Third-party information reporting dramatically increases the accuracy of tax returns. Third parties--employers, banks, and others--report wages, interest, and other information to both taxpayers and IRS. An IRS study of individual tax compliance found that in tax year 2006, taxpayers accurately reported over 90 percent of income with substantial information reporting requirements, such as interest and dividend income.only 44 percent of income subject to little or no information reporting, such as nonfarm sole proprietor income. In contrast, the same study found taxpayers accurately reported There are more than 40 different types of information returns, 25 of which are directly matched against income tax returns filed by individuals. According to IRS's analysis of tax year 2009 data, most taxpayers receive at least one of three information return types: Form W-2, Wage and Tax Statement; Form 1099-G, Certain Government Payments; or Form 1098, Mortgage Interest Statement.information returns IRS receives, a few types of returns accounted for the majority of returns in tax year 2011, as shown in figure 1. Consistent with IRS's practice of issuing refunds promptly after a return is filed, IRS issued 50 percent of 2012 refunds for tax year 2011 to individual taxpayers by the end of February, at which point only 3 percent of all information returns had been received. By April 19, 2012, IRS had issued 82 percent of refunds to individual filers but had received only 30 percent of all information returns. By August 2, 2012, when IRS completed its first match of information return data to tax returns, IRS had issued 92 percent of refunds to individual taxpayers, as shown in figure 3. Figure 4 expands upon figure 3 to show that IRS did not receive any type of information return in significant numbers until March 2012. Of the 25 types of information returns represented in figure 4, IRS had received more than 30 percent of the submissions by March 1, 2012, for one form, Form 1099-G. For all other types, IRS had received less than 15 percent of submissions by March 1, 2012. As shown in figure 4, IRS receives many information returns after their original due dates. To begin matching earlier in the year, one option is to move up information return due dates. However, without an understanding of why information returns are filed after they are due, simply moving the dates may not be effective. As discussed below, IRS frequently grants extensions to information return providers. Data from IRS did not indicate what proportion of the information returns arriving after due dates was attributable to filing extensions, but an official told us that the agency approved 371,000 requests for filing extensions from information return providers for tax year 2011. According to IRS, information providers request extensions for reasons that include complex IRS regulations, changes in tax laws, and changes in information return forms. In focus groups held by IRS, some providers of more complex return types noted they automatically request a filing extension to allow time for taxpayers to review their copy of the information return and notify the provider of any needed corrections. Some providers said that they are hesitant to provide returns to IRS before hearing from taxpayers because IRS can levy penalties on providers that file forms with incorrect information. Moving information return due dates could affect the volume of information return amendments. Amendments are changed information returns resubmitted to IRS and the amendment rate is the percent of total information return volume attributed to amended, duplicate, or corrected returns received by IRS. In focus groups held by IRS, some information return providers noted that accelerating submission due dates for complex information returns would create challenges, as they often need to correct information in consultation with information return recipients before submitting data to IRS. We did not assess the volume or timing of corrections made by providers before sending information returns to IRS. On average, information returns had an amendment rate of less than 0.4 percent. Only 3 of the 25 information returns we reviewed had amendment rates greater than 2 percent. While amendment rates for most information returns were low for tax year 2011, they still represented millions of returns. For example, the amendment rate for Form W-2 was only 0.94 percent, but this represented over 2 million of the 213 million W- 2s for tax year 2011 that IRS received. One reason for low amendment rates may be providers' fear of penalties, as discussed above. Appendix IV provides additional information on amendment rates. For 2010 income tax returns which were filed starting in 2011, IRS took over 1 year (388 days), on average, to notify taxpayers about AUR discrepancies. This is the elapsed time between when the taxpayer filed his or her income tax return and when IRS issued the first notice. The longest elapsed time was 763 days, just over 2 years. As a consequence, taxpayers may not be notified about a potential error until after filing the following year's return. IRS officials acknowledge that such a delay may be a burden to taxpayers and said they are interested in pursuing Real Time Tax in order to improve the taxpayer experience. The officials noted that the longer the time between filing an income tax return and receiving a notice, the harder it is for some people to locate the records or other information needed to understand the discrepancy, as well as to respond to IRS and resolve the issue. In addition, if taxpayers spent their refund or tax savings they may not have funds set aside