IRS uses multiple channels to provide customer service to taxpayers and process tax returns: Telephone service: Taxpayers can speak with IRS assistors to obtain information about their accounts throughout the year or to ask basic tax law questions during the filing season. Taxpayers can also listen to recorded tax information or use automated services to obtain information on the status of refund processing as well as account information such as balances due. Since fiscal year 2011, IRS has received an average of about 116 million calls from taxpayers each year. In 2015, we reported that IRS’s telephone service had continued to deteriorate from prior years and we suggested Congress require the Secretary of the Treasury to develop a comprehensive customer service strategy. Correspondence: Taxpayers may also use paper correspondence to communicate with IRS, which includes responding to IRS requests for information or data, providing additional information, or disputing a notice. IRS assistors respond to taxpayer inquiries on a variety of tax law and procedural questions, and handle complex account adjustments such as amended returns and duplicate filings. IRS tries to respond to paper correspondence within 45 days of receipt; otherwise, such correspondence is considered “overage.” Last year, we reported that about half of the 19 million pieces of correspondence IRS received was overage. Minimizing overage correspondence is important because delayed responses may prompt taxpayers to write again, call, or visit walk-in sites. IRS then would be required to pay interest on refunds owed to taxpayers if it did not process amended returns within 45 days. Online services: IRS’s website is a low-cost method for providing taxpayers with basic interactive tools to, for example, check refund status, make payments, and apply for plans to pay taxes due in scheduled payments (installment agreements). Taxpayers can use the website to print forms, publications, and instructions, and can use IRS’s interactive tools to get answers to tax law questions without calling or writing to IRS. Total visits to IRS’s website in fiscal year 2016 were about 500 million. Face-to-face assistance: Face-to-face assistance remains an important part of IRS’s service efforts, particularly for low-income taxpayers. Taxpayers can receive face-to-face assistance at IRS’s walk-in sites or at thousands of sites staffed by volunteer partners during the filing season. At walk-in sites, IRS staff provide services including answering basic tax law questions, reviewing and adjusting taxpayer accounts, taking payments, authenticating Individual Taxpayer Identification Number applicants, and assisting IDT victims. At sites staffed by volunteers, taxpayers can receive free return preparation assistance as well as financial literacy information. Nearly 4.5 million taxpayers visited an IRS walk-in site in fiscal year 2016. Tax return processing: Every year since 2011, IRS has processed more than 140 million paper and electronically-filed (e-filed) returns and approximately $300 billion in refunds. When IRS processes returns, it checks for errors and corrects those that it can. If needed, IRS corresponds by mail with the taxpayer to request additional information, such as a missing form or other documentation. IRS expends significant resources correcting errors. The process can affect how long it takes IRS to issue refunds. IRS’s fiscal year 2016 appropriation was $11.24 billion. This is about $900 million (7 percent) less than its fiscal year 2011 appropriation of $12.12 billion. The change in appropriation varied significantly by appropriation account. Specifically, IRS’s Taxpayer Services account— used to fund taxpayer service activities and programs—increased about 2 percent from $2.29 billion to $2.33 billion between fiscal years 2011 and 2016. In contrast, the Enforcement account decreased about 11 percent (about $620 million) from $5.49 billion to $4.87 billion between fiscal years 2011 and 2016. IRS’s fiscal year 2016 appropriation included a $290 million increase over fiscal year 2015, which IRS was directed to allocate to improve taxpayer services ($178.4 million), cybersecurity ($95.4 million), and IDT prevention ($16.1 million). In addition to annually appropriated resources, IRS has permanent, indefinite authority to obligate user fee collections, which allows the agency flexibility in the use of these funds. The amounts that IRS has obligated in user fee funds from the Taxpayer Services account has varied considerably in the last 3 years, from $183 million in fiscal year 2014 to $45 million in fiscal year 2015 to $70 million in fiscal year 2016 (down from a planned $103 million). Viewed broadly, IDT refund fraud is composed of two crimes: (1) the theft or compromise of PII, and (2) the use of stolen (or otherwise compromised) PII to file a fraudulent tax return and collect a fraudulent refund. Figure 1 presents an example of how fraudsters may use stolen PII and other information, real or fictitious (e.g., sources and amounts of income), to complete and file a fraudulent tax return and successfully receive a refund. In this example, a taxpayer may alert IRS of