IRS’ telephone assistors are located at 25 call sites around the country. In the 1999 filing season, IRS made major changes to its telephone customer service program. For example, IRS extended its hours of service to 24 hours a day, 7 days a week. IRS officials said they believed around-the- clock assistance would improve the level of service by distributing demand more evenly and support IRS’ efforts to provide world-class service by making assistance available anytime. Also in 1999, IRS began managing its telephone operations centrally at the Customer Service Operations Center in Atlanta by using new call-routing technology. IRS’ call router was designed to improve the overall level of service, as well as lessen disparities in the level of service across sites by sending each call to the first available assistor nationwide who had the necessary skills to answer the taxpayer’s question. As part of this centralized management, IRS developed its first national call schedule that projected the volume of calls, for each half-hour, at each of IRS’ 25 call sites, and the staff resources necessary to handle that volume. As in previous years, in the 2000 filing season, IRS had three toll-free telephone numbers taxpayers could call with questions about tax law, taxpayer accounts, and refunds. The three primary measures IRS used to evaluate its telephone performance were level of service, tax law accuracy, and account accuracy. IRS measures its level of service by determining the rate at which taxpayers that call IRS actually get through and receive assistance. Level of service is calculated by dividing the number of calls answered by the total call attempts. Calls answered is defined as calls that received service, either from assistors or telephone interactive applications. Total call attempts includes repeat calls and is the sum of calls answered, calls abandoned by the caller before receiving assistance, and calls that received a busy signal. IRS’ tax law accuracy and account accuracy rates are based on a sample of nationwide calls that quality assurance staff listen in on and score for accuracy. Using IRS’ Centralized Quality Review System, staff in Philadelphia listen to sample calls from beginning to end and determine whether the assistors provide accurate answers, follow procedural guidance to ensure a complete response, and are courteous to the taxpayers. If the assistors fail to adhere to any part of the guidance, or are not courteous to the taxpayers, the calls are counted as inaccurate. IRS began centrally monitoring calls to measure tax law accuracy in fiscal year1999 and account accuracy in fiscal year 2000. To address our objectives, we examined documents and interviewed IRS officials. Specifically: to assess IRS’ performance in the three main telephone assistance toll-free numbers, we compared its 2000 filing season level of service, tax law accuracy, and account accuracy with its performance in the 1998 and 1999 filing seasons and its performance targets, and discussed with IRS officials how its performance compared with world-class customer service; to identify the key factors and describe how they affected performance in the 1999 and 2000 filing seasons we interviewed IRS officials, including executives, division chiefs, and first-line supervisors in Customer Service Field Operations and at call sites; and analyzed documents, including various reports that described and analyzed the factors that affected IRS’ performance; to assess IRS’ process for analyzing its performance in the 1999 and 2000 filing seasons in order to make improvements, we interviewed IRS officials, including National Office and Customer Service Field Operations officials responsible for collecting and analyzing data on IRS performance; and analyzed documents, including various reports related to the process, such as the 1999 National Office business review and statistical analyses of 2000 filing season performance; and to determine the basis for restricting supervisors from using productivity data to evaluate or discuss telephone assistor performance, we interviewed IRS officials, including officials in the Organizational Performance Division and Customer Service Field Operations; and analyzed documents related to the restriction, including the Internal Revenue Manual and materials used to train supervisors on the use of statistics. We performed our work at IRS’ National Office in Washington, D.C.; Office of the Chief, Customer Service Field Operations, and Customer Service Operations Center in Atlanta; and the telephone assistance call sites in Atlanta, Dallas, and Kansas City, KS. We chose these three sites in order to include sites of various sizes, hours of operation, and work. We did not independently assess the accuracy of IRS’ performance data, however, we verified that IRS had procedures in place intended to ensure data reliability. We did our work from January 2000 through February 2001 in accordance with generally accepted government auditing standards. We obtained written comments on a draft of this report from the Commissioner of Internal Revenue in a letter dated April 2, 2001. The comments are discussed at the end of this report and reprinted in appendix I. IRS telephone assistance showed mixed results in the 2000 filing season. Performance improved somewhat in the 2000 filing season as compared with 1999, but according to IRS officials, fell short of IRS’ long-term goal to provide world-class customer service. While IRS had not established specific measures and goals for world-class service, it