Tax Administration: Taxpayer Input Could Strengthen IRS's Online Services

IRS recognizes that taxpayers want more choices in how they interact with IRS, including through online services. GAO was asked to review IRS's online services—those which allow IRS and individual taxpayers to exchange personalized information electronically. This report (1) examines what is known about how IRS's current online services are meeting taxpayers' needs, and provides information about selected foreign and state revenue agencies' online services; (2) evaluates the extent to which IRS's strategy for identifying and prioritizing the development of new online services is consistent with relevant requirements and leading practices; and (3) examines how IRS is addressing key challenges in providing online services.

GAO assessed IRS's online services against relevant requirements, agency goals, and leading practices; interviewed IRS officials; and identified additional services and practices from six foreign and state revenue agencies selected for offering multiple online services for exchanging personalized information with taxpayers.

The Internal Revenue Service's (IRS) online services for individual taxpayers primarily provide taxpayers one-way communication of key information derived from their tax return, such as when an anticipated refund should arrive, or allow taxpayers to pay money owed or make payment arrangements. IRS has done little research or reporting on the extent to which its online services are satisfying taxpayers' needs. Also, IRS has not set a target for using online services to help reduce taxpayer burden. Selected foreign and state revenue agencies' online services have developed online filing and communication capabilities, such as filing a tax return on the agency's website and offering electronic chats between revenue agency employees and taxpayers (see figure).

IRS has long-term planning documents which detail online services it intends to develop, which include services to communicate digitally with taxpayers, to achieve its goal of modernizing the taxpayer experience. However, GAO found that IRS has not sufficiently considered taxpayer input in the prioritization process for these new services and instead prioritizes services primarily based on the potential benefit to IRS operations or how quickly a service might be developed. Without considering taxpayer input on user needs and preferences, IRS risks developing services that taxpayers do not use.

A group of private sector tax preparation companies known as Free File, Inc., has a long-standing agreement with IRS in which the companies provide free electronic tax preparation and filing services to eligible taxpayers in exchange for IRS not offering its own filing capability. However, few taxpayers use these services and GAO found that IRS has given inadequate consideration to the full benefits and costs of the Free File agreement to all parties. Not considering these costs and benefits has implications for the future evolution of IRS's online services, including helping taxpayers electronically file amended returns.

GAO is making seven recommendations to IRS, including measuring and reporting on the effect of online services on satisfaction and taxpayer burden and setting a target for reducing burden, considering taxpayer input when prioritizing new online services, and ensuring that any renewal of the Free File agreement reflects benefits and costs. IRS agreed with six recommendations, but disagreed on setting a target to reduce burden. GAO continues to believe IRS should set such a target.

Technology is reshaping views about how citizens and government  agencies should be able to interact with each other. The growth of online  banking and e-commerce has heightened the public’s expectations that  federal agencies will provide high-quality online services that facilitate  transactions. The Department of the Treasury’s (Treasury) Internal  Revenue Service (IRS) interacts with tens of millions of Americans each  year. IRS’s Strategic Plan for Fiscal Years 2018-2022 recognizes that  taxpayers want more choices in how they interact with IRS, including  expanded online services. In prior work, we found that IRS had not  articulated a long-term strategy for online services and that IRS has made  uneven progress in its efforts to improve customer service.

You asked us to review IRS’s efforts to identify, develop, and implement  new online services for individual taxpayers. This report: (1) examines  what is known about how IRS’s current online services are meeting  taxpayers’ needs, and provides information about online services offered  by selected foreign and state revenue agencies; (2) evaluates the extent  to which IRS’s strategy for identifying and prioritizing the development of  new online services is consistent with relevant requirements and leading  practices; and (3) examines how IRS is addressing key challenges in  providing online services.

For purposes of this report, online services are defined as those which  allow IRS and individual taxpayers to exchange personalized information  electronically. For our first objective, we reviewed descriptions on irs.gov  concerning the capability of each online service, data showing usage of  each service, surveys administered to irs.gov users and IRS’s summaries  of the feedback received, the section of Treasury’s congressional budget  justification and performance plan and report describing IRS’s  performance, and information about how IRS estimates taxpayer burden.

For our second objective, we reviewed the section of IRS’s Integrated  Modernization Business Plan (which we will refer to as the modernization  plan) for improving the customer experience and planning documents  describing IRS’s process for developing new online services, the section  of the Treasury’s congressional budget justification and performance plan  and report describing IRS’s performance for documentation of setting  targets to improve satisfaction with online services and reducing taxpayer  burden, and IRS documents describing pilots to develop electronic  communication capabilities between taxpayers and IRS employees.

For our third objective, we reviewed IRS’s agreement with industry to  provide electronic filing services to eligible taxpayers, and IRS documents  describing plans to enable electronic filing of amended tax returns. We  also interviewed the officials who lead the consortium of companies which  made this agreement with IRS, and reviewed written responses they  provided about what they believe to be the benefits of this agreement and  their views on the future evolution of IRS’s online services as they relate  to electronic filing.

To inform sections of all three objectives, we reviewed quantitative data  IRS compiled: The numbers of taxpayers using the different online  services IRS offers, IRS’s summary of the feedback received from  taxpayers using one of IRS’s online services, the number of taxpayers  participating in electronic communication pilots, and the numbers of  taxpayers using different methods to file their tax return. For all  quantitative data, we reviewed IRS documents describing the data and  interviewed IRS officials about the quality control procedures used. We  concluded that the data were sufficiently reliable for our purposes.

In addition, we reviewed our prior work assessing IRS’s performance  during the filing season, verifying the identity of users of online services,  and efforts to build a high performing workforce and these reports are  cited as relevant in our report. We also reviewed reports prepared by the  Treasury Inspector General for Tax Administration, the National Taxpayer  Advocate, and IRS’s Advisory Council which are cited in the relevant  sections of our report. We interviewed IRS officials from the Office of  Online Services (OLS), the Office of Information Technology, relevant  business operating divisions, and other supporting offices identified in the  relevant sections of our report.

We compared IRS’s activities and performance against relevant criteria  drawn from the following five sources: (1) requirements set in laws,  executive orders, and guidance that require or direct IRS, or federal  agencies more generally, related to providing a high-quality experience  for taxpayers and other agencies’ customers; (2) leading performance  management practices of setting measurable performance goals and  regularly reporting on their performance to external audiences, as  embodied by the GPRA Modernization Act of 2010 (GPRAMA); (3) the  21st Century Integrated Digital Experience Act’s (IDEA Act) requirement  that agencies ensure public facing applications and services are made  available in digital format to the extent practicable; (4) IRS’s long-standing  goals for improving online services and reducing taxpayer burden; and (5)  leading practices our prior work identified for effectively piloting new  government services.

For our first objective, but also to inform our other objectives, we  conducted case studies of the online services offered by six selected  revenue agencies. We selected three countries—Australia, New Zealand,  and the United Kingdom—and three states—Alabama, California, and  New York—because they offer multiple online services that allow revenue  agencies and taxpayers to exchange personalized information  electronically and for other considerations. We also consulted with each  country and state’s audit office on our methodology and on any relevant  evaluations their audit offices have done of the revenue agencies’ online  services and appendix I summarizes the national audit offices’  evaluations. Appendix I also describes the filing requirements in the three  foreign countries and how taxpayers may be able to use the revenue  agency’s online services to fulfill these requirements. Our review of the  selected three states was supplemented by reviewing the websites of the  revenue agencies of the remaining states with income taxes (40 states  and the District of Columbia) to determine if taxpayers had the option of  filing a tax return on those websites. The findings from our case studies  are not generalizable to all foreign and state revenue agencies, but  provide illustrative examples of the types of online services available.

We conducted this performance audit from March 2018 to December  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

IRS began posting information on the internet in the 1990s. In the early  2000s, IRS launched its first two interactive services which allowed  taxpayers to (1) check on the status of a refund, and (2) set up a payment  plan to pay taxes they may owe over time. Since then, irs.gov has  expanded to include other online services, such as personal informational  accounts and tax transcript request services. In addition to online  services, the irs.gov website contains information on various topics,  including forms and publications offered on static web pages. While these  static web pages do not provide taxpayers with personalized support or  information, taxpayers seeking more targeted information may consult  online calculators irs.gov offers (e.g., a tax withholding estimator). Two  distinctions between these calculators and the online services our report  examines are that taxpayers do not have to establish their identity before  using a calculator and the calculators can be used to explore hypothetical  tax planning situations. IRS reports that its website, which includes online  services, static web pages, and calculators received more than 600  million visits in fiscal year 2018.

IRS Offices Responsible for Online Services for Individual Taxpayers

With respect to taxpayer services, OLS is tasked with leading IRS’s  business transformation efforts related to online services and improving  the online experience for taxpayers. To improve online services for  individual taxpayers, OLS primarily works with IRS’s relevant business  operating divisions—Wage and Investment and Small Business/Self- Employed —which assist individual taxpayers in fulfilling their tax  obligations. On the operations support side, Information Technology is  responsible for delivering services and solutions related to technology  and one of its responsibilities is to support IRS’s online services. IRS’s  Research, Applied Analytics, and Statistics division conducts research  related to taxpayer burden, which is defined as the time and money  taxpayers spend complying with their tax obligations.

