TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Office of Audit

Highlights

A STRATEGY IS NEEDED TO ADDRESS HIRING SHORTAGES AS EFFORTS CONTINUE TO CLOSE TAX PROCESSING CENTERS

Final Report issued on March 11, 2020

Highlights of Reference Number:† 2020-40-019 to the Commissioner of Internal Revenue.

IMPACT ON TAXPAYERS

The IRS Restructuring and Reform Act of 1998 included a goal for the IRS to have at least 80 percent of all tax returns filed electronically by Calendar Year 2007.† In response to the continued decreases in paper-filed tax returns, IRS management determined that they could further consolidate tax return processing sites from five to two Tax Processing Centers by the end of Fiscal Year 2024.† The IRS projected the five-year cost savings from the continued consolidation to be almost $266 million and anticipates using these cost savings to focus on taxpayer service, tax enforcement, and information technology.

WHY TIGTA DID THE AUDIT

This is the second TIGTA audit on the IRSís continuing consolidation efforts.† This audit evaluated the IRSís efforts to close the Cincinnati Tax Processing Center.† In addition, TIGTA assessed the IRSís business case basis supporting the continued planned closure of Tax Processing Centers.

WHAT TIGTA FOUND

As part of its continuing efforts to consolidate Tax Processing Centers, the IRS officially stopped accepting tax returns at the Cincinnati Tax Processing Center on June 17, 2019.† The IRS also minimized the impact of the closure on employees.† For the 2020 Filing Season, the IRS will begin the redirection of paper tax returns processed at the Fresno Tax Processing Center to the Kansas City and Ogden Tax Processing Centers.

However, the IRS needs a strategic approach to address current and future staffing challenges as consolidation efforts continue.† Management has not adequately addressed the increasing risk related to their inability to recruit and retain sufficient Submission Processing function personnel needed to handle the increased workload being transferred to the remaining Tax Processing Centers.† With the IRSís continued inability to meet its hiring goals, a long-term strategy is needed that details action to be taken to address this concern.

The IRS estimated savings of $97.2 million from the closure of the Cincinnati Tax Processing Center.† However, TIGTAís review found that revised estimated costs to close the processing center exceeded initial estimates by $56.5 million, reducing the potential five-year savings estimates to approximately $40.7 million.† Despite this, the IRS has not updated its cost‑benefit analysis using actual costs to ensure that the decision to continue consolidating Tax Processing Centers remains cost effective.

WHAT TIGTA RECOMMENDED

TIGTA recommended that the Commissioner, Wage and Investment Division, develop a long‑term recruitment strategy to ensure that the end-state Tax Processing Centers are sufficiently staffed, and update its consolidation plan using revised cost-benefit figures from the closing of the Cincinnati Tax Processing Center.

IRS management agreed with both recommendations and plans to take appropriate corrective actions.

READ THE FULL REPORT

To view the report, including the scope, methodology, and full IRS response, go to:

https://www.treasury.gov/tigta/auditreports/2020reports/202040019fr.pdf.

 

Phone Number ††/† 202-622-6500

E-mail Address †/TIGTACommunications@tigta.treas.gov

Website†††††† ††††††/https://www.treasury.gov/tigta