Tax Administration: IRS' Telephone Routing Interactive System May Not
Meet Expectations (Letter Report, 07/13/98, GAO/GGD-98-152).

GAO reviewed the Internal Revenue Service's (IRS) efforts to develop and
implement its Telephone Routing Interactive System (TRIS), focusing on:
(1) taxpayers' use of TRIS applications; and (2) TRIS' expected benefits
as presented in IRS' business case.

GAO noted that: (1) TRIS is a key component of IRS' plans to improve its
telephone accessibility; (2) as of May 1998, IRS had implemented 9
different applications at all of its 25 customer service centers; (3)
relatively few taxpayers have used TRIS applications, and although IRS
has spent about $53 million on TRIS through February 1998, the system's
benefits remain uncertain; (4) in fiscal year (FY) 1997, IRS records
showed that about 30 million calls were routed through TRIS; (5) about
300,000 callers used TRIS' applications to obtain information that was
not already available from another system; (6) IRS has not done a
comprehensive assessment of why TRIS applications are not serving more
taxpayers; (7) however, GAO's review of pilot test reports, TRIS
documents, and IRS officials' comments indicate that IRS may have
automated services that relatively few taxpayers need; (8) IRS officials
told GAO that at the time they made their decision about applications to
include with TRIS, they did not have comprehensive data on the reasons
why taxpayers call IRS; (9) the officials said that applications were
easy to automate; (10) taxpayers may find the interactive applications
difficult to use due to the number of options and the length of system
instructions; (11) also, IRS' restrictions prevent taxpayers with
certain types of cases from using some of the interactive applications,
and IRS has not publicized the services that are available or provided
information on how to use the interactive applications; (12) IRS does
not have a reliable estimate of the benefits that TRIS should provide;
(13) IRS' 1996 benefit estimate is based on several key assumptions that
may no longer be valid; (14) in FY 1997, 3 million callers routed
through TRIS were served by TRIS applications; (15) IRS now plans to
develop only 10 applications itself and contract for the development of
other needed applications; (16) the results of the pilot tests and
subsequent investment evaluation review indicated that the projected
benefits may not be achieved; (17) the evaluation team could not project
a return on investment due to the lack of reliable cost and benefit data
and specifically recommended that TRIS undergo a second evaluation in
1998; and (18) because relatively few taxpayers are using TRIS
applications and many of the system's projected benefits are uncertain,
IRS' expected role of interactive applications in its efforts to improve
customer service may also be uncertain.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-98-152
     TITLE:  Tax Administration: IRS' Telephone Routing Interactive 
             System May Not Meet Expectations
      DATE:  07/13/98
   SUBJECT:  Customer service
             Tax administration systems
             Telephone
             Cost effectiveness analysis
             Systems conversions
             Taxpayers
             Systems design
             ADP procurement
             Requirements definition
IDENTIFIER:  IRS Telephone Routing Interactive Systems Project
             IRS Customer Service Vision
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Oversight, Committee on Ways
and Means, House of Representatives

July 1998

TAX ADMINISTRATION - IRS'
TELEPHONE ROUTING INTERACTIVE
SYSTEM MAY NOT MEET EXPECTATIONS

GAO/GGD-98-152

IRS' Telephone Routing System

(268783)


Abbreviations
=============================================================== ABBREV

  ICP - Integrated Case Processing
  IRS - Internal Revenue Service
  PIN - personal identification number
  SSN - Social Security number
  TRIS - Telephone Routing Interactive System

Letter
=============================================================== LETTER


B-276596

July 13, 1998

The Honorable Nancy L.  Johnson
Chairman, Subcommittee on Oversight
Committee on Ways and Means
House of Representatives

Dear Chairman Johnson: 

Improving service to taxpayers is one of the Internal Revenue
Service's (IRS) highest priorities.  Guided by a broad plan called
the "Customer Service Vision," IRS has begun a long-term process of
consolidating work units, retraining employees, and developing new
information systems to enable its telephone customer service
representatives to better serve taxpayers.  The vision called for IRS
to reduce written correspondence and walk-in contacts with taxpayers
and serve more taxpayers by telephone.  Although the demand for
telephone assistance was expected to increase substantially, IRS has
had a long-standing problem providing taxpayers access to telephone
assistance. 

