The Internal Revenue Service (IRS) identified nearly 26,000 fraudulent electronic income tax returns during the first 10 months of 1993--a 105-percent increase over 1992 levels. In the long term, it is critical that IRS thoroughly assess its controls and determine what is needed to adequately protect the government's revenues. With a goal of 80 million electronic returns by 2001, IRS must ensure that fraud control needs, such as various up-front matching capabilities, are fully identified and considered in planning its systems modernization program. IRS also needs to learn from its electronic filing experience by building adequate controls into the design of future systems, like Telefile, which allow taxpayers to file their returns over the telephone, and ensure that those controls are adequate before nationwide implementation.