Customer Service and User Experience Requirements

Both Congress and presidential administrations have set the expectation  that agencies provide high-quality customer service. Starting in the  1990s, they required agencies to develop plans for improving their  services and regularly report on the progress they are making. In recent  years, Congress and the executive branch have emphasized the  importance of improving online services. In December 2018, Congress  passed and the President signed the 21st Century Integrated Digital  Experience Act (IDEA Act) that includes requirements for agencies when  they are creating or redesigning a website or digital service that is  intended to be used by the public. Among these requirements are to  design the website or digital service around user needs, with data-driven  analysis influencing management and development decisions, using  qualitative and quantitative data to determine user goals, needs, and  behaviors. The IDEA Act also requires agencies to ensure that any  paper form related to serving the public is made available in a digital  format by December 2020.

In July 2019, the Taxpayer First Act became law. It includes a  requirement that the Secretary of the Treasury (or designee) submit a  comprehensive customer service strategy to Congress by July 2020  including, among other things, a plan to provide assistance to taxpayers  that is designed to meet reasonable taxpayer expectations. This plan is to  include online services. The act also requires this customer service  strategy to identify metrics and benchmarks for quantitatively measuring  progress in implementing it. Similarly, the administration has established  a cross-agency priority goal called “improving customer experience with  federal services” intended to improve the usability and reliability of the  most important online services, which contains requirements related to  IRS’s online services that will be discussed in more detail later in this  report.

In addition to these expectations for a high quality user experience, the  GPRA Modernization Act of 2010 (GPRAMA) requires, among other  provisions, strategic plans identifying Treasury’s and other cabinet  departments’ and other executive agencies’ most important goals. It also  requires annual performance plans that identify specific targets and  reports to Congress and the public on results achieved. While GPRAMA  is applicable to the department or agency level (e.g., Treasury), we have  previously reported that these requirements should serve as leading  practices at other organizational levels, such as component agencies,  offices, programs, and projects, and are therefore applicable to IRS.

IRS Agreement with Industry to Provide Electronic Tax Preparation and Filing Services

IRS requires taxpayers whose income, filing status, and age fall within  specified parameters to file a tax return. Taxpayers have five choices for  filing a return: (1) hire a tax practitioner to file a return on their behalf with  IRS, which the practitioner generally does electronically; (2) obtain tax  preparation and filing services on the internet or download software,  which allows for assisted preparation in addition to online filing; (3) file on  paper for free; (4) use the Free File program; or (5) seek assistance from  IRS’s Volunteer Income Tax Assistance or the Tax Counseling for the  Elderly programs in which IRS provides funding to IRS-certified  volunteers who meet in person with eligible taxpayers to help them  prepare their return and the completed return is filed electronically.

To encourage taxpayers to file electronically, IRS advertises that it will  deliver refunds more quickly to those who file electronically than those  who file on paper. In 2002, IRS signed a memorandum of understanding  (which we will refer to as an agreement) with a consortium of tax  preparation companies now known as Free File, Inc. Initially, the  participating companies agreed to provide free electronic tax preparation  and filing services for eligible taxpayers. In return, IRS stated that it  would not offer its own free, online tax return preparation and filing  services. This agreement has been periodically renewed, most recently  in October 2018, when IRS and Free File, Inc. extended the terms of the  agreement to October 2021. This requirement that IRS not offer its own  online filing services has remained the same.

The income limit for taxpayers to participate has evolved over time. In  2005, IRS and the consortium of tax preparation companies amended the  agreement to provide for coverage for 70 percent of taxpayers based on  the taxpayers’ adjusted gross income beginning in filing season 2006.  They further agreed that while the percentage of taxpayers covered would  remain the same throughout the agreement, the income limit for  taxpayers would be adjusted each filing season. For the 2020 filing  season—which IRS expects will begin in January 2020—taxpayers will be  required to have an income below $69,000 and meet other eligibility  requirements to use the participating companies’ preparation and filing  services. For married taxpayers, the $69,000 threshold applies to their  combined income if the two individuals file a joint return. Taxpayers  whose income exceeds $69,000 are ineligible to use the participating  companies’ software for free, but are allowed to use Free Fillable Forms  (FFF), a service provided by one of the Free File, Inc. participating  companies each year, with a link on irs.gov. FFFs are designed to be the  online equivalent of paper forms, on which users can type information into  a fillable field corresponding to each line item on the paper form. IRS.gov  explains that to use FFFs, users “must know how to do your taxes  yourself” and states that “only basic guidance” is provided. After a  taxpayer completes the FFFs, the Free File, Inc. participating company  that provides this service electronically transmits the return to IRS.

IRS Primarily Offers One-Way Information Services Online and Measures of Taxpayer Experience Are Limited

IRS’s Online Services Are Concentrated in Information and Payment Services

IRS provides 10 online services for individual taxpayers (see table 1). We  organized these online services into four categories based on common  interactions between individual taxpayers and revenue agencies.

IRS officials told us and we verified that all services are accessible from  personal computers and nondesktop devices, such as smart phones and  tablets. IRS also offers an app for mobile devices which taxpayers can  use as a portal for accessing “Where’s My Refund” and for making  payments. Usage across all online services in fiscal year 2018 was  overwhelmingly concentrated within “Where’s My Refund?” (see figure 1).

In 2018, taxpayers completed more than 300 million queries on “Where’s  My Refund?”, IRS’s most used online service, attempting to determine  when their anticipated refunds would arrive. To put this figure in  perspective, IRS processed approximately 150 million individual tax  returns and approximately 120 million individual income tax refunds in  fiscal year 2018, meaning that some taxpayers are making multiple online  inquiries about their refund. IRS.gov directs taxpayers to use this online  service to follow up on their refund and suggests that taxpayers only call  IRS in certain circumstances.  “View Your Account Information” in fiscal year 2018 was IRS’s fifth most  utilized online service, but it has experienced recent growth. Usage more  than tripled between fiscal years 2017 and 2018. IRS has continued to  add capabilities and make other improvements to “View Your Account  Information” since it first launched in 2016, such as links to IRS’s online  payment and transcript services. Further, officials told us in September  2019 that they plan to add information about the status of an installment  agreement and additional payment history.

As of October 2019, the capabilities of “View Your Account Information”  focus on providing information to taxpayers about how much money they  may owe IRS and payments made. For example, taxpayers who paid  their full tax bill for prior tax years may log into “View Your Account  Information” and see they have a $0 balance. Similarly, taxpayers who  receive only refunds will log on and see a $0 balance, but not information  about their refund. Officials noted that even a $0 balance may be of value  to taxpayers who want reassurance that they and IRS have a common  understanding of their tax situation.

Revenue Agencies in Other Countries and States Have Demonstrated Online Filing and Communication Capabilities

We identified three revenue agencies in other countries that offer online  services that IRS does not: the Australian Taxation Office (ATO), New  Zealand’s Inland Revenue Department (IRD), and the United Kingdom’s  (U.K.) Her Majesty’s Revenue and Customs (HMRC) (see figure 2).

In each of the selected countries, we found that taxpayers are offered a  single online account that integrates the many different online services  each revenue agency offers. As noted above, “View Your Account  Information” on irs.gov provides links to other online services and  taxpayers do not have to log in again to use those services. However, the  remaining online services are not connected to “View Your Account  Information” and taxpayers must leave the “View Your Account  Information” platform to access those services. IRS officials told us that  over the long term they would like to integrate additional services into  “View Your Account Information,” but they explained that they have  prioritized the development of new online services over connecting  existing services to “View Your Account Information.” Further, IRS  officials told us they also want taxpayers to be able to check their refund  without having to establish an account.

A second difference is that taxpayers in the three countries can complete  their filing obligations on the revenue agency’s website. We examined the  extent to which contextual differences between the U.S. income tax  system and the three countries’ tax systems could enable or inhibit  offering electronic filing on the revenue agency’s website. We found that  the U.S. income tax system and the three other countries’ tax systems  have similar definitions of income, employers withhold income taxes  employees owe, and subsidies for certain social goals are channeled  through the tax system.

All three selected countries offer taxpayers the ability to communicate  electronically with agency employees via the revenue agencies’ websites.  For example, Australian taxpayers who are working on preparing their  return in their account can communicate through an electronic chat with  ATO employees about questions they may have, such as regarding  deductions and the capital gains tax. In New Zealand, taxpayers can  upload documents requested by IRD to their accounts, whereas American  taxpayers generally must mail these documents. IRS’s pilots of electronic  communication capabilities between taxpayers and its employees will be  discussed later in this report.

In addition to the three countries reviewed, we also selected three states  that have integrated more services into a single online taxpayer account  than IRS has done. Additionally, all three states provide taxpayers with  two-way secure electronic communication (see figure 3). For example,  Alabama and California taxpayers can log into their respective accounts  for a secure electronic chat. California and New York taxpayers can share  documents.

We found that two of the states—Alabama and California—offer  taxpayers the capability to file their tax return on the revenue agencies’  websites. However, officials in both states told us that few taxpayers have  used this option. Alabama officials believed this was because many  taxpayers prefer to use the same method to file their state tax return as  their federal tax return, and as we have previously discussed, IRS does  not currently offer this service. New York officials said they previously  offered this service, but decided to stop offering it because they did not  believe the benefits were sufficient to justify continuing it.

Our review of the revenue agency websites for the states that have  income taxes (43 states and the District of Columbia) found that 21 of the  state revenue agencies, including Alabama and California, allow  taxpayers to file their state tax return on the revenue agencies’ website  (see figure 4).

Little Is Known about the Extent to Which IRS’s Online Services Meet Taxpayer Needs

While IRS regularly surveys taxpayers who visit the static pages of  irs.gov, the surveys do not provide information on the extent to which all  of IRS’s online services meet taxpayer needs. All three of the foreign  revenue agencies we reviewed collected survey information that allowed  them to more clearly explain the extent to which they believe their online  services are meeting taxpayer needs. In addition, IRS has long-running  research seeking to estimate the time and money taxpayers spend  complying with their tax obligations, but the implications of expanding  online services for taxpayer burden have not yet been assessed.

