During Senate Finance Committee oversight hearings held in September 1997, several taxpayers testified about problems they had experienced when dealing with IRS. In response, the then Acting Commissioner of Internal Revenue announced that IRS would hold monthly PSDs in each of its 33 districts, beginning in November 1997. According to the Acting Commissioner, the objective of this initiative was to provide taxpayers with an opportunity to meet face to face with IRS staff to help resolve ongoing tax problems, such as misapplied tax payments, nonreceipt of refunds, and disputed tax bills, that they had been unable to resolve through regular IRS channels. Each IRS district office is responsible for planning and implementing the PSDs, under the overall coordination of the national Taxpayer Advocate. The Office of the Taxpayer Advocate (OTA) administers the Problem Resolution Program (PRP), which was established in 1976 and currently operates in all IRS district offices and service centers to assist taxpayers in resolving tax problems or those who are suffering financial hardship. Other responsibilities of OTA include conducting advocacy projects to identify and address systemic and procedural deficiencies that contribute to the problems experienced by taxpayers and representing taxpayers’ interests in the formulation of IRS policies and procedures. To identify how IRS implemented the PSD initiative, we met with the IRS national Taxpayer Advocate and his staff and obtained and reviewed national office guidance to the district offices concerning planning and implementing the PSDs. We also obtained and reviewed the PSD implementation plans from eight IRS districts and met with district office officials concerning these plans prior to the initial PSD held on November 15, 1997. We then attended the initial PSDs at these eight districts. We also attended the PSDs at two districts during December 1997 and at two districts during May 1998. To determine taxpayers’ overall satisfaction with the initiative and the extent to which taxpayers’ problems were resolved, we obtained and reviewed available IRS statistics concerning the status of PSD cases in general and the specific results of closed PSD cases, as well as summary reports on the results of IRS’ monthly taxpayer surveys and a summary report on the results of IRS’ April and May 1998 taxpayer follow-up telephone survey. We also mailed a questionnaire to a stratified probability sample of the taxpayers who visited the 33 IRS sites on the initial PSD held on November 15, 1997. (App. I describes our sample, response rate, and procedures to assess sources of nonsampling error.) We then analyzed the responses to determine at the time of our survey, among other things, the extent to which (1) taxpayers’ problems were resolved either during or since the November 15 PSD, (2) taxpayers considered the PSD to be a good idea, and (3) taxpayers were aware of the Problem Resolution Office located in each IRS district office. (See app. II for the results of our taxpayer survey.) To determine systemic problems identified, lessons learned, and subsequent actions taken by IRS, we met with the national Taxpayer Advocate and his staff, a district office official who led a study of the overall PSD initiative, and a regional office representative of IRS’ Taxpayer Equity Task Force. We obtained and reviewed pertinent documentation from these officials, including a compilation of lessons learned that was submitted to the National Office by the district offices, a copy of the report prepared at the conclusion of the PSD study, and minutes of meetings held by the Taxpayer Equity Task Force. We also discussed the objectives and status of ongoing task group studies of the four major areas that contributed to taxpayer problems identified during the PSD initiative with representatives from each of these task groups. (See app. III for definitions of these major problem areas.) We did our work from November 1997 to August 1998 in accordance with generally accepted government auditing standards. The work was done at IRS’ National Office and at the following nine district offices: Upstate New York, Delaware/Maryland, Georgia, North Florida, Illinois, Kansas/Missouri, South Texas, Northern California, and Southern California. We selected the IRS offices that we visited on the basis of geographic dispersion and the availability and proximity of our staff to assist in the audit work. We requested comments on a draft of this report from the Commissioner of Internal Revenue. His written comments are discussed at the end of this letter and shown in appendix IV. IRS’ district offices are responsible for holding PSDs with guidance from OTA. IRS held its initial PSD in November 1997 and has held PSD events each month since then. Through the end of July, the PSD initiative had enabled over 22,000 taxpayers to meet with IRS staff in an effort to resolve their ongoing tax problems. OTA is responsible for monitoring and coordinating the overall PSD initiative. OTA provided general guidance to the district offices concerning how PSD events were to be planned, advertised, and implemented, including the necessary staffing, security, and information systems. OTA also selected the specific dates (November 15, 1997, and May 16, 1998) on which national events were held, and district offices decided the dates