One of the ways IRS planned to provide better telephone access was
through the use of the Telephone Routing Interactive System (TRIS). 
TRIS was designed to route taxpayer calls to different sources of
assistance, including customer service representatives, recorded
messages on various tax topics, and interactive applications. 
Interactive applications are designed to allow taxpayers with certain
questions to obtain the information or service they need without
speaking to an IRS customer service representative, thereby improving
access by freeing up customer service representatives to handle other
calls.  For example, the Refund Inquiry application was designed to
allow taxpayers to determine the status of their refunds.  Although
we previously reported that IRS has made significant progress in
improving accessibility, the improvements resulted primarily from
increasing the number of employees who were available to assist
taxpayers rather than many more taxpayers being served by interactive
applications.\1

Because TRIS' applications offer the potential to improve telephone
accessibility without adding more employees, we reviewed IRS' efforts
to develop and implement TRIS under our basic legislative
responsibility for reviewing federal programs and activities. 
Because of the Subcommittee's continuing interest in improving the
quality of IRS' service to taxpayers, you asked that we issue this
report to you.  This report discusses our evaluation of (1)
taxpayers' use of TRIS' applications and (2) TRIS' expected benefits
as presented in IRS' business case. 


--------------------
\1 Tax Administration:  IRS' 1997 Tax Filing Season (GAO/GGD-98-33,
Dec.  29, 1997). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

TRIS is a key component of IRS' plans to improve its telephone
accessibility.  As of May 1998, IRS had implemented 9 different
applications at all of its 25 customer service centers.  To the
extent that many taxpayers can resolve their problems without talking
to IRS customer service representatives, other taxpayers who do need
to talk to customer service representatives should find it easier to
reach them.  However, relatively few taxpayers have used TRIS'
applications; and although IRS has spent about $53 million on TRIS
through February 1998, the system's benefits remain uncertain. 

IRS performance data show that most taxpayers get the assistance they
need from customer service representatives rather than interactive
applications.  In fiscal year 1997, IRS records showed that about 30
million calls were routed through TRIS.  About 24 million of those
calls, or about 80 percent, were served by a customer service
representative, while about 3 million callers hung up before speaking
to a representative or completing an application.  This left about 3
million calls, or 10 percent, being served by TRIS' applications. 
Furthermore, about 2.7 million of those 3 million callers used the
Refund Inquiry application to check the status of their
refunds--information that is available on another IRS automated
telephone system.  Thus, about 300,000 callers used TRIS'
applications to obtain information that was not already available
from another system. 

IRS has not done a comprehensive assessment of why TRIS' applications
are not serving more taxpayers.  However, our review of pilot test
reports, TRIS documents, and IRS officials' comments indicates that
IRS may have automated services that relatively few taxpayers need. 
IRS officials told us that at the time they made their decision about
applications to include with TRIS, they did not have comprehensive
data on the reasons why taxpayers call IRS.  The officials said that
some interactive applications were developed primarily because the
applications were easy to automate, including the Location
application, which provides taxpayers with the mailing address for
selected tax returns and forms.  As we reported in March 1996,
taxpayers may find the interactive applications difficult to use due
to the number of options and the length of system instructions.\2
Also, IRS' restrictions prevent taxpayers with certain types of cases
from using some of the interactive applications, and IRS has not
publicized the services that are available or provided information on
how to use the interactive applications.  Further, at the time of our
current review, two of the four centers we visited were not using
TRIS' capability that allows taxpayers access to interactive
applications when the demand for assistance exceeds the number of
available customer service representatives. 

IRS does not have a reliable estimate of the benefits that TRIS
should provide.  IRS' 1996 benefit estimate is based on several key
assumptions that may no longer be valid, including (1) shifting 45
percent, about 55 million, of taxpayers' calls from customer service
representatives to interactive applications by fiscal year 2000; (2)
having 27 interactive applications developed, tested, and implemented
at all of its customer service centers by fiscal year 2000; and (3)
developing and implementing the Integrated Case Processing (ICP)
system at all centers--a system to enable representatives to quickly
obtain data needed to answer taxpayers' questions.  In fiscal year
1997, 3 million callers, or about 10 percent of calls routed through
TRIS, were served by TRIS' applications.  IRS now plans to develop
only 10 applications itself and contract for the development of other
needed applications, and ICP was terminated in February 1997. 

Additionally, the results of the pilot tests and subsequent
Investment Evaluation Review indicated that the projected benefits
may not be achieved.  The evaluation team could not project a return
on investment due to the lack of reliable cost and benefit data and
specifically recommended that TRIS undergo a second evaluation in
1998. 