Assessing Taxpayer Experience with irs.gov and “View Your Account Information”

IRS seeks feedback from a randomly selected sample of users of the  static pages of its website and we reviewed an example of feedback IRS  had collected between February 28, 2019, and March 31, 2019. This  feedback mechanism is not designed to measure taxpayers’ experiences  with individual online services or the extent to which services meet their  needs. The invitation to participate appears on the static pages of  irs.gov, not when a taxpayer is logged into an online service. However,  this does not necessarily exclude taxpayers using online services from  providing feedback. IRS officials explained that it does allow IRS to  capture feedback across irs.gov static pages and related applications,  even though it does not provide feedback on any single online service.

A hypothetical example would be a taxpayer starts the process of  applying for a student loan by logging into IRS’s “Data Retrieval Tool” and  then after completing that task peruses IRS’s publications on tax benefits  for higher education on the static pages of irs.gov and is then invited to  participate. IRS officials stated that one intent of the survey is to measure  a taxpayer’s entire experience, including instances when a taxpayer is  visiting for multiple reasons. If a user goes to a static page they may be  invited to participate, however if they use the online services without  visiting a static page, they will not have the opportunity to provide  feedback.

IRS officials told us that this feedback may provide insight into taxpayers  who report coming to irs.gov to do a task, such as obtaining tax records,  but then do not successfully complete the task. IRS told us that this  information could alert IRS officials to challenges taxpayers may face in  locating online services, but officials agreed that this method does not  provide specific feedback on individual online services. IRS officials told  us that they would like to combine this survey with surveys focused on  specific online services, but face resource constraints.

In addition to the survey of users from the static web pages, IRS collects  feedback from taxpayers who access “View Your Account Information.”  For example, IRS selected a random sample of “View Your Account  Information” users between January 2019 and March 2019 who  successfully logged into their accounts. OLS officials explained that IRS  updated this survey to ask four questions that Office of Management and  Budget (OMB) guidance directs agencies to use in assessing their  customers’ experiences with the agency’s “highest-impact customer  journeys.” IRS asked users:  1.  If the online tax account tool met their needs.  2.  About their overall satisfaction with irs.gov.  3.  Whether this experience increased their confidence in IRS.  4.  Whether they could find what they needed easily and quickly.

IRS’s summary of the results of the “View Your Account Information”  taxpayer experience survey identifies potential limitations. IRS states that  users who have experienced challenges logging into protected services,  such as “View Your Account Information,” provide negative feedback on  the survey administered to users of static pages. However, the “View  Your Account Information” experience survey is not designed to capture  such negative feedback because a taxpayer must log into his or her  account to be selected to participate in this survey. IRS officials agreed  that our analysis is accurate, but had a different view on the implications.  In their view, the purpose of the “View Your Account Information”  taxpayer experience survey is to assess taxpayers’ experiences using  this particular service. They believe that challenges legitimate taxpayers  may experience in logging into “View Your Account Information” have  broader implications and affect taxpayers’ experiences using other online  services. And as noted above, IRS officials noted that the survey of users  of static pages captures negative feedback from users who have had  difficulty accessing online services. However, successfully passing the  security checks is the first step in the journey legitimate taxpayers must  take to use “View Your Account Information.” The result is a potential  knowledge gap in the extent to which “View Your Account Information” is  providing taxpayers with a satisfactory experience and very little  knowledge on the extent to which the other online services are meeting  taxpayers’ needs.

OMB has directed agencies to ask two additional questions to gauge user  experience with agency services: (1) Did it take a reasonable amount of  time; and (2) Does the customer believe he or she was treated fairly.  IRS asks the first question of a sample of users of static pages, but  neither question is currently asked of a sample of “View Your Account  Information” users. IRS told us that the first of these questions was  covered by their question about whether taxpayers could find what they  needed to easily and quickly, although OMB guidance considers these as  separate questions. IRS does not believe the second question is relevant  because its online services are automated. The OMB guidance  authorizes agencies to request exemptions and modifications to the  requirements.

We confirmed with OMB staff that IRS had discussed its approach with  OMB and that staff concurred with it. While OMB staff said they recognize  that variation presently exists across agencies in the required survey  questions, they told us that they would like to continue working with  agencies to bring greater consistency to surveys so that comparable data  will be collected by fiscal year 2021. Both IRS officials and OMB staff told  us that that IRS is participating in an interagency working group focused  on consistent implementation of this guidance.

In addition to surveying customers, OMB’s Circular A-11 section 280  establishes government-wide guiding principles for all executive branch  agencies which contain the following requirement: “Agency annual  performance plans should include indicators for outcomes related to  customer experience.” Our review of IRS’s congressional budget  justification and performance plan and report for fiscal year 2020 found no  performance measures or indicators summarizing the only taxpayer experience information that IRS collects on one of its online services—the  “View Your Account Information” survey discussed above.

In regards to the “View Your Account Information” survey, IRS officials  told us they are not allowed to publicly share the results because of the  process they used to obtain approval to administer this survey pursuant to  the Paperwork Reduction Act. The act contains requirements that  agencies justify the necessity of collecting information from the public and  publish notices informing the public of the planned information collection.  In addition the Office of Information and Regulatory Affairs (OIRA) within  OMB must review and approve planned information collections. For  authorization to administer the “View Your Account Information” survey,  IRS officials used approval the Department of the Interior had obtained  from OIRA for multiple agencies to administer customer satisfaction  surveys for government websites. However, our review of the notice the  Department of the Interior published found that while the contractor  administering the survey must obtain permission from the agency before  releasing the information, there is no prohibition on the agency choosing  to release the information. Further to facilitate government-wide  comparisons of the customer experiences different agencies are  providing, the General Services Administration published a notice in the  Federal Register in September 2019 stating that Treasury and other  agencies will be publishing relevant data on Performance.gov. This  notice does not prohibit agencies from publishing this same data in other  publications (e.g., the agency’s performance plan and report).

Until it collects more specific feedback on the other online services, it will  not be possible for IRS to summarize and report information about the  taxpayer experience with online services and the extent to which those  services are meeting taxpayer needs. Without information about how  effectively IRS’s online services are meeting taxpayer needs, it is difficult  for decision makers to appreciate the potential value of these services  and help ensure IRS has the necessary resources to maintain and  improve these services.

The three foreign revenue agencies reviewed all report to their  parliaments on the extent to which they believe their online services are  meeting taxpayer needs and use that information to help target areas for  improvement:

Australia: The Australian Taxation Office’s (ATO) annual reports for  2015-2016, 2016-2017, and 2017-2018 tracked “community  satisfaction with ATO performance,” which combined more specific  measures tracking satisfaction with different service channels—online,  telephone, and mail—and satisfaction levels among different groups  of taxpayers, such as individuals and small businesses. ATO  publishes the more detailed satisfaction levels on its website with the  most recent report presenting 2018 results. In its 2017-2018 report,  ATO reported that the information collected showed that declining  satisfaction with online services was negatively affecting its overall  performance and stated that the office plans to use this feedback to  improve online services. In its 2018-2019 report, ATO introduced a  new measure—”community confidence in the ATO” —which it says is  based on surveys of clients who have recently interacted with ATO  and surveys of the general community.

New Zealand: The Inland Revenue Department’s (IRD) annual reports  for 2018 and 2019 present detailed results of its customer satisfaction  and perceptions survey, including the overall percentage of customers  satisfied with online services, as well as how satisfied subgroups of  individual taxpayers are with online services, such as those receiving  a tax credit for working families.

United Kingdom: Her Majesty’s Revenue and Customs’ (HMRC)  annual report presents a quantitative measure of customer  satisfaction with online services. HMRC has published a more  detailed explanation of how the agency measures customer  satisfaction with online services.

Assessing the Implications of Online Services for Taxpayer Burden

IRS states that the development of new online services should reduce  taxpayer burden—referring to the time and money taxpayers spend to  comply with their tax obligations—and one of IRS’s strategic goals states  that IRS will reduce taxpayer burden. To help IRS officials and policy  makers measure the progress they are making in achieving their goal of  reducing taxpayer burden, IRS’s Research, Applied Analytics, and  Statistics (RAAS) office has periodically surveyed taxpayers since 1984  about the time and money they spend to complete their tax obligations  and uses the responses along with information from those taxpayers’ tax  returns to estimate the total compliance burden for individual taxpayers.

A RAAS official told us that IRS has not conducted any burden research  specifically related to online services. IRS’s Data Book for fiscal year  2018 describes the magnitude of the taxpayer assistance provided  through online services. More than 300 million electronic transactions  took place through online services for individual taxpayers. IRS is  missing an opportunity because taxpayers are already making extensive  use of IRS’s online services for such tasks as setting up payment plans  and obtaining records. Online services will likely continue to assist  taxpayers in fulfilling their tax obligations.

Two of the case study countries’ revenue agencies—in Australia and New  Zealand—have conducted research on taxpayer burden. For example,  New Zealand’s IRD’s annual report for 2019 stated that it has made  progress in making taxes easier and simpler for its customers. To track its  progress, IRD added online services to its taxpayer burden research in  2016 and updated this study in 2018. IRD compared the 2016 and 2018  survey results to burden research conducted in 2013 prior to expanding  online services. As a result of this research, IRD found that 20 percent of  taxpayers who run small businesses and participated in the survey  reported that expanded online services and an improved IRD website  have overall reduced their compliance burden. IRD’s report notes that  additional online services will be launched in April 2019 and a follow-up  survey is planned for 2020 to compare the reported burden with the  earlier surveys and, thereby, track the progress it is making.