for an unexpected tax debt. Finally, penalties and interest may have accumulated, which increases the amount due. One of the goals of Real Time Tax would be to reduce the number of taxpayers facing these burdens by detecting and resolving discrepancies before refunds are issued. IRS identified nearly 24 million 2010 income tax returns with discrepancies. According to IRS data, IRS selected about 22 percent (or 5.3 million) of these discrepant returns for review. After the review, IRS sent at least one notice to over 4 million of these taxpayers informing them of the discrepancy. Figure 5 shows timelines for 2011 return processing, matching, and taxpayer notification based on the first match at the end of July. The left side of the graphic illustrates when IRS and taxpayers receive most information returns, and the right side illustrates when IRS begins notifying taxpayers of discrepancies. IRS officials and the planning documents they have developed make it clear that Real Time Tax is an exploratory effort. IRS officials emphasized that they have made no final decisions regarding Real Time Tax and that they do not perceive it as a "project" at this time. As part of the exploratory effort, IRS is collecting data to understand the potential disruptions to taxpayers and information return providers that could result should IRS implement a Real Time Tax system. Officials are also seeking to understand whether doing so would be an improvement over current processes, particularly AUR and accelerated matching for wage and withholding data. IRS is conducting tests to determine potential benefits, including whether IRS could match information returns at the time taxpayers file their tax returns in a Real Time Tax environment. IRS officials are analyzing six key questions they see at the heart of the Real Time Tax concept. For each question, IRS has begun developing a list of options and is assessing them (see table 1). Officials stressed that they have made no final decisions regarding which options, if any, they may pursue. Each option presents challenges to IRS as it considers how a Real Time Tax system might operate. For example, as noted previously, moving information return due dates to earlier in the filing season may affect amendment rates for some types of information returns. IRS is exploring options using a three-phased approach that began in 2011. IRS focused its Phase 1 efforts on envisioning the taxpayer experience, incorporating input from internal and external stakeholders. During this phase, IRS held focus group meetings with stakeholders and developed a conceptual model for Real Time Tax. Phase 2 is exploring options for how business processes might change, and includes a gap analysis which considers how business operations work now versus how they may work if Real Time Tax was implemented. IRS officials told us they anticipate completing Phase 2 by the end of April 2013. If IRS proceeds to Phase 3, it will focus on determining what operational and information technology infrastructure changes will be needed. As documented in the draft Conceptual Future Operating Model, Phase 3 would include developing a roadmap for the proof of concept and implementation; comparing Real Time Tax work streams with IRS's long-term enterprise roadmap; and evaluating competing demands for resources and facilitating decision making around key investments supporting Real Time Tax. Figure 6 shows that IRS is following four of the six leading practices we used as criteria for assessing IRS's exploratory efforts, and plans to implement the other two practices. Appendix III explains the practices in more detail and the sources we used to develop the leading practices. These criteria are drawn from our previous reports, IRS policy guidance, and other sources. The Commissioner's Office created a team to lead IRS's Real Time Tax exploratory efforts. The team is comprised of Real Time Tax executives from the Wage and Investment Division and Information Technology organization; a core team of senior staff who work under the direction of the Real Time Tax executives to lead the exploratory effort; a support network of subject matter experts throughout IRS; and contractors. While some core team members and subject matter experts have transitioned on and off the effort to meet other organizational needs, IRS officials and core team members said that they have developed strategies to ensure the effort's leadership is consistent and that it has the necessary knowledge and skills. Core team members and other IRS officials confirmed that IRS provides overlapping assignments to allow for team members transitioning off the core team to brief incoming members on the history and progress of the effort. As discussed in more detail below, the core team has also identified external and internal stakeholders (see fig. 7). Key IRS stakeholders identified a vision and program goals for Real Time Tax that link to IRS's mission and consider taxpayer burden. For example, the draft Conceptual Future Operating Model documents IRS's vision to reduce taxpayer burden, improve compliance, and increase efficiency. IRS documents specify the following guiding principles and overall program goals for Real Time Tax: Minimize taxpayer burden by including measures to simplify the tax filing experience and not introducing changes that increase the burden for the majority of taxpayers. Build for the future by developing Real Time Tax with a long-term focus and implementing it with a phased approach that provides incremental benefits in the near-term. Leverage tax industry partners to help drive a successful Real Time Tax model. Mitigate vulnerabilities to identity