Because relatively few taxpayers are using TRIS' applications and
many of the system's projected benefits are uncertain, IRS' expected
role of interactive applications in its efforts to improve customer
service may also be uncertain. 


--------------------
\2 Tax Administration:  Making IRS' Telephone Systems Easier to Use
Should Help Taxpayers (GAO/GGD-96-74, Mar.  11, 1996). 


   BACKGROUND
------------------------------------------------------------ Letter :2

In fiscal year 1997, IRS received about 125 million telephone call
attempts\3 from taxpayers inquiring about things such as where to
file their returns, the status of their refunds, and their account
balances.  Increasing taxpayer access to telephone assistance is a
major emphasis in IRS' Fiscal Years 1997 to 2002 Strategic Plan. 
TRIS is a major component of IRS' long-term strategy to handle more
of its taxpayer contacts by telephone rather than through
correspondence or in person.  One of TRIS' goals is to improve
taxpayers' access to telephone assistance by automating the many
telephone calls IRS receives for routine or taxpayer account-related
information.  To the extent that many taxpayers are able to resolve
their problems using TRIS' applications, other taxpayers who do need
to talk to customer service representatives should find it easier to
reach them. 

TRIS is designed to allow a taxpayer with a Touch-Tone telephone to
access TRIS' master menu and direct the call to the appropriate
source for assistance.  TRIS allows taxpayers to route their calls to
obtain live assistance from an IRS customer service representative,
prerecorded information on various tax topics, or general and account
information and payment arrangements through TRIS applications. 

According to its 1995 to 2001 Business Master Plan, IRS planned to
develop and implement 32 TRIS applications nationwide.  As of May
1998, IRS had implemented 9 different applications at all of its 25
customer service centers and was testing one other application at the
Fresno Customer Service Center. 

TRIS' applications vary, from advising taxpayers on where to mail
their returns (the Location application) to telling them the status
of their refunds (the Refund Inquiry application).  Specifically,
using the Location application, taxpayers can determine IRS' mailing
address for mailing selected tax returns and forms.  The Refund
Inquiry application provides taxpayers with the status of their tax
refunds, including when their refund checks were issued.  To use this
application, taxpayers are required to provide information such as
Social Security number, amount of the refund, and filing status. 
Descriptions of the nine interactive applications that had been
implemented as of May 1998 are included in appendix I. 

To assess the merits of new information systems before implementing
them, IRS generally conducts a business case, an investment
evaluation review, and pilot testing.  A business case is a
management tool that documents key aspects of an information
technology initiative to include (1) justifying the initiative and
helping ensure that it provides programmatic benefits, (2) providing
a mechanism to aid in tracking and managing initiatives during
implementation, and (3) establishing a baseline against which
progress of the initiative may be judged.  TRIS' business case,
completed in July 1996, was dependent on other customer service
projects, including the ICP system.  According to the business case,
TRIS would cost $67 million and provide benefits of $815 million
through 2005. 

ICP, as originally envisioned, was to allow customer service
representatives access to several automated systems that housed the
data they needed to assist taxpayers when they called for assistance. 
ICP was also expected to include automated tools to enable the
taxpayers to be served faster.  The tools were to include automated
refund inquiries and installment agreements for taxpayers who could
not pay their taxes in full. 

IRS generally conducts an investment evaluation review to analyze the
baseline data used to justify the investment in an information system
and the results of system development and implementation.  The
investment review for TRIS was completed in September 1996.  The
review and subsequent report covered TRIS activities during fiscal
years 1992 through 1996, including an assessment of the July 1996
business case.  The review included an evaluation of TRIS development
and implementation activities and a determination of whether business
goals were met. 

Pilot testing of information systems is designed to evaluate the
performance of a system in one location before deciding whether to
implement the system at other locations.  IRS uses the pilot test to
determine the extent to which the system delivers anticipated
benefits.  TRIS' first three applications were pilot tested at the
Nashville Customer Service Center for 60-day periods during April
through June 1995.  The next three applications were pilot tested at
the Fresno Customer Service Center for 60-day periods during
September through November 1996.\4 A key element of the tests was to
measure the extent to which the interactive applications affected a
taxpayer's ability to reach IRS on its toll-free telephone number. 
IRS measured the applications' affect on accessibility in several
ways, including determining the number of hours the applications made
available to customer service representatives for assisting
additional taxpayers. 