IDT refund fraud. Alternatively, IRS can detect IDT refund fraud through its automated filters that search for specific characteristics as well as through other reviews of taxpayer returns. In October 2015, IRS formed an IDT reengineering team that is focused on improving the taxpayer experience for victims of IDT. IRS improved its telephone level of service—which is defined as the percentage of people who want to speak with an assistor and were able to reach one—from 37 percent during the 2015 filing season to 72 percent during the 2016 filing season (7 percentage points higher than forecast). This was the highest level of service reached during this time since 2011. As it has historically done, IRS reduced the level of service before and after the filing season, which IRS officials explained was to increase IRS’s attention to customer service in others areas, such as responding to taxpayer correspondence. During the 2016 filing season, taxpayers waited an average of about 11 minutes to speak to an assistor, which was substantially better than IRS expected. By comparison, during the fiscal year, callers waited an average of about 18 minutes, which was an improvement over last year and better than IRS had expected this year. Figure 2 shows that IRS provided a better level of service and shorter average wait time to speak to an assistor during the 2016 filing season compared to the fiscal year. Compared to last year, total call volume increased about 2 percent to slightly more than 114 million calls. At the same time, IRS increased the number of full-time equivalents (FTE) answering phone calls by about 23 percent (which includes about 250 FTEs from its Identity Theft Victims Assistance unit) and assistors answered about 40 percent (or 7.3 million) more calls from taxpayers. Total calls where taxpayers abandoned the call, were disconnected, or received a busy signal declined by about 10 percent (from 56.2 million in 2015 to 50.6 million in 2016). IRS officials attributed many of these improvements to additional appropriations funding and user fee funds, which in part allowed for more hiring and use of overtime compared to last year. With the additional $178.4 million in appropriated funds for taxpayer services, IRS hired approximately 1,000 more assistors. However, IRS officials noted the agency received its appropriated funds in December 2015, which caused delays in hiring and training assistors. Also, IRS assistors who answer telephone calls and respond to correspondence from taxpayers collectively worked significantly more overtime than last year (about 600 FTEs of overtime in fiscal year 2016 compared to about 60 FTEs the prior year). As in prior years, IRS maintained high accuracy rates for assistors’ responses to taxpayer questions via telephone, which have remained well above 90 percent for answering both account and tax law questions. To improve telephone service, we have made several recommendations to IRS such as to set its level of service based on a comparison to private-sector organizations providing a comparable or analogous service—or the “best in the business”—to identify gaps between actual and desired performance. As of December 2016, IRS officials reported that they completed a study to benchmark IRS’s telephone service against the best in business in June 2016, and were reviewing the results. The measures that IRS uses to report its performance in answering telephone calls include level of service, wait time, and demand to speak to an assistor, among others. Several of these measures are broken down by type of call. IRS uses this information to track which types of calls, if any, require more resources to handle or could be readily automated. IRS officials said they believe that, taken together, the measures IRS uses provide an overall picture of the resources it dedicates to the different types of calls. According to IRS estimates, the average cost per call answered by IRS assistors increased from $32 to $56 between 2011 and 2015. IRS officials attributed this increase to answering about half as many calls, combined with only slightly lower costs, in 2015 compared to 2011. However, in 2016, IRS estimated this cost declined to $42 per call. Officials attributed this decline to having more assistors and answering more calls that were shorter in average length. For automated calls, IRS estimated an average cost of about $0.79 per call in 2011, which decreased to $0.50 per call in 2016. While IRS is answering fewer calls through automation, we have previously reported that identifying more calls that IRS can answer through automation is important because it reduces demand for assistor- answered calls and saves IRS money. IRS does not break down the average cost per call by type of call received. According to IRS officials, its costs are generally consistent across the different types of calls because assistors’ pay does not vary significantly by location, and assistors can generally answer all types of calls after receiving the necessary training. Therefore, officials do not believe it would be useful to calculate and track the dollar cost per type of call in addition to the measures they currently use.