and locations for additional local problem-solving events each month. Most districts chose to hold PSDs in various locations within the districts to provide taxpayers throughout the geographic area of the districts an opportunity to meet with IRS staff to discuss their problems without traveling to the main district offices. Many districts also elected to hold these events during the week rather than on a Saturday. For example, in March 1998, 22 districts held a PSD on a weekday using extended business hours to accommodate taxpayers who could not visit during regular business hours. The other 11 districts held PSDs on Saturdays. According to IRS officials, the national office and district offices coordinated their efforts to ensure that PSD events were advertised both nationally and locally through newspapers, press releases, television, and radio. Local congressional offices and practitioner groups were also advised of dates and locations for upcoming problem-solving events. Taxpayers and practitioners were advised to call in advance to schedule appointments. Those who called in advance regarding tax problems were given appointments, and their tax accounts were researched to facilitate discussing and resolving their problems on the PSD. In addition, some taxpayers who called IRS regarding a PSD were able to get their problems resolved over the telephone without visiting an IRS office. However, due to the complexity of their tax problems, many taxpayers chose to visit an IRS office to discuss their problems face to face. “Walk-ins” who attended a PSD without an appointment were also generally provided an opportunity to meet with IRS staff to discuss their tax problems. During PSDs, the participating offices we visited were generally staffed with IRS employees from various operating groups, such as Customer Service, Examination, and Collection, who had a wide range of expertise in various tax matters and were available to assist taxpayers, thus making the initiative conducive to discussing and resolving their ongoing tax problems. This arrangement enabled IRS staff, who initially met with taxpayers to discuss their problems and who may not have had the required training or expertise necessary to resolve a particular type of problem, to call upon other IRS staff for assistance. For example, if a taxpayer wanted to discuss a technical issue and the initial IRS employee had not been trained in that area, the employee could ask a specialist to assist the taxpayer. According to the IRS official who led a study of the PSD initiative, this cross-functional approach was particularly helpful in dealing with many of the taxpayers who had multiple problems that had remained unresolved for long periods of time. The official said that IRS staff also considered this approach useful because it helped them to better understand taxpayers’ problems and to develop possible solutions. Each participating office we visited had also arranged for computer terminals, information systems, and technical support as well as office space and security to accommodate as many taxpayers as possible during these events. In some instances, space limitations made it necessary for these events to be held at locations other than an IRS office. IRS’ initial national PSD, which was held at each of the 33 district offices on Saturday, November 15, 1997, was attended by about 6,300 taxpayers and received generally favorable press coverage and reactions from taxpayers. IRS held a second nationwide PSD at each district office on Saturday, May 16, 1998, which was attended by about 2,500 taxpayers. IRS’ district offices have also held additional monthly PSD events between November 1997 and July 1998. More than 22,000 taxpayers had attended PSDs through the end of July 1998. According to OTA, the incremental costs for planning and holding these events, as well as for following up on the taxpayers’ cases that resulted from them, were about $11.5 million through the end of July 1998, primarily resulting from overtime salaries and related personnel compensation. Additional costs, such as rent, and moving and installation of computers, were incurred when PSD events were held at locations other than an IRS office. IRS estimated that the overall costs for holding PSDs during fiscal year 1998 likely would be about $15 million. These estimates do not include the costs to the taxpayers in both the money and time they spent in an effort to get their problems resolved through the PSD initiative, nor do the estimates reflect IRS’ and taxpayers’ costs from previous attempts to resolve their problems. For example, our survey of taxpayers who participated in the initial PSD indicated that all had made prior attempts to resolve their problems, including about 86 percent who had tried over the telephone, about 63 percent who had tried through the mail, and about 42 percent who had tried in person. As these percentages indicate, many taxpayers used more than one method in attempting to resolve their problems. Based on their previous attempts to resolve their problems, about 39 percent of taxpayers responded that they had participated in the PSD because they considered it to be their “last resort.” Surveys that we and IRS conducted of taxpayers who participated in a PSD have shown that taxpayers have had generally favorable reactions concerning the PSD initiative.