IRS shows improvement in tax processing efforts

The IRS' tax processing systems performed slightly better during the 2000 filing season than in 1999, according to a new report from the General Accounting Office.

Two major information systems that help frontline IRS employees fix errors in tax returns were reliable almost 100 percent of the time-up half a percentage point from last year. The number of critical system-related problems dropped 23 percent-from 757 to 584.

The IRS also picked up the pace of processing returns. By April 23, the IRS reported it had processed 83.1 million tax returns-3.2 million more than in the same period last year.

"IRS exceeded the management-level goals for refund timeliness for fiscal year 2000 for returns filed either on paper or electronically, and exceeded its fiscal year 1999 accomplishments for returns filed on paper," the report concluded.

IRS Commissioner Charles O. Rossotti attributed the success to thorough Y2K planning and preparation over the past three years.

Although the agency made progress in processing tax returns quickly and accurately, the 2000 filing season was not completely error-free.

"At the time we completed our work, IRS reported that for the 2000 filing season, it had experienced four problems with its tax processing systems that it considered minor and that affected small numbers of individual taxpayers," the report said.

Two problems involving erroneous due dates on payment statements and a glitch in the electronic filing system were corrected by the agency by mid-February. The other two problems involved mistakes in issuing tax refunds.

In one case, IRS information systems mistakenly sent 322 refunds directly to taxpayers who had designated through power of attorney that the funds should be sent to third-party representatives. The other problem involved 3,463 individual taxpayers who failed to receive their refunds via direct deposit. Instead, the IRS misdirected the refunds to other taxpayer accounts.

More than $4 million in refunds were erroneously issued, but as of April 28, the agency had corrected the problem for about 80 percent of the affected taxpayers.

Rossotti concurred with the report's findings, and provided GAO with additional information explaining why certain errors had occurred. GAO said it did not have any recommendations for the agency, but plans on following up with IRS officials on improving notification problems.

Later this year, GAO will issue reports on the IRS' efforts to improve toll-free telephone service and walk-in assistance during the tax filing season and its campaign to increase use of electronic filing.