Our objective was to assess IRS’ performance during the 1997 filing season, with particular emphasis on those areas that were identified as problematic in our reviews of past filing seasons. To achieve our objective, we interviewed IRS National Office officials and IRS officials in the Atlanta, Cincinnati, Fresno, and Kansas City service centers responsible for the various activities we assessed; analyzed filing season related data from various management information systems, including IRS’ Management Information System for Top Level Executives; analyzed IRS data relating to its telephone assistance and conducted a test of IRS’ telephone accessibility during the last 2 weeks of the filing season (see app. I for information on our test methodology); analyzed IRS data on alternative filing methods, including IRS surveys of TeleFile users and nonusers; visited two lockbox banks, one in Atlanta and one in St. Louis, to review remittance processing procedures; interviewed staff from FMS, which is responsible for negotiating and administering lockbox contracts, about the use of lockboxes to process Form 1040 tax payments and analyzed cost/benefit data related to lockbox processing; interviewed officials from IRS’ Taxpayer Advocate’s Office about the impact of various filing season activities on taxpayers; analyzed activity data for IRS’ Internet World-Wide Web site and forms distribution centers; and reviewed relevant IRS internal audit reports. We did our work from January through October 1997 in accordance with generally accepted government auditing standards. We obtained written comments on a draft of this report from the Deputy Commissioner of Internal Revenue. Those comments are discussed at the end of this letter and are reprinted in appendix II. IRS uses various indicators to measure its filing season performance. Those indicators relate to workload, like the number of returns processed; timeliness, like the number of days needed to process and issue refunds; and quality, like the accuracy of IRS’ answers to taxpayers’ questions and the accuracy with which IRS processes individual income tax returns and refunds. As shown in table 1, those indicators show that IRS met or exceeded most of its performance goals for the 1997 filing season. During each filing season, millions of taxpayers call IRS with questions about the tax law, their refunds, or their accounts. The number of callers who get through to an IRS assistor is an important indicator of filing season performance. According to IRS data, as shown in table 2, telephone accessibility, as we have defined it in the past, increased substantially during the 1997 filing season. Results of our independent test also pointed to an improvement in accessibility. Despite the improvement, however, accessibility is still low. To check whether accessibility had increased, we conducted an independent test to measure taxpayer access to IRS’ telephone system from March 31 through April 15, 1997. Our results, compared with the results of a similar test we conducted in 1995, showed that accessibility had improved. For example, during the 1997 test, we had to make 584 calls to gain access to a live assistor 211 times—a 36-percent accessibility rate. That was a significant improvement over 1995, when we had to make 1,655 calls to gain access 98 times—a 6-percent accessibility rate. Also, of the 584 calls placed during the 1997 test, 288 resulted in busy signals—a 49-percent busy rate. That compares favorably with a 92-percent busy rate during the 1995 test. Our test methodology and detailed results are described in appendix I. Despite the significant increase in 1997, telephone accessibility is still too low. The National Commission on Restructuring IRS made that point in its June 25, 1997, report. After noting how accessibility had improved to 51 percent, the Commission noted that “the level of access continues to be unacceptable and inferior to service performance in private sector service organizations.” As table 2 showed, the increase in IRS’ telephone accessibility between the 1996 and 1997 filing seasons was due to a combination of more calls being answered and fewer calls coming in (i.e., “call attempts”). Two primary reasons for the increase in the number of calls answered were (1) a revision to IRS’ procedures for handling calls involving complex tax issues and (2) more staff assigned to answer the telephone, some of whom were detailed from other IRS functions. IRS’ decision to detail staff from other functions resulted in some opportunity costs because these staff were not available to perform their normal duties, such as auditing tax returns. In an effort to increase the number of calls answered, IRS conducted a study to analyze the subject and length of taxpayer telephone calls. According to IRS, the study showed that several areas of complicated tax law involved 20- to 30-minute telephone conversations and that an assistor could answer about 5 simpler calls within the same amount of time. Thus, for the 1997 filing season, IRS revised its procedures so that callers with questions in certain complex tax areas were automatically connected to a voice messaging system. Those callers were asked to leave their name, telephone number, and the best