--------------------
\3 Call attempts represent the sum of calls answered, busy signals,
and calls abandoned by the caller before an IRS customer service
representative could answer the call. 

\4 Test reports for the other three applications that were
implemented in February and May 1998 were not available for our
review when we did our audit work. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :3

Our review objectives were to evaluate (1) taxpayers' use of TRIS'
applications and (2) TRIS' expected benefits as presented in IRS'
business case. 

To evaluate taxpayers' use of interactive applications, we analyzed
fiscal years 1997 and 1998 data from TRIS' management information
system to determine how many taxpayers used interactive applications
versus customer service representatives and how the usage compared
with IRS' goal of 45 percent of taxpayers being served by interactive
applications.  We also analyzed data to determine how frequently
taxpayers used the various applications.  To determine some of the
reasons why some taxpayers might not use the applications, we
reviewed IRS pilot test reports for the first six interactive
applications, analyzed data from TRIS' management information system
and other TRIS documents, interviewed IRS officials, and reviewed
previous IRS Internal Audit reports and reports done by us. 

To evaluate TRIS' expected benefits, we reviewed the methodology and
assumptions behind IRS' projection of TRIS costs and benefits through
fiscal year 2005.  More specifically, we reviewed the July 1996
Automated Self Service Applications Business Case, which presented
anticipated costs and benefits for three projects, including TRIS. 
We reviewed the September 1996 IRS Investment Evaluation Review
report that included an evaluation of TRIS development and
implementation activities and a determination of whether business
goals were met.  We reviewed IRS' April 1997 Internal Audit report on
TRIS that evaluated the efforts of Customer Service and Information
Systems to develop and deliver TRIS applications.  In addition, we
reviewed the results of the pilot tests of the first six applications
to determine if they increased accessibility and provided other
expected benefits. 

We visited IRS customer service centers in Atlanta, GA; Jacksonville,
FL; Nashville, TN; and Buffalo, NY, to obtain center officials' views
on TRIS and taxpayers' use of the interactive applications.  We
visited these centers because either they were involved in testing
TRIS applications or they were some of the first centers to receive
the applications.  We also visited and interviewed IRS Customer
Service and Information Systems officials at IRS' National Office in
Washington, D.C. 

We conducted our work from May 1997 through May 1998 in accordance
with generally accepted government auditing standards.  We requested
comments on a draft of this report from the Commissioner of Internal
Revenue or his designated representative.  Responsible IRS officials,
including the National Director, Customer Service Telephone
Operations and Systems; the Customer Service Transition Executive;
and staff of the Assistant Commissioner (Customer Service) and
Information Systems (Customer Service), provided oral comments and
factual clarifications in a June 4, 1998, meeting.  We incorporated
those comments in the report where appropriate.  The Commissioner of
IRS provided us written comments on June 17, 1998, which are
discussed near the end of this report and reproduced in appendix II. 


   FEW TAXPAYERS USE TRIS'
   INTERACTIVE APPLICATIONS
------------------------------------------------------------ Letter :4

IRS performance data show that relatively few taxpayers use TRIS'
applications.  The possible reasons why more taxpayers are not using
the interactive applications vary, from IRS offering applications
that relatively few taxpayers need to taxpayers' dislike of automated
systems or lack of knowledge on how to use them. 


      MOST TAXPAYERS SERVED BY
      CUSTOMER SERVICE
      REPRESENTATIVES RATHER THAN
      TRIS' INTERACTIVE
      APPLICATIONS
---------------------------------------------------------- Letter :4.1

In fiscal year 1997, about 30 million calls were routed through TRIS'
call routing system.\5 About 24 million of those calls, or about 80
percent, were served\6 by a customer service representative, while
about 3 million other callers simply hung up before being routed to a
customer service representative or completing an application.  This
left about 3 million callers, or 10 percent, who were routed through
TRIS and served by an interactive application, as shown in figure 1. 

   Figure 1:  Taxpayers Served by
   TRIS' Applications Compared
   With Those Served by Customer
   Service Representatives in
   Fiscal Year 1997

   (See figure in printed
   edition.)

Source:  IRS data. 