IRS’s Strategy for Expanding Online Services Is Not Fully Consistent with Key Requirements and Leading Practices

IRS’s Long-Term Plan Does Not Consider Taxpayer Input for Identifying and Prioritizing New Online Services

A series of long-term planning documents establishes priorities to guide  IRS decision-making and identify new online services, but does not  contain evidence that taxpayer input was used to help identify the highest  priority services. In April 2019, IRS published the IRS Integrated  Modernization Business Plan (modernization plan). One of the plan’s  goals is to modernize the taxpayer experience. To do this, IRS proposes  to develop new services including delivering taxpayer notices  electronically, modernizing online installment agreements, and  establishing omni-channel communication capabilities provided that IRS  continues to receive the requested resources from Congress. IRS does  not currently incorporate taxpayer input into its prioritization process  because it prioritizes services primarily based on their potential to benefit  IRS’s operations or because they can be developed quickly.

An OMB memorandum directs agencies to understand what their  customers want by engaging in research to understand their goals,  needs, and behaviors before beginning to develop new services. Going  forward, the IDEA Act requires that new digital services be “designed  around user needs with data-driven analysis influencing management and  development decisions”. This requirement took effect in June 2019. IRS  documents describing how new services were prioritized show that IRS  did not incorporate taxpayer research or input into the score it assigns to  each proposed service. Instead, IRS officials estimated the potential  taxpayer value of a new service. For example, supporting documentation  for one proposed project from the modernization plan to allow taxpayers  to receive notices electronically states that IRS expects taxpayers to  receive less paper mail and have easier online access to recent or  historical notices if the project is developed. IRS expects that electronic  delivery of notices will increase the timeliness of its service, which would  improve the taxpayer experience.

After a new online service is selected and approved, IRS does obtain  input from taxpayers during the development phase, for example, to  improve usability of the service and fine-tune technical capabilities. OLS  officials provided us with documentation of user experience research they  conducted on how to improve specific design elements of existing online  services. For example, IRS reworded a button within “View Your Account  Information” to access the online payment agreement service from “Need  more time to pay?” to “Go to payment plans” to improve clarity. As a  result of the change, the rate of taxpayers accessing the online payment  agreement service from their online account has doubled, according to  data IRS provided.

While IRS’s modernization plan outlines new online services it plans to  develop, the modernization plan also states that it expects additional  services to be added over time as technology advances and customer  expectations evolve. The Taxpayer First Act requires IRS to expand an  online service—currently offered to taxpayers in nine states and the  District of Columbia—to provide taxpayers with Identity Protection  Personal Identification Numbers and an online platform to prepare and file  a Form 1099 to report independent contractor earnings or other  miscellaneous income. In May 2019, IRS officials told us that they will  continue to reprioritize new service development based on available  resources. As IRS reprioritizes the new services it plans to develop, IRS  runs the risk of developing online services which may be of lower priority  to taxpayers or that taxpayers do not utilize if IRS does not include input  from taxpayers on what new services IRS should prioritize.

By contrast, the United Kingdom’s HMRC has conducted taxpayer  research to understand user needs and taxpayer preferences. For  example, HMRC conducted taxpayer research in 2016 to inform decisions  about which services to include in development of the “Personal Tax  Account” which as noted above provides taxpayers with integrated  access to various online services. HMRC’s research included workshops  and interviews with taxpayers who use online services as well as an  online survey of 4,000 taxpayers. The online survey asked taxpayers to  rank the top five services they would like HMRC to develop from a list of  14 potential services and asked taxpayers to explain their rationale.  HMRC then assessed preferences among taxpayers and concluded that  secure electronic messaging was one of the services most highly sought,  according to the report. As a result, HMRC incorporated taxpayer input  into its new service prioritization process and began developing services  that it knew taxpayers desired and were more likely to use.

IRS’s Plans for Expanding Online Services Do Not Set Specific Targets for Improving Taxpayers’ Experiences or for Decreasing Taxpayer Burden

IRS’s modernization plan states that IRS intends to measure the success  of its efforts to improve taxpayers’ experience consistent with the  administration’s government-wide goal to improve customer experience  with federal services. OMB’s guidance to agencies on this topic states  that they should measure customer perceptions of the ease, efficiency,  and equity in the process of obtaining the service. The modernization plan  also states that IRS will measure taxpayer burden hours, which would  capture changes in the amount of time taxpayers spend doing their taxes  as a result of the modernization of information services and the  development of new online services. The GPRA Modernization Act  (GPRAMA) requires agencies’ annual performance goals to be expressed  in an objective, quantifiable, and measurable form and this principle is  relevant to IRS’s modernization plan.

In prior work identifying leading practices related to this requirement, we  explained that expressing goals in a quantifiable form provides an  objective way to assess the agency’s performance. The Taxpayer First  Act, enacted in July 2019, similarly requires the Secretary of the Treasury  (or designee) to identify metrics and benchmarks for IRS for quantitatively  measuring progress in implementing a customer service strategy that the  act requires IRS to develop. That strategy must be submitted to Congress  within 1 year of enactment.

While Treasury and IRS are not required under the act to submit the  strategy containing the metrics and benchmarks for quantitatively  measuring progress until July 2020, we found that IRS’s modernization  plan is not well positioned to help Treasury and IRS implement this new  requirement. IRS’s modernization plan states that IRS intends to measure  progress towards its customer experience goal through promoting ease  and simplicity in taxpayer interactions. To measure that, IRS stated that it  plans to increase its “American Customer Satisfaction Index” score,  although IRS did not set a numerical target for improvement. The survey  for this index score is administered by researchers outside the  government and focuses on taxpayers’ experiences filing their tax return,  which is not a service offered on irs.gov, making it of little use in  assessing taxpayer satisfaction with IRS’s online services.

IRS’s modernization plan does set numerical targets for output measures  such as the percentage of notices available in an electronic format for  taxpayers, but these targets are not aligned with any of IRS’s taxpayer  experience feedback mechanisms, including those that come from the  feedback mechanism discussed above administered to users of IRS’s  “View Your Account Information.” For example, IRS asks a sample of  “View Your Account Information” users if the online service met his or her  needs, but IRS’s modernization plan does not set a target or desired level  of performance for this question or for any other survey question.

Our finding that IRS lacks targets for improving taxpayer experience is  consistent with our prior work. In April 2013 we reported that previous IRS  planning efforts to expand online services had not set a clear target for  improving taxpayer experience and we recommended that IRS establish  a numerical or other measureable goal to improve taxpayer satisfaction  and a time frame for achieving it. While IRS neither agreed nor  disagreed with this recommendation, in 2016 IRS said it would consider  the development of numerical or other measurable goals related to  taxpayer experience. Our current review shows that IRS has not  developed such measures. We continue to believe this recommendation  is valid and that the issue will continue to grow in importance along with  the use of IRS’s online services.

While IRS believes that the planned online services will promote “ease  and simplicity,” no target is set in the modernization plan for reductions in  taxpayer burden hours. As noted above, IRS has not started to examine  the implications of expanding online services on taxpayer burden. Without  targets for reducing taxpayer burden, IRS cannot determine the success  of new online services in helping drive progress towards this goal.

All three of the foreign revenue agencies we reviewed set numerical  targets for performance measures related to improving online services  and used these goals to target areas for further improvement. New  Zealand’s IRD stated in 2015 that its business transformation program  should improve the percentage of customers “who find it easy to comply”  to between 90 and 95 percent by 2023/2024 to assess progress in its  goal to reduce taxpayer burden. IRD’s annual report for 2019 states that  the business transformation program remains on track and is delivering  benefits and this section also provides an update on the percentage of  customers “who find it easy to comply.” While the annual report does not  refer to the target for 2023/2024, the percentage reported in the 2019  annual report is lower than the target identified for 2023/2024. The 2019  report explains that taxpayers are “getting used to our new systems and  processes” and describes additional improvements IRD is planning. In  addition, the United Kingdom’s HMRC set a target for 80 percent of  taxpayers to report satisfaction with online services for 2018. HMRC  published performance towards its goal in its 2018-2019 annual report,  finding that 80.4 percent of taxpayers reported satisfaction with online  services.

IRS Pilot Programs Identify Potential Risks for Future Digital Communication Capabilities

IRS’s modernization plan states that taxpayers will be able to sign up to  receive notices electronically by fiscal year 2021 and to have text or video  chats with IRS employees by fiscal year 2024. IRS currently sends  taxpayers notices via mail for identity verification, balance due, or if IRS  needs additional information about a tax return. IRS plans to allow  taxpayers to access certain notices electronically via a taxpayer’s online  account. In July 2019, IRS Information Technology (IT) officials told us  that they have established a team to start developing the capability to  make notices available to taxpayers electronically, which is IRS’s first  step towards developing full-scale digital communication capabilities. IT  officials told us in October 2019 that they plan to conduct customer  testing to pilot the service before it launches and gather customer  feedback after launching the service.

While IRS has just begun development of full-scale digital communication  capabilities, IRS has experience providing a subset of taxpayers secure  messaging capabilities through two pilot programs that we reviewed.  Specifically, under the coordination of OLS, IRS began testing digital  communication services in December 2016 to allow for secure and  personalized correspondence between taxpayers and IRS employees  through three pilot programs, as described below:

An active pilot within the Small Business/Self Employed (SB/SE)  business unit is testing digital messaging for examinations, which  have traditionally been done by mailing questions and documents  back and forth between the examiner and taxpayer. SB/SE began this  pilot in fiscal year 2017 for a subset of taxpayers selected for  examination for returns related to itemized deductions, the child care  deduction, and education tax credits. Interested taxpayers must  successfully complete security checks to verify their identity and then  can exchange messages electronically with IRS employees and share  requested documents through a platform accessed through irs.gov.

