Response Accuracy Is Higher for the Internet Program Than
for Other Options Available to Taxpayers Needing Assistance With Tax Law
Questions
October 2002
Reference Number: 2003-40-014
This report has cleared the Treasury
Inspector General for Tax Administration disclosure review process and
information determined to be restricted from public release has been redacted
from this document.
October
31, 2002
MEMORANDUM FOR
Commissioner, Wage and Investment
Division
FROM: Pamela J. Gardiner /s/ Pamela J. Gardiner
Acting Inspector General
SUBJECT: Final Audit Report - Response Accuracy Is Higher for the Internet
Program Than for Other Options Available to Taxpayers Needing Assistance
With Tax Law Questions (Audit # 200240041)
This
report presents the results of our review to determine if the Internal Revenue
Service (IRS) accurately and timely responds to Wage and Investment (W&I)
tax law questions submitted via the IRS’
Internet site, the Digital Daily.
Since 1995, the
IRS has administered the Electronic Tax Law Assistance (ETLA) Program to
answer taxpayer questions submitted through
its Internet site known as the Digital Daily. The ETLA Program offers taxpayers an accessible and
convenient alternative to using the telephone or visiting an IRS office to obtain
answers to tax law questions. Taxpayers
have the ability to submit tax law questions 24 hours a day, 7 days a
week. The IRS provides responses to
taxpayer questions via an e-mail message.
The IRS met its goal of providing a response within 2
business days for 89 percent of the anonymously submitted Treasury Inspector
General for Tax Administration (TIGTA) questions for which the IRS provided a
response. In addition, the accuracy
rate for responses received via the IRS’ ETLA Program was higher than the
accuracy rates for the TIGTA’s testing of responses received via the IRS’
walk-in Taxpayer Assistance Center offices and toll-free tax assistance
program.
However, the IRS does not have an effective system to
ensure responses are provided for all the questions submitted. Specifically, auditors did not receive a
response for 14 (16 percent) of the 90 questions anonymously submitted. To continue the success of the ETLA Program
and ensure one-stop service to taxpayers, the IRS should: provide clear
instructions to taxpayers accessing the IRS’ web site as to where ETLA
questions can be entered and transmitted to the IRS, provide e-mail
confirmations to taxpayers acknowledging the IRS’ receipt of their questions,
and develop a system to track questions submitted to ensure a response is
provided in all instances.
Management’s
Response: IRS management responded that they were
pleased our report recognized their successful efforts with the ETLA
Program. They agreed with two of our
recommendations and have agreed to send e-mail confirmations to taxpayers
acknowledging receipt of their questions and to develop a system that will
track questions taxpayers submit to ensure the IRS responds to all of those
questions.
However,
IRS management disagrees that the IRS Internet site needs specific instructions
to direct taxpayers to the Internet location for submitting questions. They believe a recent redesign of the
Internet site allows users to quickly locate various tools, such as the ETLA
Program.
Office of Audit Comment: Our
recommendation was made to address the fact that taxpayers need easy access to
submit tax law questions that they need answered through the IRS’ Internet
site, the Digital Daily. While
we acknowledge the new design of the Internet site, we do believe that
taxpayers will find it difficult to locate where they should submit ETLA
questions since the ETLA Program topic button was moved to the help topic
section.
While we agree that the IRS
has made significant advances in promoting the ETLA web site, we also
acknowledge that overall the use of the Internet to gather information is
greatly increasing. Therefore, in our
opinion, more specific directions should be provided to taxpayers for accessing
the ETLA Internet site.
While we believe
Recommendation 1 is worthy of further consideration, we recognize the
limitations expressed by the IRS. We do
not intend to elevate our disagreement concerning this matter to the Department
of the Treasury for resolution and believe the IRS will continue working to
overcome such limitations in the future.
Copies of this
report are also being sent to the IRS managers who are affected by the report
recommendations. Please contact me at
(202) 622-6510 if you have questions or Michael R. Phillips, Assistant Inspector
General for Audit (W&I Income Programs), at (202) 927-0597.