The level of taxpayers' use of TRIS varied by application.  For
example, of the 3 million callers, 2.7 million (89 percent) used the
Refund Inquiry application to check the status of their refunds,
while about 25,000 callers (less than 1 percent) used the Payoff
application to determine the balance on the taxes they owed, as shown
in figure 2. 

   Figure 2:  Taxpayer Usage of
   TRIS' Applications in Fiscal
   Year 1997

   (See figure in printed
   edition.)

Note 1:  Percentages in chart do not add up to 100 percent due to
rounding. 

Note 2:  Chart does not show data for all nine applications because
three were not available in 1997, and IRS did not report separate
data for one application--Voice Processing Personnel Identification
Number. 

Source:  IRS data. 

In fiscal year 1997, 2.7 million callers used the Refund Inquiry
application to check the status of their refunds--information that is
available on IRS' Tele-Tax System.\7 Thus, about 300,000 callers used
TRIS' applications to obtain information that was not on another
automated system. 

IRS' performance data for the first 5 months of fiscal year 1998
showed that most taxpayers continued to rely on the customer service
representatives for the help they needed from IRS rather than the
interactive applications.  Specifically, during this period, about
21.2 million calls were routed through TRIS.  About 18.5 million of
those callers, or about 87 percent, either were served by a customer
service representative or hung up.  This left about 2.7 million, or
about 13 percent, who were served by an interactive application. 
Similar to fiscal year 1997, 2.5 millon, or about 94 percent, of the
calls that were served by interactive applications were to inquire
about the status of refunds. 


--------------------
\5 According to IRS officials, IRS actually answered 60 million calls
on its (1-800-829-1040) toll-free number in fiscal year 1997; but,
TRIS' management information system only captured 30 million calls. 
Fourteen of the customer service centers did not have TRIS'
management information reporting system throughout the fiscal year
because the system was installed at customer service centers in
stages during the year. 

\6 "Served" means the callers reached a representative or completed
an interactive application.  IRS records do not show whether the
taxpayers were satisfied with the information they received. 

\7 IRS' Tele-Tax System provides taxpayers an option to listen to
recorded tapes on different tax topics or check on the status of
their refund.  However, the TRIS Refund Inquiry application can
access taxpayer accounts nationwide and route callers to a customer
service representative. 


      REASONS FOR LIMITED USE OF
      INTERACTIVE APPLICATIONS
      VARY
---------------------------------------------------------- Letter :4.2

IRS has not done a comprehensive assessment of reasons why TRIS'
applications are not serving more taxpayers; however, there are
several possibilities.  For example, IRS may have automated
assistance that relatively few taxpayers need.  In addition, some
taxpayers may find the system difficult to use, may be restricted
from using certain applications, or may be reluctant to use the
applications because they are not familiar with the system and the
services the applications provide.  Also, local operational decisions
have limited the availability of the interactive applications at some
customer service centers. 


         DEVELOPMENT OF SOME
         APPLICATIONS WERE NOT
         BASED ON EXPECTED CALL
         VOLUME
-------------------------------------------------------- Letter :4.2.1

Our review of pilot test reports, TRIS documents, and IRS officials'
comments indicate that IRS may have automated services that
relatively few taxpayers need.  When IRS made its decisions on which
services to automate, IRS officials said that they did not have
comprehensive data on the reasons why taxpayers call IRS.  Further,
they told us that the Payoff and Location applications were developed
primarily because the services were easy to automate.  IRS'
Investment Evaluation Review team recommended that decisions on which
services to automate should be supported by projected call volumes. 

Also, in April 1997, IRS' Internal Audit found that, in an effort to
aggressively deliver TRIS applications, IRS was not performing
certain critical processes that were designed to ensure that new
applications are cost beneficial and properly prioritized.  Internal
Audit maintained that the criteria for prioritizing the applications
should include the number of taxpayers that are expected to be
served, expected savings, and expected costs.  According to Internal
Audit, the principal focus should be to reduce, to the minimum
necessary, the number of taxpayer calls that are forwarded to a
customer service representative for information or assistance. 


         TAXPAYERS ARE REQUIRED TO
         REMEMBER TOO MANY OPTIONS
-------------------------------------------------------- Letter :4.2.2

As we reported in March 1996, taxpayers may find the interactive
applications difficult to use because of the number of menu options
they are required to listen to and remember.\8

When taxpayers are routed to TRIS' main menu, they are presented with
nine options.  They must listen to and remember the different options
unless they are familiar with the menu and know which option provides
the specific service they need.  For example, taxpayers who call to
obtain a transcript of a return or account are presented with nine
main-menu options, including the personal tax-records option.  After
taxpayers select the personal tax-records option, they are presented
with another eight options, including the Transcript option.  After
gaining access to the Transcript application, taxpayers are presented
with seven more options.  The various options taxpayers may have to
listen to in order to use the Transcript application are depicted in
figure 3. 

