In recent years IRS and we have reported problems with IRS’ written communications to taxpayers. Instances of IRS correspondence being incorrect, incomplete, unclear, and nonresponsive have been documented by GAO and IRS. The need to improve the formats of notices has also been identified. In a recent annual report, IRS acknowledged that taxpayers too often find its notices confusing. Describing its written communications with taxpayers as a “seemingly intractable problem,” IRS made a commitment to improve the clarity of these documents. Its current Business Master Plan, a strategic planning document, establishes measurable clarity improvements in notices as one of its goals. IRS master file notices may request payment, seek information, inform taxpayers of account activity, or provide instructions related to account settlement. Many notices concern discrepancies identified during the processing of returns or result from collection efforts, examination of returns, and related audit activities. Under IRS procedures, notices are comprised of standard paragraphs written by staff in IRS functional units such as Returns Processing, Collections, Examination, and IRS field offices. NCU reviews notices to ensure that the text is clear and understandable. IRS’ master files contain specific account information for each taxpayer and IRS relies on these data to generate notices. The Individual Master File (IMF) and the Business Master File (BMF) contain histories of transactions maintained by IRS, including returns submitted by taxpayers, information returns submitted by third parties, and payments made. IMF and BMF notices may be generated, for example, when a discrepancy occurs between information reported on a taxpayer’s return and data stored in the master file. At that point, the notice is automatically printed and sent to the taxpayer. Appendix I illustrates a flowchart of a common situation precipitating the issuance of a notice—a mathematical error made by the taxpayer. The flowchart shows the steps involved in processing the notice. IRS has 94 different IMF-generated notices that it sends to taxpayers. However, as figure 1 shows, in 1993 13 IMF notices comprised approximately 71 percent of all IMF-generated notices sent that year. Figure 2 shows the distribution of the 152 different BMF-generated notices during 1993. A total of 31 BMF notices accounted for 92 percent of all BMF-generated notices sent to business taxpayers. Because a notice’s content and format may affect the taxpayer’s ability and willingness to comply, it is important that notices be clear, informative, and comprehensive. If a notice is unclear, a taxpayer may become less willing to respond out of frustration with IRS. IRS recognized the need to improve the quality of its written communication to taxpayers and established NCU in 1990 to initiate clarity reviews. NCU was tasked with evaluating notice revisions proposed by functional units as well as examining notices suspected of confusing taxpayers. This unit, comprised of approximately eight professional staff, analyzes notices for clarity, readability, and logical material presentation. According to IRS officials, functional units are required to obtain NCU’s approval of new notices and text revisions to existing notices before computer programs containing text will be created or altered. Appendix II depicts the notice revision process and the various IRS units involved. Our objectives were to (1) review a group of commonly used notices and offer suggestions to enhance their clarity where appropriate and (2) determine if the IRS’ process for issuing notices produces clear notices. To address the first objective, we examined 47 high-volume IMF and BMF notices. We selected the notices that were most frequently sent to taxpayers by IRS, excluding those we previously reviewed for our April 1993 report. These 47 notices resulted in the issuance of more than 33 million notices in 1993, or almost 52 percent of all IMF and BMF notices sent to taxpayers that year. We reviewed the versions of the notices currently being sent to taxpayers as well as any revisions to these notices proposed by NCU, but not yet implemented. In reviewing these notices for clarity, understandability, and usefulness, we considered if more specific language, clearer references, and consistent use of terminology would enhance these documents. We assessed whether the material was logically presented, whether sufficient information and detail was provided so taxpayers could evaluate their situations, and whether the taxpayer could resolve the matter without additional guidance. We also evaluated the notice’s format, the suitability of the notice’s title, the directions or guidance provided in enclosures or remittance forms, and whether IRS provided the taxpayer with all pertinent information in a single notice or whether additional notices would have to be sent to resolve the situation. Each notice was independently reviewed by at least two GAO evaluators. They considered the same factors in determining if the notices clearly conveyed the message IRS wanted to convey to taxpayers, including whether the text of the notice contained IRS’ intended message; title of the notice was consistent with the text; tax statement or statement of adjustment or other transaction was easy to read and compare to the taxpayer’s return; notice made any assumptions and, if so, whether they were clearly explained; terminology in the notice was easy to understand and logically presented; notice clearly explained what, if any, action was expected of the taxpayer notice provided