Tax Law Response Accuracy Is Higher for the Internet
Program Than for Other Options Available
Tax Law
Questions Submitted Via the Internet Are Not Always Answered
Appendix I – Detailed Objective, Scope, and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix IV – Outcome Measures
Appendix V – Management’s Response to the Draft Report
The use of the Internet has
increased dramatically. Industry trends
project that the percentage of adults online (connected to the Internet) will
increase between 35 and 56 percent from 2000 to 2003, with an estimated 74
percent of the adult population online by 2003. The increase in Internet usage will provide greater opportunities
for the Internal Revenue Service (IRS) to market online services.
Since 1995, the IRS has administered the Electronic Tax Law Assistance (ETLA) Program to answer taxpayer questions submitted through its Internet site known as the Digital Daily. The ETLA Program offers individual and business taxpayers an accessible and convenient alternative to using the telephone or visiting an IRS office to obtain answers to tax law questions. Taxpayers have the ability to submit tax law questions 24 hours a day, 7 days a week. The IRS provides responses to taxpayer questions via an e-mail message.
This audit was conducted at the IRS’ ETLA Program headquarters in Washington, D.C., and the Boston, Massachusetts, field office from January 2002 to June 2002. The audit was conducted in accordance with Government Auditing Standards. Detailed information on our audit objective, scope, and methodology is presented in Appendix I. Major contributors to the report are listed in Appendix II.
The IRS met its goal of providing a response within 2 business days for 89 percent of the anonymously submitted Treasury Inspector General for Tax Administration (TIGTA) questions responded to via the ETLA Program. In addition, the accuracy rate for responses to tax law questions received via the IRS’ ETLA Program was higher than the accuracy rates of the TIGTA’s testing of responses to tax law questions received via the IRS’ walk-in Taxpayer Assistance Center (TAC) offices and toll-free tax assistance program.
During February 22 to March 6, 2002, TIGTA auditors anonymously submitted 90 tax law questions typical of those that may be submitted by an individual taxpayer. The following chart provides a listing of the categories for which TIGTA auditors submitted questions anonymously.
Tax Law Category
|
Number of Questions Submitted via the IRS’ |
|
Filing Requirements/Status/ Dependents/Exemptions |
9 |
|
Itemized Deductions/ |
12 |
|
Interest/Dividends/Other Income |
12 |
|
Pensions/Annuities |
6 |
|
Social Security Income |
6 |
|
Child Care Credit/Other Credits |
24 |
|
Earned Income Tax Credit |
9 |
|
Capital Gains, Losses/Sale of Home |
12 |
|
Total |
90 |
Source: These categories are available on the IRS’
Internet site for taxpayers to choose from when they need to submit a tax law
question.
Responses received via the
ETLA Program to questions submitted by the TIGTA were timely
IRS guidelines state that taxpayer inquiries submitted via the IRS’ Internet site should be answered in 2 business days. After 2 business days, unanswered taxpayer inquiries are considered over-aged.
A response was received for 76 (84 percent) of the 90 questions anonymously submitted by TIGTA auditors (see page 6 for an explanation of the missing responses). The IRS met its goal of providing a response within 2 business days for 68 (89 percent) of the 76 questions. For the remaining 8 of 76 questions (11 percent), a response was received on the third day after submission of the question.
Tax law question response accuracy was higher for
the IRS Internet program than for other options available to taxpayers
When compared with other options available to taxpayers who need assistance with tax law questions, the accuracy rate for responses received via the ETLA Program was higher than the accuracy rates for responses received during TIGTA testing of the IRS’ walk-in TAC offices and toll-free tax assistance program.
The following chart compares the accuracy rate percentages for the TIGTA’s testing of TAC offices, toll-free tax assistance, and the ETLA Program. Details as to how the accuracy rates were arrived at are provided below.
The chart was removed due to its
size. To see the chart, please go to
the Adobe PDF version of the report on the TIGTA Public Web Page.
Details of TIGTA testing results
for the IRS’ TAC offices and toll-free tax assistance program
· During January to April 2002, TIGTA auditors anonymously visited 77 TAC offices and asked 314 tax law questions. They found that 158 (50 percent) were answered correctly.
· During January 14 to March 14, 2002, TIGTA auditors monitored a judgmental sample of 736 toll-free calls. The overall accuracy rate was 78 percent (572 of the 736 toll-free calls were answered correctly).
Details of TIGTA
testing results for the ETLA Program
TIGTA testing of the ETLA Program found that, of the 76 responses received:
·
Sixty-three (83 percent) provided a correct answer.
