 $21.00

Refund timeliness 

– individual (paper) 

Percentage of refunds issued 

within 40 days or less. 

99.2%

(+/-0.18)

99.3%

(+/-0.13)

98.9%

(+/-0.19)

99.1% 

(+/-0.19%) 

99.2%

(+/-0.18%)

98.4%

Productivity 3 Weighted volume of 

documents processed per 

staff year expended at the 

processing centers. 

31,444 32,237 34,313 37,624 47,040 45,663

IMF efficiency Measure of Individual Master 

File returns processed per 

staff year expended. 

14,965 16,124 22,031 23,834 23,596 23,692

Source: GAO analysis of IRS data. 

a

The reported Correspondence Error Rate result is a weighted combination of the results of the Letter 

and Notice Error Rate Measures. The weights are based on the actual volumes of letters and Notices 

(as reported in Letter and Notice weighted reports). 

b

Systemic errors are computer-generated errors over which a particular processing center would have 

no control. 

Page 40 GAO-10-225 IRS's 2009 Filing Season
A

P

Live A

ppendix IV: IRS Toll-Free Calls and 

ercentage of Callers Seeking and Receiving 

ssistance for 2009 and 2008

Page 41 GAO-10-225 

Appendix IV: IRS Toll-Free Calls and 

Percentage of Callers Seeking and Receiving 

Live Assistance for 2009 and 2008 

During the 2009 filing season, the Internal Revenue Service (IRS) received 

most of the calls early on, with the heaviest call volume during February 

(see fig. 2 below). Most of the calls were related to taxpayers’ need for 

authentication information and tax law changes. In contrast, during the 

2008 filing season IRS received most of the calls after the filing season, 

between April and June and were primarily stimulus-related questions. 

Figure 2: Weekly Toll-free Calls and Percentage of Callers Seeking and Receiving Live Assistance from January 1 to June 28, 

2009, and June 30, 2009 

Weekly calls on IRS's tax law and account assistance lines ( in millions) Weekly calls on IRS's tax law and account assistance lines ( in millions)

Week ending

0

2

4

6

8

10

12

Jun. 30

Jun. 1

Jun. 27

3

Jun. 6

May 30

May 23

May 16

May 2

May 9

April 1

April 25

8

April 11

April 4

March 28

March 14

March 21

Feb. 2

March 7

8

Feb. 14

Feb. 21

Feb. 7

Jan. 31

Jan. 10

Jan. 17

Jan. 24

Jan. 3

Assistor calls answered

Automated calls answered

IRS disconnects or busy

Caller abandons

Percentage of callers seeking and receiving live assistance

Source: GAO analysis of IRS data.

January 1 through June 28, 2008 January 1 through June 30, 2009

0

25

50

75

100

0

2

4

6

8

10

12

Jun. 28

Jun. 14

Jun. 21

Jun. 7

May 31

May 10

May 17

May 24

May 3

April 12

April 19

April 26

April 5

March 15

March 22

March 29

March 8

Feb. 2

March 1

3

Feb. 16

Feb. 2

Feb. 9

Jan. 12

Jan. 19

Jan. 26

Jan. 5

0

25

50

75

100

Note: Weekly calls are those seeking tax law and account information assistance and do not include 

calls to IRS’s compliance division. 

 IRS's 2009 Filing Season 
Appendix V: Key Facts on Selected Tax Appendix V: Key Facts on Selected Tax Benefits for Higher Education 

Benefits for Higher Education 

Taxpayers can generally claim tax benefits to help offset qualified higher 

education expenses for an eligible student if the eligible student is the 

filing taxpayer, their spouse, or a dependent for whom they claim an 

exemption on a tax return.1

 Tax benefits include credits, deductions, as 

well as a number of other programs to help taxpayers offset qualified 

education expenses. Unlike other student aid programs such as federal 

grants that offer assistance to the taxpayer in determining their 

entitlements, tax benefits require the taxpayer to understand the pertinent 

rules and, ultimately, choose the option that provides the most benefit.2

Information reported by educational institutions on the tuition statement 

(Form 1098-T) assists taxpayers in determining the amount of benefits to 

which they are entitled. Consequently, inaccurate information on the 

tuition statement may contribute to taxpayer confusion and result in 

taxpayers making less-than-optimal claims or being unintentionally 

noncompliant. 

Table 10 below provides information on tax benefits for education that are 

available to qualifying taxpayers for the 2008 and 2009 tax years. 

Table 10: Select Tax Benefits for Higher Education—Tax Year 2008 

Tax benefit for 

education 

Relevant IRS 

form

Maximum amount 

of benefit 

How long can benefit 

be claimed?

Hope credita8863 $1,800b2 yearsc

Lifetime learning credit 8863 $2,000dno limit

Tuition and fees 

deductione

8917 $4,000 no limit

Source: GAO analysis of IRS data. 

 

1

Limitations on whether a taxpayer can claim tax benefits include the taxpayer’s income 

level, whether the taxpayer is listed as a dependent on another return, and residency status. 

Further, there are limitations on the number of tax benefits that can be claimed in 1 year. 

For example, taxpayers cannot claim both the Hope credit and the Lifetime learning credit 

in 1 year. 

2

GAO-05-684 explains how the complex rules for determining benefits may lead taxpayers 

to make less-than-optimal benefit claims. 

Page 42 GAO-10-225 IRS's 2009 Filing Season
Appendix V: Key Facts on Selected Tax 

Benefits for Higher Education 

a

Taxpayers cannot claim the Hope and Lifetime learning credit for the same student in the same year. 

The Hope credit has been changed for tax years 2009 and 2010, and referred to as the American 

opportunity tax credit. For example, for tax-years 2009 and 2010, generally 40 percent of the Hope 

credit is a refundable credit, which means that a person may be eligible to receive up to $1,000 even 

if they owe no taxes. Additionally, the term “qualified tuition and related expenses” is expanded to 

include expenditures for “course materials,” which means books, supplies, and equipment needed for 

a course whether or not the materials are purchased from the educational institution as a condition of 

enrollment or attendance. 

b

The maximum amount of the Hope credit increases to $3,600 per student attending an eligible 

education institution in the Midwestern disaster areas in the states of Arkansas, Illinois, Indiana, Iowa, 

Missouri, Nebraska, and Wisconsin. Under the American opportunity tax credit, the maximum amount 

increases to $2,500 and increases to $3,600 per student attending an eligible education institution in 

the Midwestern disaster areas. 

c

Under the American opportunity tax credit, for tax years 2009 and 2010, the credit was expanded 

from a 2-year to a 4-year limit. 

d

The maximum amount of the Lifetime Learning credit increases to $4,000 per return for students 

attending an eligible education institution in the Midwestern disaster areas. 

e

Taxpayers cannot take both an education credit and tuition and fees deduction for the same student 

for the same year. 

Page 43 GAO-10-225 IRS's 2009 Filing Season
Appendix VI: 

A

GAO Contact and Staff 

cknowledgments 

Page 44 GAO-10-225 

Appendix VI: GAO Contact and Staff 

Acknowledgments 

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

In addition to the contact named above, Joanna M. Stamatiades, Assistant 

Director; Vida Awumey; John P. Dell’Osso; Kara Eusebio; Melanie D. 

Helser; Lina Khan; Kirsten B. Lauber; Angela Leventis; Natalie Maddox; 

Paul B. Middleton; Karen V. O’Conor; Sabine R. Paul; Neil Pinney; Sabrina 

C. Streagle; and Jessica Thomsen made key contributions to this report. 

 IRS's 2009 Filing Season 

GAO Contact 

Acknowledgments 

(450727) 
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