The IRS should implement more than two dozen past and new top recommendations by the U.S. Government Accountability Office (GAO), the GAO said in a letter to the Service released Monday.
The letter, one of a number of similar assessments issued to federal agencies, is intended to follow up on the GAO's previous top recommendations in audit reports. As of May 2022, the IRS had 268 GAO recommendations that remained open. Of those, 25 had been designated priority recommendations, meaning the GAO considers them as deserving the Service's attention to significantly improve its operations by saving money, improving management, and preventing abuse and fraud.
Since the GAO issued a similar letter to the IRS in June 2021, the IRS has implemented four of the 25 priority recommendations, and one, concerning cryptoasset reporting, was closed because a new law requiring third-party reporting of certain cryptoasset transactions addressed the issue. To the remaining 20 priority recommendations, the GAO added five more in the letter. The IRS did not agree with all the recommendations.
The recommendations were divided into six categories: improving taxpayer services (eight recommendations); reducing tax fraud and improper payments (six recommendations); improving cybersecurity (one recommendation); enhancing information reporting (five recommendations); improving audit effectiveness (three recommendations); and enhancing IRS staffing and personnel management (two recommendations). With each recommendation, the GAO described what actions remained to be taken.
The recommendations for improving taxpayer service were:
Reduce 2020 return backlog: The IRS should revise its estimates for clearing its backlog of work from the 2020 filing season, the GAO had recommended in a March 2021 report. The IRS disagreed with this recommendation, saying it continues to monitor its backlog of paper returns. Most of these returns have been fully processed, the IRS reported in April 2022, other than some held "for review due to complex errors." The GAO requested further information on these remaining returns.
Reduce correspondence backlog: The IRS should estimate time frames for resolving its backlog of taxpayer correspondence and monitor, update, and publicly report its progress on doing so periodically, the GAO recommended. The IRS agreed.
Improve "Where's My Refund?": The IRS agreed with this recommendation but said enhancing the web-based tool depends on available funding and the results of research this spring on users' needs and expectations. National Taxpayer Advocate Erin Collins recently called upon the Service to provide more information on the site about the status of a pending refund. The IRS soon afterward expanded the service to allow taxpayers to check the status of refunds for two previous tax years in addition to that of the most recently filed return.
Reexamine the Free File agreement: The IRS should ensure that future decisions of whether to renew this arrangement, in which third-party tax software vendors provide free federal return preparation to qualifying taxpayers, take into account developments since a March 2021 IRS analysis, including the exodus of two large companies from the program in 2020 and 2021 and the removal of a prohibition against the IRS's operating its own online filing system. The IRS agreed.
Develop more options for free online tax return filing: Before the current Free File agreement expires in October 2023, the IRS should work with stakeholders to develop additional ways for taxpayers to file returns at no cost that would reflect current guidelines for federal digital services. The IRS disagreed with this recommendation in an April 2022 report, saying it lacked sufficient funding and that it "does not believe a public free filing option would significantly improve the taxpayer experience," according to the GAO.
Identify taxpayer service improvement goals: In a September 2020 report, the GAO recommended the IRS identify performance goals for better service and taxpayer experience. The IRS agreed, noting that its January 2021 Taxpayer First Act Report to Congress outlined a framework along those lines.
Identify taxpayer service improvement performance measures: The IRS also agreed to more specifically state how it would measure its progress toward meeting its taxpayer service goals. The Service indicated that it would do so in its 2022–2026 IRS Strategic Plan, which it said in March 2022 would be completed in the spring of 2022.
Establish time frames and monitoring procedures for processing taxpayer appeal requests: The IRS agreed with this recommendation from 2018, saying all four of its major administrative divisions have already developed timeliness standards for their handoff of appeals requests from their examination units to the IRS's Independent Office of Appeals, and that three of the divisions have procedures fully in place for monitoring timeliness.
Among the remaining 13 recommendations were:
- Establish a dedicated unit to lead efforts to combat business-related identity theft refund fraud;
- Research, evaluate, and develop expanded third-party information reporting to include more information on sole proprietors' income and expenses;
- Submit a revised modernization plan to Congress for information returns;
- Track the results of large partnership audits and analyze them to better plan and allocate audit resources; and
- Fully implement an agencywide workforce planning initiative.
The AICPA continues to advocate for better IRS services; visit the webpage describing AICPA advocacy efforts to learn more.
— To comment on this article or to suggest an idea for another article, contact Paul Bonner at Paul.Bonner@aicpa-cima.com.