A Taxpayer Advocate Service (TAS) pilot that tested the ability for  taxpayers to send documents in electronic form began in fiscal year  2017 and ended in fiscal year 2019. TAS designed the pilot for the  purpose of helping two sets of taxpayers: (1) those who were facing  the prospect of IRS seizing their property to pay a tax debt, and (2)  those who were facing an audit of their claim of the Earned Income  Tax Credit and had sought TAS’ assistance.

IRS officials told us that an authenticated chat pilot to assist taxpayers  in completing an Online Payment Agreement was introduced in June  2019. Results for this pilot were unavailable as of October 2019.

We evaluated the SB/SE and TAS pilots against leading practices. We  found that the two digital communication pilots mostly addressed leading  practices our prior work identified for designing a well-developed and  documented pilot program. These leading practices are to: (1) establish  objectives; (2) develop an assessment plan; (3) assess scalability; (4)  evaluate results; and (5) ensure stakeholder communication. These  practices enhance the quality, credibility, and usefulness of evaluations  and help ensure that time and resources are used effectively. Although  we found both pilots to be generally aligned with the leading practices to  develop an assessment plan, evaluate results, and ensure stakeholder  communication, neither pilot fully established objectives or assessed  scalability. These leading practices are also relevant for testing of future  capabilities of the electronic messaging platform that IRS plans to  develop.

Our leading practices state that objectives for pilot evaluations should be  well defined, appropriate, clear, and measurable. We found differences in  stated objectives between OLS and the participating offices. OLS set a  target for the SB/SE pilot to reduce total case time from greater than 200  days to fewer than 100 days, and for the TAS pilot to improve the relief  rate to taxpayers by 5 percent, which OLS officials explained were  ambitious goals. However, SB/SE officials told us that they believed the  magnitude of OLS’s goal for reduction in case time to be unrealistic. The  National Taxpayer Advocate told us that she had narrower objectives for  the pilot including testing the viability of sending documents electronically  and assessing taxpayer willingness to participate. Having officials from  relevant offices with different understandings of the quantitative target  they are trying to achieve is not fully consistent with the leading practice  and makes it more difficult for officials to evaluate the performance of the  pilots.

We previously reported that key features of an assessment methodology  include a strategy for comparing the pilot’s implementation and results  with other efforts; a clear plan that details the type and source of the data  necessary to evaluate the pilot; and methods for data collection, including  the timing and frequency. Our review found that the implementing  offices for both pilots developed plans to conduct periodic assessments to  assess the objectives. For example, the assessment plan for SB/SE’s  pilot included measurements of average case time and participation  levels. The TAS assessment plan also included measurements of  average case time and participation levels as well as the reasons  taxpayers provided for not enrolling in the online pilot.

The purpose of a pilot is generally to inform a decision on whether and  how to implement a new approach in a broader context. Identifying  criteria or standards for identifying lessons about the pilot will help inform  an agency’s decisions about scalability and when to integrate pilot  activities into overall efforts. A common challenge that both of IRS’s  communication pilots experienced was that only a small proportion of  eligible taxpayers participated. Among the taxpayers selected for an  SB/SE exam for whom the pilot was offered, approximately 11 percent of  taxpayers participated in the digital communication pilot and sent their  exam responses and supporting documentation through a secure,  electronic messaging platform while approximately 51 percent of  taxpayers sent their exam responses to IRS via mail. In contrast, 1 percent of invited taxpayers participated in the TAS pilot, according to the  TAS report, which found that most taxpayers opted to communicate with  TAS through more traditional methods such as telephone, mail, or fax.

Officials involved in each pilot reported that additional taxpayers  expressed interest in participating, but experienced challenges in getting  through the identity verification requirements for enrollment. Of the  potential participants in the SB/SE pilot, only 44 percent of those who  began the secure enrollment process successfully enrolled. Pilot  participants told TAS that they found the secure enrollment system for the  TAS pilot to be too complicated to use and preferred instead to fax  documents to avoid the burdensome sign up process. The National  Taxpayer Advocate concluded that the participation rate was so low that it  did not make sense to continue the pilot.

In conjunction with a clearly articulated assessment methodology, a  detailed data-analysis plan identifies who will analyze the data as well as  when and how data will be analyzed to assess the pilot’s performance  and draw conclusions about how to improve procedures moving  forward. SB/SE’s pilot report found that use of the Taxpayer Digital  Communications (TDC) electronic platform did reduce the number of days  to complete an examination compared to paper. However, IRS examiners  spent more hours on average on exams conducted through TDC than  paper exams because taxpayers sent more attachments in their  electronic messages, on average, than in the mail. TAS found that those  taxpayers who enrolled in the pilot were able to successfully  communicate with them.TAS officials expressed optimism that enrollment  in secure communication could help reduce case processing time among  those seeking assistance avoiding an IRS seizure of their property to pay  a tax debt.

A leading practice is that agencies identify who the relevant stakeholders  are and communicate frequently to obtain feedback on the successes and  challenges of the pilot. IRS identified taxpayers and participating  business units as the relevant stakeholders for each pilot. We found that  both the SB/SE and TAS pilots obtained feedback from stakeholders  including employees and taxpayers who participated in a pilot as well as  taxpayers who chose not to participate. In January 2018, SB/SE developed a web-based survey which sends taxpayers a voluntary survey  upon closing of an exam, when communication ceases with a taxpayer. In  addition, SB/SE called taxpayers who did not participate in the pilot  program to discuss why they chose not to participate. Of the 262  taxpayers who were successfully contacted, taxpayer reasons for not  signing up included that they did not remember seeing the invitation to  enroll, they could not pass the secure enrollment process, and they  thought it was a scam. TAS held focus groups with employees  participating in its pilot and found that many employees raised concerns  that the digital communication platform was not user friendly and  discouraged uptake.

The Office of Appeals conducted a pilot between fiscal years 2017 and  2018 using video conferencing software as a way for Appeals Officers  who volunteered to participate to conduct video conferences with  taxpayers in lieu of a telephone conference. The Office of Appeals  concluded the pilot demonstrated the viability of this technology and  allowed all Appeals officers who are willing to use this technology to offer  it to the taxpayers they are working with as of October 1, 2018. We did  not assess the pilot against our leading practices for conducting pilots  because we had recently completed a review of IRS’s Office of Appeals,  including its video conferencing capabilities, and the Treasury Inspector  General for Tax Administration (TIGTA) recently published a review of the  pilot.

TIGTA identified a risk related to the scalability of videoconferencing. As  of September 30, 2018, Appeals’ officials told us that less than 4 percent  of invited taxpayers chose to participate in its pilot. They said that some of  the taxpayers who declined to use videoconferencing thought it easier to  have a phone call rather than go through the steps involved in setting up  a videoconference. Unlike the digital communication pilots described  earlier, participants in the Appeals pilot were not required to verify their  identity through Secure Access, which is a multifactor authentication  process for which taxpayers provide personal and financial information  and then IRS verifies that the taxpayer has a mobile phone in his or her  name by texting a code to the phone or mailing an activation code.  Instead, Appeals officers verified taxpayer identities at the beginning of  the videoconference. Despite the difference in security requirements, the  participation rate for the Appeals pilot was also low. IRS’s modernization  plan’s discussion of future video chats between IRS employees and  taxpayers makes no mention of the challenges Appeals has experienced  in getting taxpayers to use the videoconferences it already offers selected  taxpayers.

The same concerns about clear objectives and scalability that we found in  the TAS and SB/SE digital communication and videoconferencing pilots  also have implications for the full-scale services that IRS plans to  develop. The modernization plan states that one of IRS’s objectives  through development of an online notification service is to reduce mailing  costs by sending fewer notices via mail. However, IRS officials told us in  September 2019 that they plan to continue to mail all notices once an  online notice service is developed. This suggests that IRS will move  forward with development of an online notification service without clear  objectives such as cost savings. In December 2019, IRS officials noted  that while this may be true of initial deployment, future iterations could  potentially allow users to change their delivery preferences.

The services outlined in IRS’s modernization plan include delivery of tax  credit qualification notices electronically to taxpayers, which IRS officials  explained would be limited to low-income taxpayers who IRS believes to  be eligible for, but not claiming, the Earned Income Tax Credit (EITC).  TAS’s pilot of secure messaging with a similar set of taxpayers— taxpayers subject to an audit of their EITC claim—showed that many low- income taxpayers did not have the access to technology to properly  enroll. IT officials told us that they plan to conduct customer testing before  and after the introduction of the new electronic notice service. Because  IRS is just beginning development of its new digital communication  platform, it has not yet provided evidence that it plans to consider  concerns and limitations identified in prior digital communication pilots.  Without developing a pilot to test its new services and incorporate the  lessons learned from prior pilots, IRS risks developing a full-scale service  targeted to taxpayers with a low potential for uptake.

IRS Faces a New Challenge with Private Industry as It Plans to Expand Online Services

IRS Continues to Face Security and Human Capital Challenges

Our discussions with IRS officials confirmed that they continue to address  security and human capital challenges, which we have evaluated in  recent reports. IRS’s modernization plan states that IRS faces  increasingly sophisticated and frequent efforts by cybercriminals to steal  taxpayer data. For example in 2015, IRS temporarily suspended online  transcript services after fraudsters used personal information obtained  from sources outside IRS to pose as legitimate taxpayers and access tax  return information from up to 724,000 accounts. IRS relaunched this  service in 2016 with the requirement that taxpayers go through Secure  Access. IRS also uses Secure Access for “View Your Account  Information”.