theft and fraud to reduce the risk of IRS issuing credits and refunds to identity thieves and other fraudsters. IRS has particularly emphasized the importance of minimizing taxpayer burden. In addition to identifying it as a guiding principle, officials said that, if they proceed, they will use statistical modeling to better understand the Real Time Tax system's potential effects on taxpayers. The guiding principles outlined in the draft Conceptual Future Operating Model link closely with IRS's mission to provide taxpayers top-quality service while enforcing the law and meeting the agency's performance goals and objectives. Officials told us the core team has provided input for IRS's next strategic plan. IRS officials have begun planning for performance measurement and have taken steps such as conducting a baseline analysis, hypothesis testing, and considering performance measures. For example, IRS conducted a baseline analysis to understand the current volume, timing, filing patterns, and concentrations of tax filing activity for tax year 2009. During Phase 2, officials said that the core team is using statistical modeling to test possible Real Time Tax models to better understand their potential effects. These tests will help them understand whether they can match information return data at the time individuals file their tax returns and the extent to which IRS can notify taxpayers of a discrepancy at the time of filing. Officials noted that they are still determining what data will be needed to assess Real Time Tax, and whether such a system can provide benefits greater than those IRS and taxpayers receive under the current system. Officials consider it too early in the exploratory effort to define performance outcomes, but anticipate doing this as Real Time Tax exploration and planning progress. IRS documented time frames for its communication strategy and for evaluating matching capabilities, but has not developed a timeline for the exploratory efforts' critical phases and essential activities. The draft Communications Strategy and Plan documents a high-level timeline for implementing IRS's stakeholder communications strategy. IRS also documented time frames for live tests that began in March 2013 that will help officials understand whether IRS can match information return data to simple tax returns at the time of filing. However, while officials noted that the core team has a general idea about how long each planning phase should take, IRS has not developed a timeline or planned interim milestones for its overall exploratory effort. Officials noted that IRS management views Real Time Tax as a broad goal, and the core team did not set milestone dates to avoid causing concern among the stakeholder community that IRS has already decided on a path for Real Time Tax. Also, officials said that they want to conduct additional tests before planning next steps and then use the results of those tests to help determine if IRS should proceed with Phase 3. As we have stated in prior reports, the demand for transparency and accountability is a fact that needs to be accepted in an exploratory effort Establishing a timeline that includes critical phases of this magnitude.and essential activities that need to be completed by particular dates to achieve results is important for accountability and success in implementing a new exploratory effort. A full range of stakeholders and interested parties, including Congress, are concerned not only with what results are to be achieved, but also which processes are to be used to achieve those results. Also, an exploratory effort can build momentum internally and externally by demonstrating progress towards these goals. We recognize that IRS's planned time frames and milestones may evolve as it learns from its exploratory efforts. Also, it may not be feasible for IRS to develop a detailed timeline for the Real Time Tax initiative, as planning efforts are still ongoing and officials have not decided whether to pursue Real Time Tax or how to structure it. At this early stage, it may make sense for IRS to identify contingency-based time frames rather than firm dates for the exploratory effort. However, having a documented timeline that identifies critical phases and milestones for essential activities--such as time frames for developing the "proof of concept" in Phase 3--could help IRS and Congress assess the progress of the exploratory efforts. Without a timeline for the overall exploratory effort, planning may go on endlessly, and IRS cannot know if its efforts are on track or will be completed in even the broad time frames IRS is considering. In addition, Congress may not be able to determine what legislative action may be needed. IRS officials stated that managing risk is a high priority for IRS, but while they have documented potential risks to Phase 2 testing, they have not developed an overall risk management framework for Real Time Tax. A risk management framework helps ensure that managers systematically identify, analyze, and manage risks. A documented risk management framework articulates what managers have done to analyze the consequences of identified risks and the likelihood they will occur, as well Leading practices suggest that as to assess alternatives to mitigate risk.a risk management framework should be developed early so that relevant risks are identified and managed, and that the framework should evolve and be reviewed on an ongoing basis. Such a framework could help IRS identify and mitigate the risks stemming from options it is considering for Real Time Tax, including the risks of moving information return due dates and communicating electronically