This testimony discusses the administration's fiscal year 2000 budget request for the Internal Revenue Service (IRS) and the status of the 1999 tax filing season. For next year, the administration is requesting $8.2 billion and nearly 98,000 full-time equivalent positions for IRS--about the same as for fiscal year 1999. Even so, there are differences in how IRS plans to spend its fiscal year 2000 funds. For example, the request includes about $197 million for three critical initiatives--organizational modernization, implementation of the IRS Restructuring and Reform Act of 1998, and customer service training. IRS' current five-year cost estimate to make its information systems Year 2000 compliant is $1.3 billion--$345 million higher than its estimate a year ago. IRS is requesting $1.46 billion for information systems in fiscal year 2000. IRS' plans for spending those funds are consistent with earlier GAO recommendations and congressional direction. For fiscal year 2001, IRS is also asking for an advance appropriation of $325 million for its multi-year capital account for systems modernization. The agency has not adequately justified that request in accordance with federal information technology investment requirements. With respect to the 1999 filing season, GAO found that the accessibility and quality of IRS' telephone service has deteriorated considerably since last year; the number of individual income tax returns filed electronically continues to rise, although fewer returns are being filed by telephone; many taxpayers have made mistakes with the new child tax credit; and many systems for processing returns and remittances have been doing a good job.

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