The remaining online services require different levels of authentication.  For example, taxpayers must provide their Social Security numbers or  individual taxpayer identification numbers, filing status, and exact refund  amounts to access “Where’s My Refund?” The information provided is  limited to tracking IRS’s receipt of a return, approving the refund, and  sending the refund. Users of this service cannot, for example, redirect the  refund from the destination specified on the tax return or access the  detailed personal information contained in transcripts. If IRS makes the  authentication process too stringent, it may adversely affect legitimate  taxpayers, but too easy of an authentication process presents security  risks.

In June 2018, we recommended 11 actions IRS should take to improve  taxpayer authentication, including developing a plan to fully implement  new federal guidelines for online authentication and IRS agreed with our  recommendations. In June 2019, IRS officials stated that they have  identified an approach for improving the security of online authentication  consistent with new federal guidelines. However, additional work remains  to fully address our recommendations. Further, the Taxpayer First Act,  enacted in July 2019, requires IRS to verify the identity of any individual  opening an “e-Services account” by January 2020 before the individual  can use the e-Service tools.

IRS also continues to face human capital challenges. The former Acting  Director of OLS told us in March 2019 that her office has faced several  challenges in recruiting and hiring: (1) competition with technology  companies for employees with the necessary skills; (2) challenges in  crafting position descriptions to inform job seekers of openings; and (3)  delays in IRS’s Human Capital Office processing of applications. These  challenges are similar to IRS-wide challenges we recently identified,  including skill gaps in mission critical occupations and limited capacity by  the Human Capital Office to hire employees. In March 2019, we  recommended IRS take six actions, including improving its workforce  planning and addressing delays in the hiring process. IRS agreed with  our recommendations. In September 2019, the Deputy Commissioner for  Operations Support reported that IRS is working to address our  recommendations, including a plan to reduce the hiring backlog, increase  hiring capacity, and improve monitoring and reporting capabilities. In  November 2019, we determined IRS had addressed two of our  recommendations by developing a strategy to address current and future  hiring requirements and issuing guidance to business units’ executives on  streamlining the hiring approval process. As noted above, the Deputy  Commissioner for Operations Support reported that IRS is working to  address our remaining recommendations.

Long-Standing Agreement with Private Industry Complicates IRS’s Ability to Expand Online Services, Including Filing Amended Tax Returns Electronically

Taxpayers cannot file their tax returns on irs.gov and IRS officials told us  they have no plans to develop such a capability. As noted above, the  absence of electronic filing services on irs.gov is a notable difference  between the services IRS provides and those provided in the three  countries and two of the three states we reviewed. We found that IRS’s  Free File agreement benefits a small proportion of taxpayers, but that the  full benefits and costs of this agreement are uncertain. IRS has renewed  the nearly 20-year old agreement eight times since its inception in 2002  without sufficient consideration of how this agreement relates to its  growing portfolio of online services, such as the development of the  capability for taxpayers to file amended returns electronically.

Potential Benefits of the Free File Agreement

IRS officials do not regard the absence of electronic filing capabilities on  irs.gov to be a shortcoming. Rather, they believe that the Free File  agreement has served both taxpayers and IRS well. Officials noted that  eligible taxpayers can receive free access to electronic tax preparation  and filing services provided by the companies which make up the Free  File, Inc. consortium. Additional benefits accrue to IRS, according to  officials, by encouraging electronic filing which reduces the costs of  processing returns. Further, IRS officials noted that having industry assist  taxpayers with electronic filing allows them to focus on providing other  online services, such as the informational and payment services  described above. Officials representing Free File, Inc. expressed similar  views on what they consider to be the benefits of the agreement.  However, IRS data show that less than 2 percent of all individual tax  returns were filed using Free File in fiscal year 2018 (see figure 5).

IRS’s annual data books started tracking the number of returns filed using  Free File in fiscal year 2009. As the data show, excluding paper returns,  approximately 2 to 3 percent of all electronically filed returns were filed  through Free File for the 10 years with available data. IRS’s data include  taxpayers who were eligible for and used free commercial software or  websites and those who used Free Fillable Forms discussed earlier (see  table 2). As the data show, the vast majority of taxpayers filing  electronically either hired a practitioner to do so on their behalf or  obtained commercial tax preparation and filing services outside of the  Free File program.

The low usage of Free File is one of the topics that has been reviewed in  more detail in reports by the National Taxpayer Advocate and IRS’s  Advisory Council. Usage was also cited in separate letters that the  Chairman and Ranking Member of the Senate Committee on Finance and  the Chairman and Ranking Member of the House of Representative’s  Committee on Ways and Means sent to the IRS Commissioner in May  2019 requesting a review of Free File.

In June 2019, IRS hired the MITRE Corporation to review, among other  objectives, the Advisory Council’s findings and recommendations. In an  October 2019 report submitted to IRS, the MITRE Corporation examined:  (1) The extent to which eligible taxpayers were using Free File; (2) the  participating companies’ compliance with the agreement between Free  File, Inc. and IRS; and (3) researchers’ observations of taxpayers’  experiences using the software provided by companies participating in  Free File. The report found that the program generally appeals to  taxpayers who prefer a “do-it-yourself” method of tax preparation and  filing and taxpayers’ preferences should be taken into account when  interpreting IRS’s usage data. It found that participating companies had  generally complied with the terms of the agreement but that taxpayers  experienced challenges in navigating the Free File program. The report  made a number of recommendations on these and other topics to IRS.

Potential Costs of the Free File Agreement

Under the terms of the Free File agreement, IRS does not pay Free File,  Inc. companies for the services provided. Rather, participating companies  benefit from continuing this agreement because they stand to potentially  lose business should IRS develop its own online filing capabilities.  Although the agreement does not have a direct monetary cost to IRS, our  review found there are indirect costs. Specifically, the agreement states  that “the federal government has pledged to not enter the tax preparation  software and e-filing services marketplace.” IRS’s decision not to  develop and offer electronic filing on its website is a contrast to the  capabilities offered by some other countries and U.S. states. The Free  File agreement in its current form could potentially constrain the  development of new online services such as allowing taxpayers to file  amended returns on irs.gov. Online services have the potential to  decrease both taxpayer burden and costs for revenue agencies in the  long term.

IRS’s efforts to assist taxpayers with amending previously filed tax returns  illustrate the potential costs of renewing the Free File agreement without  consideration of IRS’s long-term plans for online services. Irrespective of  the method used to file the original return, taxpayers must file an  amended return (Form 1040X) on paper. Officials in IRS’s Wage and  Investment (W&I) business operating division provided a business case  they drafted proposing to give taxpayers the option of filing an amended  return electronically. The business case makes clear that IRS officials  believe the current paper-based process is inconvenient for taxpayers  because the vast majority of taxpayers are filing the original return  electronically. It is also costly and challenging for IRS to process these  paper forms with more than 3 million of these amended returns received  in processing year 2017. The business case says IRS has been  assessing a potential online service in this area for more than 10 years,  but has not moved forward due to technical and resource challenges.

One approach IRS is exploring is to allow private sector tax preparation  and filing companies and practitioners to file an amended return on behalf  of a client, which would be similar to the current arrangement for original  returns established by the Free File agreement. The second approach  IRS is exploring is allowing taxpayers to correct the return with a new  online service on irs.gov. The business case states IRS currently prefers  the first approach of having taxpayers work with industry or a tax  practitioner because of a combination of cost and technical  considerations.

The business case states that IRS officials have had discussions with  officials affiliated with Free File, Inc. According to IRS’s account of these  discussions, industry is supportive of the first potential approach of having  taxpayers electronically file amended returns through their industry.  Further, IRS notes that some taxpayers who used software to prepare the  original return may find it convenient to use the same software to prepare  and file an amended return. However, the business case also states that,  “the costs are not insignificant” for IRS in working with industry, even  though IRS plans to leverage existing systems as much as possible.

A further complication is how IRS’s plans to work with industry on  electronic filing of amended returns relate to the Free File agreement.  IRS’s business case states that Free File, Inc. officials told them  participating companies would be willing to provide electronic filing of  amended returns for free, but as noted above less than 2 percent of  original returns are filed through Free File. While individual tax  preparation and filing companies could choose to offer electronic filing of  amended returns for free or include that capability in paid packages they  offer for filing an original return, the agreement in its current form would  not guarantee free access to electronically filing amended returns for the  vast majority of taxpayers who file an original return outside of Free File.

If IRS were to return to its earlier idea of offering the capability to file an  amended return on irs.gov, that approach also comes with potential risks  for IRS regarding the Free File agreement. IRS officials noted that the  agreement states that, “this agreement does not limit IRS from providing  phone-based, web-based, or electronic interaction between the IRS and a  taxpayer (or a taxpayer’s representatives) regarding issues in a  previously filed return after such a return has been accepted by IRS.”  IRS officials told us they believe this language allows Form 1040X-type  actions by IRS. However, as noted above, IRS made a commitment to  “not enter the tax preparation software and e-filing services marketplace”.

Our analysis determined that the Form 1040X is nearly identical to the  Form 1040, with the difference being that a taxpayer notes which lines he  or she needs to correct. IRS’s instructions for the Form 1040X state,  “When you file Form 1040X for a tax year, it becomes your new tax return  for that year. It changes your original return to include new information.”  Therefore, the capability for taxpayers to file a Form 1040X on irs.gov  would put irs.gov closer to having an online filing capability for original  returns.