with taxpayers. Officials stated they have not yet developed a risk management framework because they are still in the early stages of their exploratory efforts. Nevertheless, an IRS official stated that officials discuss potential risks for Real Time Tax regularly and that they are developing descriptions of "pros and cons" of the different approaches. IRS officials plan to further develop the risk strategy if IRS decides to pursue Real Time Tax. Without systematically identifying and evaluating the risks of Real Time Tax options, IRS officials may miss critical factors that could complicate the effort, including the potential costs to IRS, taxpayers, and other stakeholders. Furthermore, without a documented record of risk discussions, IRS may lose its knowledge of what risks and mitigations have been analyzed. For an effort that cuts across as many IRS functions as Real Time Tax and will likely take years to implement, a record of prior risk analyses could help prevent unnecessarily repeating the same analyses. IRS developed a communication strategy that identifies internal and external stakeholders, defines stakeholder communication needs, identifies communication media, and describes how IRS plans to communicate its Real Time Tax efforts to stakeholders. In its draft Communications Strategy and Plan, IRS developed talking points to describe its vision for Real Time Tax and to explain what a possible Real Time Tax system does not include. For example, IRS officials have stated that Real Time Tax will not involve a prefill option (where IRS prepopulates tax returns) or replace all compliance activity that occurs after the filing season, such as AUR. The draft Communications Strategy and Plan also states that IRS will work collaboratively with external stakeholders to outline the vision for Real Time Tax. To obtain the views of external stakeholders on potential frameworks for Real Time Tax, IRS held two public meetings and six focus groups involving individuals representing consumer groups, tax return preparers, the software industry, oversight agencies, payroll providers, and state revenue departments. IRS plans to continue activities aimed at increasing the public's awareness and understanding of the Real Time Tax exploratory effort. These activities may include responding to media inquiries, posting information to the IRS website, and sending IRS officials to speaking engagements. Real Time Tax has the potential to provide substantial benefits, including reducing taxpayer burden and improving compliance by moving some information matching earlier in the tax season. However, it also may require significant and possibly costly changes to tax administration and impose new burdens on third parties. Careful consideration of risks and alternatives for mitigating those risks is crucial in weighing the potential benefits and costs of Real Time Tax options. While IRS has taken important steps in exploring the feasibility of Real Time Tax, much remains unknown because the exploratory effort is still underway. IRS has not yet developed time frames for the exploratory effort's critical phases and essential activities, and we anticipate IRS may revise time frames as it obtains new information from its exploratory efforts. In addition, IRS has not created a risk management framework, which would provide valuable information about potential costs and benefits to IRS management. Given the potential scope of a Real Time Tax system, both agreed-upon time frames and a record of risk management considerations are likely to be important management tools that will help inform IRS management's decisions about the future of Real Time Tax and help Congress oversee IRS's efforts. Recognizing IRS's exploratory efforts are in their early stages and the Real Time Tax concept will likely evolve over time, we recommend the Acting Commissioner of Internal Revenue take the following actions to help ensure managers are able to assess the progress of exploratory efforts and have the information needed to weigh the potential risks, costs, and benefits of options: Identify time frames for the Real Time Tax exploratory effort's critical phases and essential activities. Develop a risk management framework for Real Time Tax that includes a record of risk analyses. We provided a draft of this report to the Acting Commissioner of Internal Revenue for comment. In written comments, reproduced in appendix V, IRS agreed with our recommendations. IRS said that as it continues to engage stakeholders and explore the Real Time Tax concept, it will identify time frames for critical phases and key activities and develop a risk management framework. We are sending copies of this report to the Acting Commissioner of Internal Revenue. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at James R. White at (202) 512-9110 or whitej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. This appendix describes our methodology for addressing the following objectives: (1) describe when the Internal Revenue Service (IRS) receives and matches individual tax and information returns and (2) assess the extent to which IRS is following leading practices for managing an exploratory effort of this importance at IRS. To describe when IRS receives and matches individual tax and information returns, we reviewed IRS documents and guidance, including the Internal Revenue Manual and IRS information return forms. We limited the scope of our review to the Form 1040 series and the 25 information returns IRS officials said would likely be most relevant to matching to individual income tax returns under a Real Time Tax system.We list these information returns in appendix II. Due