GAO Issues Letter Recommending Priorities for IRS

June 14, 2022

The U.S. Government Accountability Office (GAO) recently issued a letter to the IRS outlining more than two dozen past and new top recommendations, including improving taxpayer service.

The letter follows up on the GAO's earlier top recommendations in audit reports. As of May 2022, 268 GAO recommendations remained open, including 25 priority recommendations. The GAO defines a priority recommendation as an action that will significantly improve IRS 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. A fifth priority recommendation concerning cryptoasset reporting was closed, as a new law requiring third-party reporting of certain cryptoasset transactions dealt with the issue. In its latest letter, the GAO added five more priority recommendations, including suggested actions for implementation. The IRS responded that it did not agree with all the recommendations.

The recommendations are 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)
  • Enhancing IRS staffing and personnel management (two recommendations)

The eight recommendations for improving taxpayer service are:

Reduce 2020 return backlog
In a March 2021 report, the GAO recommended the IRS amend its estimates for clearing its 2020 return backlog. The IRS disagreed and said that it continues to monitor its backlog of paper returns. In April 2022, the IRS stated that most of the 2020 returns had been fully processed, other than some held for review due to complex errors. The GAO requested more information on the outstanding returns.

Reduce correspondence backlog
The GAO recommended the IRS estimate time frames for reducing its backlog of taxpayer correspondence and monitor, update and publicly report its progress periodically. The IRS agreed with this recommendation.

Improve "Where's My Refund?"
After National Taxpayer Advocate Erin Collins recently requested the IRS provide more information on the “Where’s My Refund?” online tool about the status of a pending refund, the IRS expanded the tool to allow taxpayers to check the status of refunds for two previous tax years in addition to that of the most recently filed return. The GAO recommended the IRS continue to make improvements to the tool. The IRS agreed but also stated that providing further improvements depends on funding and the results of research conducted this spring on users' needs.

Reexamine Free File agreement
The GAO stated the IRS should consider developments since the IRS last analyzed the Free File program in March of 2021 when deciding whether to renew the agreement. These developments include the departure of two companies from the program in 2020 and 2021 as well as the removal of a prohibition against the IRS's operation of its own online filing system. The IRS agreed with this recommendation.

Develop more options for free online tax return filing
The GAO recommended the IRS work with stakeholders to develop additional ways for taxpayers to file returns for free before the current Free File agreement expires in October 2023. In an April 2022 report, the IRS disagreed with this recommendation, stating that it lacks adequate funding and does not believe a public free filing option would substantially improve the taxpayer experience.

Identify taxpayer service improvement goals
In a September 2020 report, the GAO recommended the IRS develop performance goals for improved service. The IRS agreed with the recommendation and said that the goals outlined in its January 2021 Taxpayer First Act Report to Congress were a step in that direction.

Identify taxpayer service improvement performance measures
The GAO also recommended the IRS more specifically state how it would measure its progress toward meeting its taxpayer service goals, and the IRS agreed with this recommendation. The IRS stated that it would outline this information in its 2022–2026 IRS Strategic Plan, which had been slated for completion in the spring of 2022 but has not yet been released.

Establish time frames and monitoring procedures for processing taxpayer appeal requests
This recommendation was originally made in 2018, and the IRS agreed, stating that all four of its major administrative divisions have developed timeliness standards for their handoff of appeals requests to the IRS's Independent Office of Appeals. Also, three of the divisions have procedures in place for monitoring timeliness.

The remaining 13 recommendations included items such as establishing a unit to combat business-related identity theft refund fraud, expanding third-party information reporting to include more information on sole proprietors' income and expenses, submitting a revised modernization plan to Congress for information returns, tracking and analyzing the results of large partnership audits to better allocate audit resources, and implementing an agency-wide workforce planning initiative.