   Figure 3:  Options Taxpayers
   Hear in Accessing the
   Transcript Interactive
   Application

   (See figure in printed
   edition.)



   (See figure in printed
   edition.)

Source:  TRIS Transcript Menu. 

In a 1992 IRS study, taxpayers said that five to six options were
more than they could remember.  In 1996, we recommended that IRS
conduct a cost-benefit analysis of the actions needed to overcome the
problems caused by too many menu options, including using multiple
toll-free numbers and providing taxpayers with a written, detailed
step-by-step description on how to use the interactive systems' menu
options.  In response to our recommendations, IRS said it planned to
do further tests of the menu options and interactive telephone
systems to determine customer needs and their abilities to use the
systems easily.\9 At the time of this review, IRS had not conducted
these studies. 

Also, the telephone routing system does not allow taxpayers to return
to the main menu after selecting one of TRIS' applications.  As a
result, taxpayers who select the wrong menu option or want to resolve
multiple issues with one call must either wait for an available
customer service representative or hang up and call back.  For
example, if a taxpayer completed the Refund Inquiry application and
also needed a copy of his account transcript, the taxpayer must wait
for an available representative or hang up and call back and select
the menu options leading the taxpayer to the Transcript application. 
If callers were allowed to return to the main menu, they could select
the Transcript option and use the interactive system to obtain the
information they need in one telephone call.  IRS' design guidelines
called for such a feature, but IRS officials said they decided
against using it to limit the amount of time taxpayers stay in the
system.  The officials believed that by limiting taxpayer time in the
system, more taxpayers could be served.  However, without this
feature, many taxpayers may have to call back or wait for an
available customer service representative to obtain the information
they need and as a result spend more, not less, time in the system. 
Allowing taxpayers to return to the main menu may reduce taxpayer
frustration and allow them to obtain the information they need more
quickly and in one telephone call, thereby enabling IRS to serve more
taxpayers. 


--------------------
\8 GAO/GGD-96-74, Mar.  11, 1996. 

\9 GAO/GGD-96-74, Mar.  11, 1996. 


         IRS' RESTRICTIONS PREVENT
         SOME TAXPAYERS FROM USING
         APPLICATIONS
-------------------------------------------------------- Letter :4.2.3

IRS officials told us that IRS' restrictions prevent taxpayers with
certain types of cases from using some interactive applications. 
These taxpayers can attempt to use an application but, after TRIS
accesses their records and determines that one of the restrictions
applies, their calls are routed to a customer service representative
for special handling.  For example, prior to May 1998, only those
taxpayers who owed less than $10,000 could use the Voice Balance Due
application to set up an installment agreement.  Also, if IRS records
indicate that a taxpayer has not filed a tax return in a previous
year and the taxpayer attempts to use the application to set up an
installment agreement, the caller would be routed to a customer
service representative.  Similarly, if IRS records indicate that a
taxpayer is under investigation by the IRS Criminal Investigation
Division and the taxpayer tries to use the Payoff application, the
taxpayer will be routed to an IRS representative. 

Overall, in fiscal year 1997, IRS restrictions prevented over 1
million callers from using the interactive applications.  IRS has
studied these restrictions and is considering revising some of them. 
For example, on May 1, 1998, IRS revised the Voice Balance Due
restriction on the threshold of taxes owed from $10,000 to $15,000
and eliminated the dollar ceiling for extensions.  The officials told
us they are also putting together a Request for Information Services
to IRS' Information Systems for improvements to other applications. 


         IRS HAS NOT PUBLICIZED
         APPLICATIONS
-------------------------------------------------------- Letter :4.2.4

Some taxpayers are resistant to using automated systems, as indicated
by their responses during pilot testing.  In focus group interviews,
customer service representatives said some taxpayers preferred to
talk to a representative, disliked automated systems, defaulted to
verify information previously received from an interactive
application, and that the system did not permit users to correct
entry errors or return to previous menus.  IRS officials also told us
that taxpayers often want to handle sensitive tax matters with a
person, especially for payment-related matters. 