to the manner in which IRS's Compliance Data Warehouse (CDW) consolidates data for Forms SSA-1099 and RRB-1099, we analyzed the combined data for these two returns. These two types of returns collectively accounted for 3.8 percent (59 million out of 1.6 billion returns) received by IRS for tax year 2011. We generated descriptive statistics by accessing selected data elements from the CDW database, which provides a variety of tax return, enforcement, compliance, and other data. To develop information related to return volume, timing of return receipts and amendments, and refund issuance, we analyzed data for tax year 2011 returns, as this is the most recent year for which relatively complete data are available.when tax returns were received by IRS, we used the cycle posting date, when IRS posts tax return data to the master file, as it represents when the tax return data are available for matching. Officials noted that IRS must cleanse the data prior to posting to IRS systems. This may include identifying and correcting incomplete or inaccurate data before posting the data to IRS systems. To develop information related to the elapsed time between matching information returns to income tax returns and when IRS issued the first notice of discrepancy to taxpayers, we analyzed data for tax year 2010 as this is the most recent year for which IRS has completed the three phases of its matching process. We assessed the reliability of CDW data by (1) performing electronic or manual testing of required data elements to identify obvious errors, (2) reviewing existing information about the data and the system that produced them, and (3) interviewing agency officials knowledgeable about the data. We determined that the data were sufficiently reliable for the purposes of this report. GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: Nov. 1, 1999). the course of our audit work, and IRS agreed with our approach. Officials noted that they do not yet consider Real Time Tax a "project" and have not decided whether to pursue Real Time Tax. A description of the leading practices is detailed in appendix III. We conducted this performance audit from August 2012 to June 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Description Filed by lenders to report mortgage interest of $600 or more. Certain points (prepaid interest on a mortgage loan) are also reported if the points, plus other interest on the mortgage, are $600 or more. Filed by lenders to report student loan interest of $600 or more received. Filed by eligible educational institutions and insurers (who make reimbursements or refunds) to report payments received or amounts billed for qualified tuition and related expenses. Issued by lenders who acquire an interest in property that was security for a loan, or who know such property has been abandoned, to report income or loss. Filed to report proceeds from broker and barter exchange transactions. Filed by lenders to report cancelled debt of $600 or more. Issued by banks and other financial institutions to report dividends and other distributions. Filed by federal, state, and local government units to report payments of: unemployment compensation; state or local income tax refunds, credits or offsets; taxable grants; and/or agricultural payments. Filed to report interest income or U.S. Savings Bond and Treasury obligation interest of $10 or more, withholding for foreign taxes paid on interest, and backup withholding. Issued by payment settlement entities to report merchant card payments and third-party network payments. Filed by insurance companies, government units, and other providers to report long-term care benefits. Used to report miscellaneous income, such as: royalties or broker payments in lieu of dividends or tax-exempt interest of $10 or more; $600 or more in rents, services (including parts and materials), prizes and awards, medical and health care payments, crop insurance proceeds, cash payments for fish (or other aquatic life); fishing boat proceeds; gross proceeds paid to an attorney; direct sales of at least $5,000 of consumer products for resale from other than a permanent retail establishment; payments to independent contractors; directors' fees; commissions paid to lottery ticket sales agents; and backup withholding. Description Filed by financial institutions, brokers, and other entities to report the original issue discount (the excess of an obligation's stated redemption price at maturity over its issue price) includible in gross income of at least $10. Filed by cooperatives to report payments of $10 or more in patronage dividends and other distributions, as well as any federal backup withholding. Filed by states or eligible educational institutions to report earnings or distributions from qualified tuition programs and Coverdell Education Savings Accounts. Used to report distributions of $10 or more from pensions, annuities, individual retirement arrangements (IRAs), survivor income benefit plans, charitable gift annuities, and profit-sharing and retirement plans. Used to report the sale or exchange of real estate. Used to report distributions from a health savings account, Archer Medical Savings Account, or Medicare Advantage Medical Savings Account. Filed by the Railroad Retirement Board (RRB) to report Tier 1 railroad retirement benefits (the benefits railroad employees or beneficiaries would have been entitled to receive under the Social Security system) and special guaranty benefit payments. Filed by the Social Security Administration (SSA) to report Social Security benefits. Filed by the trustee or issuer of IRAs to report contributions, including any catch-up contributions, and