In written documents that officials from Free File, Inc. provided to us, they  said they would need to see a specific proposal for electronic filing of  amended returns before they could comment. However, they made clear  that they believe any future development of IRS’s online services should  continue to leave the task of preparing and electronically filing a tax return  to industry. Officials provided a copy of a letter the Executive Director of  their organization had sent the W&I Commissioner in March 2019  recommending that IRS consider enabling the electronic acceptance of  amended returns through the system industry uses to electronically file  original returns on behalf of taxpayers.

Change in Circumstances Since the Free File Partnership Was First Established

Circumstances, including IRS’s technical capabilities, have changed since  the Free File agreement was first established in 2002. Today’s irs.gov  provides “View My Account Information” and other online services which  did not exist in 2002, and as discussed above, IRS is exploring allowing  taxpayers to file amended returns electronically.

Another potential new online service serves as a second example of a  way that IRS might soon interact directly with taxpayers online without the use of private sector intermediaries in the tax preparation and filing  industry. In the Taxpayer First Act, Congress directs IRS to develop a  new online service for taxpayers to report miscellaneous payments.  Specifically, Congress directed IRS to develop no later than January 1,  2023, an internet platform for persons to prepare and file the Form 1099,  which is used by persons to report payments made to taxpayers for such  things as rent and services performed by someone other than an  employee. The House Committee on Ways and Means’ report  accompanying the act explains that the committee believes that having  IRS provide this online service will improve compliance with the reporting  requirements and reduce the administrative burden for taxpayers who run  small businesses.

OLS coordinates the development of new online services and W&I  oversees the Free File agreement. OLS officials referred our questions  about the Free File agreement to W&I. W&I officials provided no  documentation they had coordinated renewal of the Free File agreement  in 2018 with OLS. IRS also could not provide us any evidence that it has  analyzed the full costs and benefits of the Free File agreement to IRS, the  participating private sector companies, and the public. For example, the  MITRE Corporation report discussed above states that the researchers  “assume that industry will continue to be the entity that provides free tax  return preparation and filing offerings to taxpayers.”

IRS’s approach to renewing the Free File agreement is not consistent  with leading practices we identified in our prior work stating that decision  makers should periodically review government programs, tax provisions,  and regulations to ensure they are achieving desired goals. Among the  leading practices we identified is that the costs and benefits should be  assessed. Without more rigorous examination of costs and benefits to all  parties of future renewals of the Free File partnership, IRS runs the risk of  not being fully aware of the effects of the agreement; including the effects  of constraints on new services that IRS could provide to taxpayers.

The internet has reshaped how citizens interact with businesses and  government agencies. IRS.gov has contributed to this by giving taxpayers  access to detailed information about their taxes and allowing them to  make arrangements to pay money they owe. Our comparison of IRS to  other countries’ and states’ revenue agencies highlights areas for  potential future development. IRS has told Congress and the public that  developing electronic communication capabilities is an area of focus. Our  review identified a number of challenges IRS will need to address as it  moves forward, including measuring taxpayers’ experiences with the  online services IRS already offers—including the extent to which those  services meet taxpayer needs—and how these services may affect  taxpayer burden. Summarizing and reporting that information would help  decision makers appreciate the potential value of these services and help  ensure IRS has the necessary resources to maintain and improve these  services. Likewise, including input from taxpayers when prioritizing new  services would help IRS reduce the risk of developing online services that  taxpayers do not use.

While IRS has recently published a modernization plan which outlines its  vision for expanding online services, no targets are set for improving  taxpayer experience or reducing taxpayer burden, which hinders  decision-making. As we recommended in April 2013, we continue to  believe that IRS should establish a numerical or other measureable goal  to improve taxpayer satisfaction and a time frame for achieving it. IRS  also faces a risk that plans for full-scale digital communication services  will encounter enrollment challenges similar to those that IRS has  experienced in prior digital communication pilots.

In 2002, IRS established a Free File agreement in which participating tax  preparation companies agreed to provide free electronic tax preparation  and filing services for low- and middle-income taxpayers, provided that  IRS does not enter the tax preparation software and e-filing services  marketplace. IRS’s Free File agreement benefits a small proportion of  taxpayers, but the full benefits and costs of this agreement are uncertain.  IRS is currently constrained in providing the online services that are part  of its long-term plans for taxpayers, including allowing electronic filing of  amended tax returns.

We are making the following seven recommendations to IRS:  The Commissioner of the IRS should ensure that information is collected  on taxpayers’ experiences with all online services and the extent to which  the services are meeting taxpayers’ needs. (Recommendation 1)

The Commissioner of the IRS should ensure that information collected on  taxpayers’ experiences with online services is summarized in the  document serving as IRS’s performance plan and report.  (Recommendation 2)

The Commissioner of the IRS should direct the Director of OLS and the  Chief Research and Analytics Officer to work together to analyze the  potential effects of online services on taxpayer burden. (Recommendation  3)

The Commissioner of the IRS should ensure that taxpayer input is  included as an element of IRS’s identification and prioritization process  for new online services. (Recommendation 4)

The Commissioner of the IRS should work with relevant officials to set a  target to reduce taxpayer burden through the development of new online  services. (Recommendation 5)

The Commissioner of the IRS should direct the Chief Information Officer  and the Director of OLS to ensure that planned future capabilities of  digital communication platforms are tested or piloted before deployment  with a particular focus on mitigating the risks that were identified in prior  pilots of digital communication services, such as challenges in  establishing common objectives and enrolling taxpayers.  (Recommendation 6)

The Commissioner of the IRS should direct the Commissioner of W&I to  work with the Director of OLS to ensure that future decisions regarding  whether to renew the Free File agreement incorporate findings from a  comprehensive examination of the benefits and costs of the agreement  as it relates to long term plans for IRS’s online services, including plans to  file amended returns electronically. (Recommendation 7)

Agency Comments, Third-Party Views, and Our Evaluation

We provided a draft of this report to IRS for review and comment. In  written comments provided by IRS’s Deputy Commissioner for Services  and Enforcement (reproduced in appendix II and summarized below), IRS  agreed with six of our seven recommendations. IRS also provided  technical comments, which we incorporated as appropriate.

IRS agreed with our recommendations to ensure that information is  collected on taxpayers’ experiences with online services, ensure that  such information is summarized in IRS’s performance plan and report,  analyze the potential effects of online services on taxpayer burden,  include taxpayer input in its identification and prioritization of new online  services, ensure that planned future capabilities of digital communication  platforms are tested or piloted, and ensure that future decisions regarding  renewal of the Free File agreement incorporate findings from a  comprehensive examination of the benefits and costs of the agreement  as it relates to long term plans for IRS’s online services. IRS indicated  general steps it plans to take to address these recommendations but did  not provide time frames for doing so.

IRS disagreed with our recommendation that it set a target to reduce  taxpayer burden through the development of new online services. IRS  stated that it will continue to look for opportunities to reduce burden  through the development of new online services, but believes that a  measurable target cannot be set. We recognize that it may take time for  the relevant IRS offices to review changes in individual taxpayer burden  estimates over multiple years and begin to collect the necessary data to  set a measurable target for burden reduction. However, as established in  our prior work, goals should be expressed in as specific terms as possible  and be expressed in a form which allows the agency and external  audiences to assess the progress being made.

As noted in our report, IRS has a strategic goal for reducing taxpayer  burden and its strategic plan identifies expanding online services as one  of the strategies it will use to drive progress on its goal. Further, IRS  agreed with our related recommendation that relevant offices analyze the  potential effect of online services on taxpayer burden, which should  provide a starting point for IRS in working to identify a burden reduction  target. In its response, IRS also stated that its methodology for estimating  taxpayer burden is not designed to capture the effect of specific program  improvements on taxpayer burden. We agree and are not suggesting IRS  resurvey taxpayers and re-estimate burden for every new online service it  may introduce. Rather, our recommendation refers to total burden  reduction from all the online services IRS offers individual taxpayers. As  noted above, IRS’s strategic plan anticipates that taken together all these  different online services should make it easier over time for taxpayers to  fulfill their tax obligations. We continue to believe that this  recommendation has merit.

We provided relevant sections of this report to OMB staff concerning  information they provided us regarding the applicability of customer  experience requirements to IRS. Staff confirmed we accurately  summarized their statements.

We provided relevant sections of the draft report to the revenue agencies  and national audit offices in the three countries reviewed and to the  revenue agencies in the three states reviewed. Two foreign revenue  agencies, three national audit offices, and three state revenue agencies  provided technical comments, which were incorporated as appropriate.  One foreign revenue agency did not respond as of December 10, 2019.  We also contacted 19 additional state revenue agencies which our draft  report identified as offering electronic filing of a state income tax return on  the revenue agency’s website and verified that 15 of them offer this  service. The remaining four did not respond as of December 12, 2019.

We provided relevant sections of the draft report to officials representing  Free File, Inc.; specifically, sections describing the agreement between  their organization and IRS and the views of Free File, Inc., officials  towards IRS plans for allowing electronic filing of amended returns. An  official representing the organization provided technical comments, which  were incorporated as appropriate.

We are sending copies of this report to the relevant congressional  committees, the Secretary of the Treasury, the Commissioner of the IRS,  and other interested parties. In addition, this report is available at no  charge on the GAO website at https://www.gao.gov. If you or your staff  members have any questions about this report, please contact me at  (202) 512-9110 or lucasjudyj@gao.gov. Contact points for our Offices of   Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix III.

