Audit reveals budget cuts, new IT systems slow IRS capabilities

Monday - 4/16/2012, 6:51pm EDT

A Treasury Department audit of the Internal Revenue Service has revealed an agency hampered by budget cuts and struggling to update its technology to assist a growing number of taxpayers.

The seasonal audit conducted by the Treasury Inspector General for Tax Administration tracked IRS' activities between Jan. 1 and March 3. It counted 63 million tax returns, a 4.7 percent increase from last year — and about half of the returns expected this year.

Problems included long wait times, inaccurate information and bugs in old and new IT systems.

The findings are consistent with IRS' own expectations, TIGTA officials said, and reflect a $300 million budget cut and reducing staff by 3,600. The Obama administration has asked for a 21 percent increase in the agency's funding next year to help with the modernization process.

Colleen Kelley, president of the National Treasury Employees Union, recently noted that 93 percent of the federal government's revenues were processed by IRS.

"Clearly, adequately funding the IRS is an investment for our nation, not a cost," she said.

Problems with technology

Of the 63 million tax returns filed in the time period, 57 million were filed electronically, the report said. IRS is continuing the process of migrating its records from the old e-filing system to the new Modernized e-File (MeF) system. Early this year, many refunds were delayed by a problem with filters in the MeF system used to flag identity fraud. The problem has since been resolved, but TIGTA plans an audit focusing exclusively on the performance of the new system later this year.

IRS Commissioner Doug Shulman, speaking at the National Press Club last week, said that while the IRS was once a leader in technology, it now retained few employees who understood its antiquated systems.

"We have a very complicated interrelated set of systems that have evolved on top of those systems. When you try to unbundle all of that, it makes the job even harder," Shulman said.

Long wait times, reduced staff

As a result of budget constraints, IRS has reduced hours and dedicated staff at walk-in assistance centers. In addition, the audit found that cutoff times were earlier to avoid overtime, and taxpayers were no longer able to schedule appointments but were helped on a "first come, first serve" basis only. This led to increased wait times for taxpayers.

Reduced staff and hours at call-in centers also led to increased telephone wait times, resulting in a 66 percent "level of service" success. That means one-third of taxpayers attempting to speak to someone either hear a busy message or abandon the phone call before being connected. IRS hasn't achieved a level-of-service score higher than 80 percent since 2007.

Inaccurate assistance

The audit found that as the availability of walk-in centers decreased, use of the Volunteer Program — certified volunteers who help the elderly and those earning less than $50,000 — has increased, up 4.3 percent from the same time last year.

But tax returns prepared by volunteers in random tests had only a 44 percent accuracy rate, down from 60 percent last year, the report said.

Self-assistance technologies flourishing

As live assistance has dwindled, use of self-assistance and social-media platforms has sky-rocketed. Use of the "Where's My Refund?" online tool nearly doubled from last year, with almost 81 million hits. Smartphone apps, multilingual YouTube videos, Twitter updates and RSS feeds have also flourished.