·
Six (8 percent) provided no specific answer to the question;
however, we were provided with correct general information from a tax
publication relating to the tax subject of our question.
· Seven (9 percent) provided an incorrect answer. For example, one response stated that the taxpayer could use a cancelled check as a receipt for a charitable deduction. Another incorrect response to a question concerning dependents stated that if a taxpayer provided more than half the total support for a niece and her son, they could be claimed as dependents.
IRS guidelines require responses to taxpayers via the ETLA Program to cite the publication, form, or other reference that supports the response provided to the taxpayer’s question. Answers should be complete and accurate without overwhelming the taxpayer with unnecessary information. For 68 (89 percent) of the 76 questions responded to, the IRS employee provided us with a reference to the form or publication where information about our specific topic could be found.
IRS management indicated that they continue to review responses as part of their managerial review and quality assurance processes to ensure the completeness and accuracy of the responses provided to taxpayers.
The number of taxpayer questions submitted via
the ETLA Program has declined
Despite the timeliness and higher accuracy rate, the number of taxpayer questions submitted to the IRS via the ETLA Program has declined. The table below provides the number of taxpayer questions submitted via the IRS’ ETLA Program for the past three tax return filing seasons.
Filing Season
|
Questions Submitted
|
|
2000 |
218,405 |
|
2001 |
183,566 |
|
2002 |
119,036 |
Source: IRS
ETLA Report 4.
Although TIGTA auditors performed no substantive testing, the difficulty in locating the ETLA Program when accessing the IRS’ web site may be contributing to the reduction in questions submitted from Filing Seasons 2000 through 2002. TIGTA auditors experienced difficulty identifying where ETLA questions should be submitted when accessing the IRS’ web site. Specifically, upon accessing the IRS’ web site, no information is provided indicating where ETLA questions should be submitted. Auditors finally located the ETLA link that is embedded in the IRS help topic section instead of a tax law assistance section.
The IRS redesigned its web site during the 2002 Filing Season, moving the ETLA Program topic section button from the front page when entering the web site to the help topic section.
In an effort to provide one-stop service, information should be provided to taxpayers upon entering the IRS’ Internet site to enable the taxpayers to easily locate where ETLA questions can be submitted. Without such a system, IRS may not be providing the one-stop service to taxpayers who are seeking tax assistance via the IRS’ Internet site.
The Commissioner, W&I Division, should:
1. Provide clear instructions to taxpayers accessing the IRS web site as to where ETLA questions can be entered and transmitted to the IRS.
Management’s Response: IRS management disagrees that the IRS Internet site needs specific instructions to direct taxpayers to the Internet location for submitting questions. They believe a recent redesign of the Internet site allows users to quickly locate various tools, such as the ETLA Program.
Office of Audit Comment: Our recommendation was made to address the fact that taxpayers need easy access to submit tax law questions that they need answered through the IRS’ Internet site, the Digital Daily. While we acknowledge the new design of the Internet site, we do believe that taxpayers will find it difficult to locate where they should submit ETLA questions since the ETLA Program topic button was moved to the help topic section.
While we agree that the IRS has made significant advances in promoting the ETLA web site, we also acknowledge that overall the use of the Internet to gather information is greatly increasing. Therefore, in our opinion, more specific directions should be provided to taxpayers for accessing the ETLA Internet site.
The IRS does not have an effective system to ensure responses are provided for all tax law questions submitted via the ETLA Program. Specifically, no response was received for 14 (16 percent) of the 90 test questions submitted anonymously by TIGTA auditors. The auditors transmitting these questions received a message confirming submission of the question – “Your Question Has Been Submitted. We will direct your message to the appropriate IRS office. Thank you!” However, unlike many companies that interact with individuals via the Internet, no message was received acknowledging the IRS’ receipt of the submitted question.
When TIGTA advised IRS management regarding non-receipt of responses in 14 instances, management was unable to explain why a response was not received. Additionally, management indicated that during the period in which TIGTA auditors submitted their questions, the IRS was moving responsibility for its Internet site from one vendor to another, which may have contributed to the problem of missing questions. However, TIGTA auditors noted that the issue of non-response to a submitted question was detailed in a prior TIGTA audit report. In one instance, the same question had to be submitted three times before a response was received.