the fair market value of the account. Used to report contributions, including rollover contributions, to any Coverdell Education Savings Account. Filed by a trustee or custodian of health savings accounts, Archer Medical Savings Accounts, and Medicare Advantage Medical Savings Accounts to report contributions, rollovers, and fair market value. Filed to report certain gambling winnings and any federal income tax withheld on those winnings. Filed by employers to report wages paid to each employee from whom income, Social Security, or Medicare tax was withheld or from whom income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4 (Employee's Withholding Allowance Certificate). The types of payments reportable on a 1099-MISC and their reporting thresholds vary widely. These include payments to nonemployees for services of at least $600 (called nonemployee compensation), royalty payments of $10 or more, and medical and health care payments made to physicians or other suppliers (including payments by insurers) of $600 or more. If reporting substitute payments in lieu of dividends or interest or gross proceeds paid to an attorney, the due date was February 15, 2012. Provider must have furnished fair market value information and required minimum distribution, if applicable, to participants by January 31, 2012. Paper returns were due to the Social Security Administration by February 29, 2012, and electronic returns were due by April 2, 2012. We have identified a number of leading practices for planning new initiatives at the Internal Revenue Service. Table 2 lists these leading practices and the sources used to develop them. As the table makes clear, we have applied these leading practices for a decade or more. In addition, our own review found these leading practices still relevant today. We discussed with IRS officials the leading practices on which we based our descriptions and assessments during the course of our audit work, and they agreed they are relevant to the Real Time Tax exploratory effort. The figure below provides additional information on the amendment rates for the 25 information returns we reviewed. James R. White, (202) 512-9110 or whitej@gao.gov. In addition to the contact named above, David Lewis (Assistant Director), Shannon Finnegan (Analyst-in-Charge), Ellen Rominger, Andrew Ching, and Albert Sim made key contributions to this report. Also contributing to this report were Joanna Berry, Jehan Chase, Michele Fejfar, Robert Gebhart, Robert Robinson, Sabrina Streagle, and John Zombro.

Summary:
For tax year 2011, IRS matched over 140 million individual income tax returns against the 1.6 billion information returns it received from third parties such as employers. Generally, this match does not occur until well after refunds are issued. In early 2011 the then IRS Commissioner outlined a vision for a "Real Time Tax" system--a strategy to improve verification by matching third party information to income tax returns before refunds are issued, and IRS began exploring options for Real Time Tax later that year. GAO was asked to review IRS's strategy for exploring Real Time Tax. This report (1) describes when IRS receives and matches individual tax and information returns and (2) assesses the extent to which IRS is following leading practices for managing an exploratory effort of this importance. GAO reviewed IRS documents and guidance, including the Internal Revenue Manual, information return forms, and drafts of Real Time Tax planning documents. GAO generated descriptive data on the timing and volume of 25 information returns using IRS's Compliance Data Warehouse database. GAO identified leading practices on planning new initiatives at IRS using past GAO reports, internal control standards, and IRS documents. The Internal Revenue Service (IRS) receives few information returns before issuing most tax refunds. In 2012, IRS issued 50 percent of tax year 2011 refunds to individuals by the end of February, but had only received 3 percent of information returns. Most information returns are not received by IRS until after mid-April, and IRS conducts the first match of tax and information returns in July, with subsequent matches in February and May of the following year. For tax year 2010, over a year passed on average before IRS notified taxpayers of matching discrepancies, and IRS recognizes that this long time lag burdens taxpayers. IRS is generally following leading practices in its Real Time Tax exploratory effort by, for example, dedicating a team and defining program goals. IRS did not develop an overall timeline because management views Real Time Tax as a broad goal, and officials wanted to avoid causing concern that IRS had already decided on a path. Without a timeline for the overall exploratory effort, IRS cannot know if its efforts will be completed in even the broad time frames IRS is considering, and Congress may not be able to determine what legislative action might be required. IRS officials stated that managing risk is a high priority, but they have not developed an overall risk management framework, as they are still in the early stages of the exploratory effort. They said they plan to further develop the strategy if IRS pursues Real Time Tax. Without systematically identifying and evaluating the risks of Real Time Tax options, IRS officials may miss critical factors that could complicate the effort. A record of prior risk analyses could help prevent unnecessarily repeating the same analyses. GAO recommends IRS identify time frames for the exploratory effort's critical phases and activities and develop a risk management framework for Real Time Tax. IRS agreed with our recommendations.