was considering adopting some of those used by leading telephone customer service organizations. In the 2000 filing season, IRS answered 36.1 million of the 61 million calls taxpayers made, resulting in a 59-percent level of service—better than the 50 percent IRS achieved in the 1999 filing season and its target of 58 percent, but short of the 69 percent IRS achieved in the 1998 filing season. IRS provided accurate responses in 73 percent of the tax law calls it answered—unchanged from 1999 and lower than its 2000 target of 80 percent. Account accuracy in the 2000 filing season was slightly lower than IRS’ target of 63 percent. Table 1 shows IRS’ performance during the 1998-2000 filing seasons. IRS officials in National Office and Customer Service Field Operations recognized that telephone performance in the 2000 filing season fell short of its long-term goal of providing world-class customer service--assistance comparable to that provided by leading public and private telephone customer service organizations. IRS has not defined world-class service in terms of specific measures and goals. However, IRS officials have acknowledged the need to change their performance measures to be more consistent with leading telephone customer service organizations. IRS’ level of service measures the percentage of call attempts that receive assistance, with no consideration of how long callers wait for it. Some leading organizations measure service level as the percentage of calls answered within a specified period of time, such as answering 90 percent of calls within 30 seconds. IRS was considering adopting a similar measure and goal. However, IRS’ performance in fiscal year 2000 fell substantially short of this level, with only 31 percent of calls being answered within 30 seconds. A number of interrelated factors influenced IRS’ telephone assistance performance in the 2000 filing season. According to IRS, some of the key factors were the demand for assistance, staffing levels, assistor productivity, assistor skills, and IRS’ guidance for assistors. Additionally, many of the factors were interrelated—changes in one factor could cause changes in others. According to an analysis by Customer Service Field Operations officials, IRS was able to answer a greater percentage of calls in the 2000 filing season compared with 1999 because demand for service substantially decreased. IRS measured demand in two ways: total call attempts and unique telephone number attempts. Total call attempts includes repeat calls and is the sum of calls answered, calls abandoned by the caller before receiving assistance, and calls that received a busy signal. The unique telephone number measure is designed to count the number of taxpayers who called, rather than the number of calls. It measures the number of calls from identifiable telephone numbers, and counts all call attempts from each telephone number as one call until it reaches IRS and is served, or until a 1-week window expires. Total call attempts decreased from 83.5 million in 1999 to 62.8 million, a 25-percent decrease, while unique number attempts decreased from 33.2 million to 25.9 million, a 22- percent decrease. According to IRS, demand declined partly because IRS issued 1.8 million fewer notices to taxpayers asking them to call IRS about such issues as math errors IRS detected while processing returns. Also, fewer taxpayers called about the status of their refunds because IRS processed returns more quickly. Additionally, timing of notices IRS sends taxpayers influences demand for assistance. For example, as we previously reported, in the 2000 filing season, because of contract delays, a contractor mailed the bulk of over 1 million notices to taxpayers over a 2-week period, rather than over a 7- week period as intended. When taxpayers called about the notices, IRS was unprepared to answer the unexpected increase in the number of telephone calls, which caused level of service to decline during this period. According to IRS officials, a factor that may have prevented the level of service from being higher in the 2000 filing season was IRS’ decision to reduce the staff dedicated to telephone assistance as compared with 1999. Specifically, in the 2000 filing season, IRS dedicated 4,912 staff years to telephone assistance as compared to 5,339 staff years in 1999, an 8-percent decline. According to IRS officials, IRS dedicated fewer resources to telephone assistance to increase staffing in other programs, including the telephone collection system, adjustments, and service center compliance. IRS managers were concerned that in 1999, when IRS redirected resources from these other programs to telephone assistance, the backlog in these programs increased to unacceptable levels, causing uneven service and a decline in collection revenues. Assistor productivity is another factor that affects the level of service taxpayers receive from IRS. According to IRS officials, the level of service would have been higher had assistor productivity not declined in the 2000 filing season. This decline was in addition to a productivity decline that occurred in the 1999 filing season. According to analysts and officials in Customer Service Field Operations, a key indicator of productivity is the average time for an assistor to handle a call. Handle time is the total of the time an assistor spends talking to the taxpayer, the taxpayer is on hold, and the assistor spends in “wrap status”, which is the time between hanging up at the end of a call and indicating readiness to receive another call.