the taxpayer with sufficient, but not excessive, information regarding the situation; and notice provided the taxpayer a telephone number to call or address to write to should he or she have questions or need additional guidance. We used appropriate guidance found in IRS’ Taxpayers Service’s Handbook and the Catalog of Federal Tax Forms, Form Letters and Notices to verify the purposes of the 47 notices. We also discussed all of our concerns and suggestions with the NCU Chief. However, we did not attempt to determine if the notices we reviewed were appropriate given a taxpayer’s particular circumstances. In addressing the second objective, we also gathered information to help us assess whether IRS had established a workable process for adopting and implementing notice text improvements. We also obtained data on the number of notice revisions proposed by NCU and the number implemented. However, data were not available on the length of time IRS took to implement the revisions. We identified the computer programming changes required to implement the revisions. We also gathered information concerning how IRS set priorities for requested computer programming changes, including notice revisions, and obtained information on proposed revisions that were rejected. Finally, we identified IRS’ efforts to improve the quality of notices and documented its recent testing of notice production on the Correspondex computer system, which may make revisions more efficiently. We did our work at IRS’ National Office in Washington, D.C., from August 1993 to June 1994 in accordance with generally accepted government auditing standards. We provided a draft of this report to pertinent IRS officials including the National Director of Planning, the Chief of NCU, and representatives from the Information Systems Management Division (ISM) and other organizational units involved in the notice development and review process. We met with these officials on September 26, 1994, to discuss this report. They suggested several minor technical modifications, which we adopted, but generally agreed with the facts presented as well as our conclusions and recommendations. Our review of 47 IMF and BMF notices revealed problems with both the language and format of 31 of these notices. For example, we found that many of the 31 notices would have been improved by more specific language, clearer references, consistent terminology, logical presentation of material, and sufficient information and guidance. Format problems included instances where the attached remittance form contained directions that were in conflict with those found in the body of the notice. Another format problem we identified was IRS’ inability to issue notices that addressed multiple or inter-related tax problems with a taxpayer’s account in a single piece of correspondence. Instead, taxpayers would receive several notices in a relatively short time period that addressed several different problems with their tax accounts rather than a detailed, comprehensive notice. This could cause taxpayers confusion and frustration and give taxpayers the impression that IRS is unsure of its position. IRS’ computer system is old and inefficient and is largely responsible for the delay in implementing notice language changes. Because of the time-consuming nature of the programming required to make notice text revisions along with other program changes, a bottleneck occurs. Consequently, IRS must evaluate and prioritize program requests. Notices are presently maintained on an aging computer system, which uses an old computer programming language—known as assembler language—that is difficult to change. Each master file notice exists as a separate program and, because of the technical difficulties involved in implementing language changes, minor revisions can result in major reprogramming efforts. Unlike modern word processing technology, which processes text changes almost as quickly as typing, the assembler language uses an older programming technique that requires each letter of every word and every character to be separately programmed. This character-by-character programming is known as hard coding and affects all IMF and BMF notices. Consequently, these notice revisions are not simple or quick to do. A single change in a word or punctuation mark would require that every subsequent character be reprogrammed. This is time consuming and inefficient and serves as a deterrent to improving notices. IRS established the National Automation Advisory Group (NAAG) in 1992 to facilitate establishment of programming priorities. According to IRS officials, NAAG is comprised of representatives from IRS’ Returns Processing, the major initiator of programming changes, and computer programming officials from ISM. NAAG allows Returns Processing to establish its own priorities, in view of limited resources and the technical difficulties specifically associated with the proposed changes. Faced with numerous demands to alter existing operational programs, ISM has found that it does not have the resources to respond to all requests. Programming changes to process returns for the next filing season and those related to implementing new tax laws, for example, take precedence over notice text revisions. These higher priority demands for computer programming changes lessen the likelihood that notice text changes will be made. While recommended notice text changes remain unprogrammed, the old version of the notice continues to be issued to taxpayers. The cyclical nature of IRS’ programming activities further delays prompt implementation of text revisions.