GAO gives IRS mixed grades for 2007 tax filing season

Last year’s stimulus package created challenges for the IRS filing season

The Internal Revenue Service was flooded with calls about the last year’s economic stimulus package (ESP) during the 2008 tax filing season, leaving many callers on the hook and costing the government more than half a billion dollars in foregone revenue as tax collectors were shifted to answering phones, according to the Government Accountability Office.

Despite a sharp increase in the number of returns filed and calls made because of the stimulus plan that resulted in checks being sent to most households, the IRS had a generally successful season, GAO said in its recent report, titled “IRS’s 2008 Filing Season Generally Successful Despite Challenges.” Most taxpayers filed their returns electronically, and the number of electronic tax returns climbed in 2008. But an influx of almost 9 million returns filed only for the stimulus payment, most of them on paper, kept the overall percentage of electronic filings flat at 59 percent for 2008.

Out of a total of 150 million returns processed through Sept. 12, 2008, 88 million were filed electronically, up from 79 million the previous year. But, “IRS processed 16 million Form 1040As on paper, a 92 percent increase from last filing season, largely due to ESP,” GAO reported. “According to IRS officials, this increase was especially burdensome not only because paper processing is more labor-intensive and expensive then electronic processing, but also because claimants made many errors on ESP-only returns, which IRS had to manually correct.”

IRS attributed much of the increase in electronic filing to its Free File program. The number of taxpayers using the system increased 24 percent in 2008 to 3.8 million, after a 2 percent decline in the previous year. IRS officials credited public awareness and marketing with the increase.

The Customer Account Data Engine (CADE), a part of the IRS Business Modernization Program that eventually will replace the legacy Master File processing system and facilitates faster refunds, posted 30.5 million returns as of Aug. 8. This is up sharply from the 11 million returns posted with CADE in 2007 and exceeded the agency’s goal of 30 million returns for 2008. Because CADE posts information daily, direct-deposit refunds are issued one to five business days faster than with the Master File system and paper checks are issued four to eight business days faster.

Visits to the IRS Web site were up sharply in 2008, totaling more than 292 million, a 74 percent increase over 2007. Nearly 66 million visits were related to the Economic Stimulus Package.

‘This is IRS, please hold’

The one area where IRS technology faltered under the load was its call centers. The total number of calls more than doubled in 2008 to 118 million, due largely to the stimulus package. The number of queries that were satisfied with an automated process kept pace with the overall increase in calls, but the system faltered when queries had to go to a person. More than 34 million callers hung up without talking to a person, a jump of 159 percent, and more than 13 million callers got a busy signal or were disconnected by the call center, 10 times the number who could not get through in 2007.

The percentage of callers seeking and receiving live assistance dropped to about 57 percent last year, down sharply from the 81 percent of 2007. The average time to answer a call went up sharply, from 4.6 minutes in 2007 to 8.6 minutes in 2008.

The IRS issued 116 million stimulus payments totaling $94 billion last year, at a direct cost of $305 million. A much larger cost was $655 million in foregone revenue that came from shifting automated collection system staff to answering stimulus package related calls.

About the Author

William Jackson is a Maryland-based freelance writer.

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