time for IRS to call back, and they were told that someone would be calling back within 2 working days. According to IRS, it received 619,310 calls to the voice messaging system during the filing season and contacted 451,051 taxpayers in response to those calls. IRS said that there are several reasons why it may not have responded to a message. For example, the message may have been garbled, thus preventing IRS from deciphering the caller’s telephone number; callers may have failed to include an area code; or IRS attempts to contact the caller may have gone unanswered. To help return calls to the messaging system, IRS detailed staff from the Examination function, which is the IRS organization primarily responsible for auditing tax returns. IRS data show that staff who were detailed from the Examination function spent about 125 full-time-equivalent staff years returning calls received by the messaging system. A cognizant official in the Examination function estimated that the use of Examination staff to answer taxpayer questions resulted in about $55 million in foregone revenue because those staff were not available to audit returns. We did not assess the validity of that estimate. Another factor that contributed to the increase in the number of calls answered was IRS’ decision to assign more staff to answer the telephone. Nationwide, according to data provided by IRS’ Customer Service function, IRS dedicated 2,546 full-time-equivalent staff years to answer taxpayers’ telephone calls between January 1 and April 30, 1997. This was an increase of 605 staff years over the 1,941 staff years dedicated during the same period in 1996. In addition, some field offices, including the three service centers we visited, temporarily detailed staff to help answer the telephone, some of whom came from functions other than Customer Service. According to IRS, some of these staff were used only as needed, while others were detailed for a few months. The increase in the number of calls answered contributed to the decrease in the number of call attempts. As IRS improves its ability to answer the telephone, taxpayers should encounter fewer busy signals. Fewer busy signals reduce the need for taxpayers to redial, which reduces the number of call attempts. In that regard, IRS’ telephone data showed that the number of busy signals dropped from 86.0 million during the 1996 filing season to 22.7 million during the 1997 filing season and that the average number of call attempts per taxpayer dropped from 2.5 during the 1996 filing season to 1.4 during the 1997 filing season. IRS cited two other contributors to the decrease in call attempts—the elimination of certain notices and the availability of information through other IRS sources, such as the Internet. Before the 1997 filing season began, IRS eliminated 23 notices that it deemed unnecessary, which, in turn, reduced the need for persons to call IRS with questions about these notices. IRS estimated that its action eliminated the issuance of about 7.5 million notices, but IRS could not estimate how many calls might have been eliminated because every notice does not necessarily generate a telephone call to IRS. IRS has a World-Wide Web site on the Internet that was first available during the 1996 filing season. The Web site provides, among other things, some interactive applications that answer tax questions, IRS regulations with “plain English” summaries, answers to the most frequently asked tax questions, and tax forms. IRS data showed a significant growth in the use of IRS’ Web site in 1997. For example, taxpayers accessed the Web site about 117 million times between January 1 and April 20, 1997, compared with about 102 million accesses throughout 1996, and taxpayers downloaded about 6.3 million files during the 1997 filing season compared with about 2.4 million files for the same period in 1996. As noted earlier, the data in table 2 reflect our traditional way of measuring telephone accessibility. Over the last few years, IRS has used another indicator, which it calls “level of access,” to measure its performance in providing telephone assistance to taxpayers. IRS defines level of access as the number of calls answered divided by the number of callers (i.e., the number of taxpayers seeking assistance). Because IRS’ indicator is based on the number of callers, it shows a higher level of performance than does our indicator, which is based on the number of call attempts. Nonetheless, IRS’ indicator, like ours, showed a significant improvement in performance during the 1997 filing season. IRS reported its level of access as 71 percent through April 19, 1997, compared with 51 percent during a comparable period in 1996. We have been working with IRS to establish one mutually agreeable measure of telephone accessibility. As a result, we have reached agreement on a measure to be used in future filing seasons. That measure defines accessibility as the number of calls that get into IRS’ automatic call distribution system, including those that are answered and those that are abandoned by the caller before getting assistance, divided by the total number of call attempts, which would consist of calls answered, calls that are abandoned, and calls that receive a busy signal.