The Government Accountability Office (GAO) has added five new priority recommendations for action to the to-do list of the Internal Revenue Service (IRS), including new items related to improving taxpayer services and reducing tax fraud.
In its latest annual update to its list of open recommendations for IRS, GAO classified 25 “priority areas” for the agency to address. That larger list of 25 items features enhancing cybersecurity, improving information reporting, and working on strategic human capital management.
As of May 2022, the IRS had 268 open recommendations stretching back years, and fully implementing these recommendations could significantly improve operations for the IRS, GAO said.
On the cybersecurity front, GAO said the IRS needs to centralize leadership for its efforts in overseeing cybersecurity practices of third-party providers, such as paid tax return preparers and tax software providers.
“If these third parties do not properly secure taxpayers’ personal and financial information, taxpayers will be vulnerable to data breaches that expose their information for use by fraudsters to commit identity theft refund fraud,” the report notes.
The IRS agreed with the intent of this recommendation but has not agreed to implement it. In February 2022, IRS executives explained that the agency needs additional and explicit authority to establish security requirements. However, the GAO responded that the IRS could implement this recommendation without that statutory authority.
“We also disagree that convening a governance structure or other centralized form of leadership would be inefficient, ineffective, or costly. To fully implement this recommendation, IRS needs to demonstrate a structure to coordinate across seven different offices working on information security-related activities,” the GAO report states. “Without this structure, it is unclear how IRS will adapt to changing security threats in the future and ensure those threats are mitigated.”
For improving information reporting, the GAO made two separate recommendations to the IRS Commissioner:
- To revise the 2017 Information Returns Systems Modernization plans by evaluating changes in the environment, assessing risks to systems and programs, and detailing how the agency intends to address issues in the intake, processing, and use of information returns across business units; and
- To submit revised information returns system modernization plan to Congress that describes how it integrates with IRS’s broader information technology modernization efforts and the resources needed to achieve effective and timely modernization.
According to GAO, IRS neither agreed nor disagreed with these two related recommendations. However, the report notes that IRS will submit an Information Return System Modernization plan to Congress that leverages the 1099 Internet Platform required by section 2102 of the Taxpayer First Act as the foundation of information return modernization efforts.
As part of the agency’s broader modernization effort, “it is important that IRS can explain to Congress and other decision-makers the critical need to modernize the information reporting system,” the report notes. It’s also crucial that the IRS can explain the proposed scope, schedule, and resource requirements needed to implement such a project, GAO said.
Additionally, GAO found that the IRS continues to face capacity challenges with skills gaps in mission-critical enforcement staff. Moreover, IRS continues to rely on expensive overtime payments to manage the unprecedented workloads for processing tax returns and assisting taxpayers.
GAO laid out two priority recommendations that would position IRS to identify the workforce needed for the future, address skills gaps, and use overtime efficiently to meet their objectives.
“The [IRS Commissioner] should fully implement the workforce planning initiative, including taking the following actions: conducting enterprise strategy and planning, conducting workforce analysis, creating a workforce plan, implementing the workforce plan, and monitoring and evaluating the results,” the report states.
The IRS agreed with this recommendation and has established a workforce plan, including an enterprise strategy, and initiated the associated workforce analysis needed to implement the initiative. As of March 2022, IRS has extended the full implementation of the plan to August 2022.