Checks and balances are common in the Internet
industry
Our discussions with the IRS’ current web site vendor indicated that a check and balance process to ensure that all taxpayer inquiries have been received upon transmission and are responded to is a common control in the industry. Management indicated that controls were not built into the ETLA Program to track questions from the time they are submitted to ensure the question is received and a response is provided. Without such a system, IRS may not be providing one-stop service to taxpayers who are seeking tax assistance via the IRS’ web site.
The Commissioner, W&I Division, should:
2. Provide taxpayers with e-mail confirmations acknowledging receipt of their questions at the time of submission.
Management’s Response: IRS management agreed with this recommendation and agreed to send e-mail confirmations to taxpayers acknowledging receipt of their questions.
3. Develop and implement a system that will track every tax law question submitted from the time of transmission to ensure that all taxpayer inquiries are received and that a response is provided.
Management’s Response: IRS management agreed with this recommendation and agreed to develop a system that will track questions taxpayers submit to ensure the IRS responds to all of those questions.
Appendix I
Detailed Objective, Scope, and Methodology
The
overall objective of this review was to determine if the Internal Revenue Service
(IRS) accurately and timely responds to Wage and Investment (W&I) tax law
questions submitted via the IRS’ Internet site, the Digital Daily. To
accomplish this objective, we:
I.
Determined if
the IRS accurately and timely responded to tax law questions submitted by
taxpayers via the IRS Internet site.
Specifically, we:
A.
Reviewed IRS Electronic Tax Law Assistance
(ETLA) Program guidance.
B.
Used a judgmental sample of 90 cases since we
did not plan to project the results. Set
up 90 e-mail accounts using free e-mail services on the Internet.
C.
Anonymously submitted each of the 30
questions 3 times for a total of 90 submissions via the Digital Daily of
tax law questions typical of those that may be submitted by an individual
taxpayer during February 22 to March 6, 2002.
D.
Analyzed answers received for accuracy and
timeliness.
II. Determined if the IRS had assurance
that all taxpayer inquiries for tax law assistance had been received and
responses provided to these inquiries.
A.
Interviewed appropriate management involved
with the ETLA Program at both the headquarters and field offices concerning any
systemic issues.
B.
Presented our results to management
concerning any missing responses to the 90 questions in our sample submitted
via the Digital Daily.
Appendix II
Major Contributors to This Report
Michael R. Phillips, Assistant
Inspector General for Audit (Wage and Investment Income Programs)
Kerry Kilpatrick, Director
Russell Martin, Audit Manager
Edith
Lemire, Senior Auditor
Roberta Fuller, Auditor
Mary Keyes, Auditor
Appendix III
Commissioner N:C
Director, Customer Account Services W:CAS
Director, Customer Assistance, Relationships, and Education W:CAR
Director, Electronic Tax Administration Division W:E
Director, Strategy and Finance W:S
Chief Counsel CC
National Taxpayer Advocate
TA
Director, Legislative Affairs CL:LA
Director, Office of
Program Evaluation and Risk Analysis
N:ADC:R:O
Office of Management Controls N:CFO:F:M
Audit
Liaisons:
Program/Process Assistant Coordinator,
Wage and Investment Division W:HR
Program Coordination and Support Section Liaison W:CAS:P
Electronic Tax Administration Division Liaison W:E
Appendix IV
This appendix presents detailed information on the measurable impact that our recommended corrective actions will have on tax administration. These benefits will be incorporated into our Semiannual Report to the Congress.
Type and Value of Outcome Measure:
· Taxpayer Burden (other) – Potential; 16 percent (14 of 90) of Treasury Inspector General for Tax Administration (TIGTA) test questions were unanswered (see page 6).
Methodology Used to Measure the Reported Benefit:
Between February 22 and March 6, 2002, TIGTA auditors set up 90 e-mail accounts using free e-mail services on the Internet. TIGTA auditors anonymously submitted 30 questions 3 times for a total of 90 submissions via the Digital Daily. TIGTA auditors then analyzed answers received for accuracy and timeliness. No responses were received for 14 (16 percent) of the 90 questions submitted anonymously by TIGTA auditors. In addition, TIGTA auditors could not determine the number of taxpayers who submitted a question and did not receive a response.
Appendix V
Management’s Response to the Draft Report
The response
was removed due to its size. To see the
complete response, please go to the Adobe PDF version of the report on the
TIGTA Public Web Page.