Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) overall performance during the 1996 tax filing season, focusing on: (1) changes in 1996 that relate to taxpayer services and the processing of taxpayer refunds; and (2) some of IRS' efforts to modernize its processing activities.

GAO found that: (1) IRS met or exceeded its timeliness and accuracy goals for processing individual income tax returns and issuing taxpayer refunds, answered more telephone calls from taxpayers seeking assistance than it had planned to answer, and received more returns through alternative filing methods than it had projected; (2) for the 1996 tax filing season, IRS revised its procedures to limit the number of delayed refunds to the volume of cases it could review, and focus on the cases most in need of review, and as a result, IRS delayed many fewer refunds in 1996 than it did in 1995 and avoided the kind of negative press it received in 1995 as taxpayers and tax return preparers reacted to the delays; (3) recognizing that much could be done to improve its systems and procedures, IRS has initiated several modernization efforts, and those efforts achieved mixed results in 1996; (4) IRS is developing a strategy to increase the use of electronic filing and reassessing its strategy for processing paper returns; and (5) IRS' decision to have taxpayers send not only their payments but also their tax returns to a lockbox and to have the banks sort those returns before sending them to IRS has increased program costs, unnecessarily in GAO's opinion, by $4.7 million.

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