Appendix I: Filing Requirements in the United States and Selected Countries and Relevant Reports by the Selected Countries’ National Audit Offices

Filing Obligations for Individual Taxpayers in the United States and Three Countries

Common Features of the United States’ and Selected Countries’ Income Tax Systems

The four countries in this review—the United States and Australia, New  Zealand, and the United Kingdom—define income similarly and tax  investment income. For wages, all four revenue agencies require  employers to withhold taxes from their employees’ paychecks.  Withholding also means that the four revenue agencies have processes  for sending refunds to taxpayers should the government end up collecting  more money than the taxpayer owes in taxes. Further, all four countries  use tax expenditures to channel subsidies through their tax systems to  further social goals such as supplementing the wages of lower income  workers.

The requirement to file a tax return depends on a combination of factors:  gross income, filing status such as whether a taxpayer is single or  married, age, and whether a taxpayer is a dependent. For example, a  single taxpayer who is under the age of 65 and has a gross income of at  least $12,000 is required to file. Taxpayers who meet the specified criteria  must file a return even if the government owes them a refund. A taxpayer  married to another taxpayer can choose to file a joint return which reports  the two individuals’ combined income and deductions. Selecting this  option may provide a higher standard deduction and access to other tax  benefits for married couples.

The Australian Taxation Office’s (ATO) website states that most  taxpayers need to lodge a tax return each year and taxpayers can choose  among using their online account to electronically file a return, submit a  paper return, hire a registered tax agent, or taxpayers meeting specified  eligibility criteria may seek assistance from ATO-trained volunteers who  help taxpayers complete their tax returns online. Spouses file separate  returns, although taxpayers are required to report details about their  spouse’s tax situation, such as their taxable income. After a return is  lodged, ATO issues a notice of assessment informing the taxpayer  whether he or she is entitled to a refund or owes tax. A taxpayer can  correct errors on the original return electronically, on paper, or through a  registered tax agent.

An Inland Revenue Department (IRD) publication and the IRD website  explain that the requirement to file depends on the sources of the  taxpayer’s income. Taxpayers who received income other than salary,  wages, interest, dividends, or taxable Maori authority distributions must  file a return. For example, the filing requirement applies to taxpayers who  had self-employed income, rental income, cash jobs, or income derived  overseas exceeding 200 New Zealand dollars. Taxpayers required to file  can log into their online account to electronically file a return or choose to  file on paper or hire a tax agent to prepare their return. After receiving the  return, IRD informs the taxpayer of any refund or tax they must pay.  Taxpayers can correct errors on their return by logging into their online  account or calling IRD.

In regards to the remaining taxpayers whose income is from sources IRD  is aware of, such as wages, the department sends them an assessment  informing them of whether they owe taxes or are owed a refund and  directing them to report any additional income over 200 New Zealand  dollars IRD does not know about, such as cash jobs. To support this, an  IRD official explained that his department receives information from  employers on income paid and taxes withheld every pay cycle. Further,  the official reported that beginning in April 2020 IRD will receive at least  monthly information from financial institutions on investment income,  which should help IRD further refine its calculations of the tax positions of  taxpayers. Regarding married taxpayers, each spouse is required to file  his or her own return or receives their own assessment, although the tax  return states that the amount a spouse or partner (or ex-spouse or ex- partner) received for a tax credit for working families may affect the other  spouse’s tax situation.

The United Kingdom’s government website explains that Her Majesty’s  Revenue and Customs (HMRC) uses a system—called pay as you  earn—in which taxes are deducted automatically from wages and  pensions. This means that taxpayers whose only income is from wages  or pensions are generally not required to file a return. HMRC mails these  taxpayers an annual tax summary (or taxpayers can view it online in their  account) informing them of their taxable income and amount collected. If  HMRC determines that they owe the taxpayer money or the taxpayer  owes the government money, HMRC sends a separate form explaining  how it will pay or collect this money. Taxpayers with untaxed income  (e.g., renting a property, tips and commissions, income from investments  and dividends, and foreign income) may be required to file a return (also  referred to as a self-assessment). Even if a taxpayer is not required to file  a return, he or she may choose to file a return to claim “income tax reliefs”  for such activities as making pension or charitable contributions.

Before filing a return, taxpayers who did not file a return in the previous  tax year must register with HMRC, which can be done online. HMRC will  mail an identification number and activation code and set up an online  account for the taxpayer to use to complete the self-assessment. Once  taxpayers confirm they are registered, they complete their tax return  online using their personal account or choose among using commercial  software, hiring an accountant or someone else to help them, filing on  paper, or taxpayers meeting specified eligibility criteria may be able to get  free professional advice. However, HMRC advises there are certain tax  situations, such as a taxpayer receiving income from a partnership, in  which its website cannot be used and taxpayers in these situations must  use commercial software or file on paper. Regarding correcting errors  on filed returns, taxpayers who submitted their return on HMRC’s website  can make corrections there, while paper filers must mail a corrected  form. Married taxpayers file separate returns, but the tax form has a  marriage allowance section which allows a taxpayer to transfer a portion  of his or her personal allowance to their spouse or civil partner under  certain conditions.

Relevant Audit Reports Assessing Selected Countries’ Online Services for Taxpayers

The ATO commenced development of new online services for individual  taxpayers in 2015 under the direction of its modernization plan, titled  “Reinventing the ATO”. The Australian National Audit Office (ANAO)  reviewed ATO’s modernization plan in a 2017 report and found that the  ATO’s modernization plan provided “clear road maps outlining program  intent, deliverables and timing” but identified challenges for ATO in  conformance to those processes, specifically in completing cost estimates  for development of all new services. In addition, the ANAO found that the  costs and benefits associated with the “Reinventing the ATO” program  and most of its projects had not been tracked.

ANAO reported that ATO collects survey information from taxpayers  about the ease of accessing services and information, doing business  with the ATO, and measures of timeliness in processing complaints.  However, ANAO noted that ATO’s online services have experienced  periods of outages, but ATO has not monitored the impact of service  outages on satisfaction with its services. In 2017, ANAO reported that  ATO had successfully implemented its recommendation to develop an  overarching cross-channel strategy that detailed how the ATO plans to  transition to an improved online service environment, while also  continuing to provide and improve the performance of other service  channels.

In 2011, IRD began a long-term business transformation program, which  plans to modernize tax administration in New Zealand and offer new  online services to taxpayers. New Zealand’s Office of the Auditor General  (OAG) reviewed IRD’s governance of the business transformation  program in 2015 and found IRD to be providing clear direction and  supporting clear and effective decisions, but recommended that IRD  continue to manage risks, including identifying clear benefit estimates to  decision makers. OAG also recommended that IRD manage risks by  improving its outreach to stakeholders and taxpayers in advance of the  release of new services. As a result, IRD stated in its 2018 program  update that it intends to be more proactive in engaging with individual  taxpayers. In regards to IRD’s procurement of goods and services for  the business transformation program, OAG found instances in which IRD  did not consistently comply with relevant rules and policies and made  recommendations for improvement. OAG’s report, however, noted that  IRD restructured its procurement function and brought in procurement  specialists with appropriate skills and resources and OAG intends to  follow up on the progress IRD is making in addressing its  recommendations. An OAG official reported in November 2019 that his  office is currently doing a performance audit of the measurement of  benefits from the IRD business transformation program. OAG anticipates  submitting the report to the House of Representatives in the first half of  calendar year 2020.

HMRC outlined a strategy in 2014 (it refers to as a transformation  program) to improve its online services for individual taxpayers, which  included goals of promoting voluntary tax compliance, designing services  to meet customer needs, and improving ease and convenience to  taxpayers. The United Kingdom’s National Audit Office (NAO) has  reviewed HMRC’s customer service performance, including online  services. A 2016 NAO review found that HMRC had reduced the cost of  its personal tax operations between 2010-2011 and 2014-2015 in part by  moving customers from traditional service channels to less expensive  service channels, including online services. Initially, HMRC maintained or  improved its customer service performance, but HMRC ended up  releasing too many customer service staff and wait times for telephone  service started to increase in 2015-2016. While HMRC’s performance  improved after it recruited additional staff, NAO concludes that the  sustainability of HMRC’s cost reductions will depend on the success of  new online services in reducing demand for telephone and mail service.  Another review by NAO in 2017 credited HMRC for exceeding its target  set for customer satisfaction for digital services, which includes both  existing services and new services. Moving forward, NAO  recommended that HMRC continue to reevaluate its priorities for its  transformation program at least annually, including by measuring the  impact on customers, to ensure that new services are delivering the  anticipated benefits. In addition, NAO recommended that HMRC be  clearer about the way it tracks the costs and benefits of its transformation  program. In 2019, NAO found that HMRC had reprioritized its plans due  to other demands related to the agency’s preparations for the United  Kingdom’s planned exit from the European Union, which has resulted in  deferment of development of new online services.

Appendix II: Comments from the Internal Revenue Service

Appendix III: GAO Contact and Staff Acknowledgments

Jessica Lucas-Judy, (202) 512-9110 or lucasjudyj@gao.gov.

In addition to the individual named above, Tara Carter (Assistant  Director), Michael O’Neill (Analyst in Charge), Michael Bechetti,  Jacqueline Chapin, Rianna Jansen, Edward Nannenhorn, Andrew Olson,  Julia Robertson, Kayla Robinson, Cynthia Saunders, Stewart W. Small,  Andrew J. Stephens, Robyn Trotter, and Christopher Woika made key  contributions to this report.

IRS offers a range of online services, including services that allow taxpayers to track refunds or view their accounts. Although IRS recognizes that taxpayers want more online options, it hasn’t considered taxpayer input in developing new services. Also, its efforts to determine whether current online services meet taxpayer needs haven’t yet been sufficient to make decisions about how to move forward.

IRS has long relied on private companies to help taxpayers file electronically, but it hasn’t given adequate consideration to the benefits and costs of this agreement with industry.

We made 7 recommendations to address these and other challenges.