In accordance with 31 U.S.C. section 720, I am writing you concerning actions by the Internal Revenue Service (IRS) in response to the recommendations contained in a report by the General Accounting Office (GAO) entitled Tax Administration: Electronic Filing Falling Short of Expectations (GGD-96-12, October 31, 1995). The GAO report contains several recommendations geared to addressing the electronic filing program (ELF). Specifically, this report focuses on assessing (1) the IRS' progress in maximizing electronic filing; (2) the availability of data needed to develop an electronic filing strategy; and (3) the implications for the IRS if it does not significantly reduce its paper-processing workload. Our July 27, 1995, response to GAO on the draft of this report is included in the final report beginning on page 17. We generally agree with the report recommendations to (1) identify those groups of taxpayers who offer the greatest opportunity to reduce the IRS' paper-processing workload and operating costs if they were to file electronically and develop strategies that focus the IRS' resources on eliminating or alleviating impediments that inhibit those groups from participating in the program, including the impediment posed by the program's cost; (2) adopt goals for electronic filing that focus on reducing the IRS' paper-processing workload and operating costs (these goals could be used in addition to the existing electronic filing goal to assess the IRS' progress in achieving the intended benefits of electronic filing); and (3) prepare contingency plans for the possibility that the electronic filing program will fall short of expectations. In addition to our response to the final report recommendations, we would like to make the following comments. The IRS is continuing to develop and refine its strategies for "non-paper filing." This year, the IRS will be implementing several components of our overall electronic filing strategy to encourage taxpayers to fulfill their tax obligations without sending paper to the IRS. Included among these strategies is the recently-announced plan to expand the very successful TeleFile program The Honorable Ted Stevens -2 TeleFile is the first totally-automated way of filing an individual federal income tax return. Millions of Americans who enjoy the convenience of shopping or banking by phone will now be able to file Forms 1040EZ simply by making a short telephone call to a toll-free number. Like shopping and banking by phone, TeleFile is totally paperless. Taxpayers will end their call by using a personal identification number (PIN) that will substitute for the signature required on paper returns. An estimated 23 million taxpayers will now be able to file paperless tax returns over the phone. Approximately three million taxpayers are expected to file via TeleFile in 1996 compared to the 680,000 taxpayers who used TeleFile last year when the program was available in ten states. Many other initiatives to reduce paper filing are also underway. After successful testing last year, an estimated 500,000 Forms 941 will be filed electronically in 1996 as the program is made available to all taxpayers. This new filing option will greatly benefit businesses which already have to make their Federal Tax Deposits electronically through a system called TAXLINK. TAXLINK eliminates the need for employers to bring checks and paper deposits to designated banks to pay their taxes. Once enrolled in TAXLINK, an employer may initiate electronic payments to the IRS by telephone or computer. As of March 1, 1996, the IRS has collected almost $383 billion since TAXLINK started in 1992 from over 55,000 participants. A more advanced Electronic Federal Tax Payment System will replace TAXLINK in 1996, enabling IRS to handle future electronic transactions. The IRS is also continuing to explore methods for taxpayers to file directly from home which would open the electronic filing market to a new and more sophisticated group of taxpayers. Finally, the IRS went online with its new home page on the World Wide Web (WWW) in January -- another vehicle for providing information to taxpayers electronically. The IRS WWW site became operational for public use on January 8, 1996, after the success of a 1995 pilot program. The site includes user-friendly graphics and dramatically expanded self-help services, including hypertext links from index or text directly to appropriate forms, publications or other information. The IRS' WWWW site serves as the Internet gateway to Internal Revenue Information Services (IRIS) on FedWorld and is also electronically linked to the Treasury and White House Www sites. This year through March 10, 1996, there have been 26,554,204 million accesses The Honorable Ted Stevens -3 The Internal Revenue Service strongly believes that the electronic filing program currently focuses on those taxpayers who, by filing electronically, will offer the greatest opportunity to reduce our paper processing. Further, IRS management continues to explore possible additions to the current ELF legacy system while developing new programs to increase electronically-filed returns in future years: This goal will be accomplished with the assistance of external and internal stakeholders. If you have any questions, please do not hesitate to contact me or Erik North, National Director for Legislative Affairs, at 622-3720. Sincerely, Margaul Milner Richard Margaret Milner Richardson Enclosure |