Additionally, many taxpayers may not be using the applications
because they are not aware of the services offered or are not
familiar with how the applications work.  IRS has not publicized the
services that are available or provided information on how to use the
interactive applications either to the taxpayers or the tax
practitioner community.  According to an IRS document, "IRS has
categorically failed to inform the general public that these
automated processes exist and how to be prepared to use them when
they call." The Investment Evaluation Review team questioned whether
IRS had adequately marketed TRIS and recommended that IRS consider
developing strategies to inform the public about the services the
system has to offer.  Customer Service officials stated that they had
deferred marketing the system until the applications and taxpayer
data were made available at all the customer service centers.\10
Customer service officials told us that IRS plans to do some limited
marketing by using the 1998 tax filing packages to inform taxpayers
about the services provided by the interactive applications and what
information they will need to use them. 


--------------------
\10 Prior to the implementation of the Universal Integrated Data
Retrieval System, in November 1997, access to data on taxpayers was
limited to the service centers where the taxpayers filed their
returns. 


         SOME TRIS CAPABILITIES
         ARE NOT BEING USED
-------------------------------------------------------- Letter :4.2.5

Two of the four centers we visited during this review were not using
TRIS' ability to allow taxpayers access to interactive applications
when the demand for assistance exceeds the number of available
customer service representatives.  This capability, referred to as
"selective expanded access," is to inform callers that due to a high
volume of calls only automated services are available.  Taxpayers are
then to be given a mini menu of TRIS interactive applications and
Tele-Tax from which to choose.  The expanded access feature offers at
least some assistance to millions of callers who would otherwise
receive busy signals, particularly during the filing season when the
demand for services is high.  Also, according to some IRS officials
and an IRS study, using this capability can significantly increase
the number of taxpayers served, as well as provide other benefits. 
According to an IRS document, data repeatedly show that the use of
selective expanded access increases the number of completely
automated calls by 400 percent. 

The Nashville Customer Service Center tested this capability for
approximately 2 months during the 1996 tax filing season and found
that over 800,000 callers had the option of using interactive
applications or Tele-Tax instead of receiving busy signals.  The
study also reported reduced telephone costs, taxpayer calls
abandoned, and wait times.  The study concluded that this capability
could reduce the number of customer service representatives needed to
handle account-related calls. 

IRS was aware of the inconsistent use of TRIS' selective expanded
access feature and was in the process of establishing standard
operating procedures.  IRS has decided that the expanded access
feature will be used during February through July.  Customer service
officials told us that the system was not needed during other parts
of the year because the customer service representatives would be
able to meet the taxpayers' demand for services.  Also, while IRS
officials could not provide specific cost data, they said using the
feature during nonpeak periods would unnecessarily increase telephone
circuitry costs. 


   DESPITE SIZEABLE INVESTMENT,
   TRIS BENEFITS REMAIN UNCERTAIN
------------------------------------------------------------ Letter :5

IRS estimated that it had spent about $53 million on TRIS between
fiscal year 1992 and February 1998.  Despite this sizeable
investment, IRS does not have a reliable estimate of the benefits
that TRIS will provide.  The benefit estimate of $815 million through
2005 presented in TRIS' July 1996 business case was based on several
key assumptions that may no longer be valid, including (1) shifting
45 percent of taxpayers' calls from telephone customer service
representatives to interactive applications by fiscal year 2000, (2)
having 27 interactive applications developed, tested, and implemented
at all of its customer service centers by fiscal year 2000, and (3)
developing and implementing ICP at all customer service centers.  IRS
officials acknowledged that TRIS is not likely to serve as many
taxpayers as projected; IRS now plans to develop and implement only
10 applications itself and contract for the development of other
needed applications, and ICP was terminated in February 1997.  The
pilot test results indicate that TRIS may not provide expected
benefits. 


      BENEFIT PROJECTIONS BASED ON
      OUTDATED ASSUMPTIONS
---------------------------------------------------------- Letter :5.1

IRS estimated that TRIS would shift 45 percent of all taxpayer calls
to its (1-800-829-1040) toll-free number, or about 55 million calls
annually, from customer service representatives to interactive
applications.  However, as previously discussed in this report, 3
million or 10 percent of the callers routed to TRIS actually used
TRIS interactive applications in fiscal year 1997.  Of the 3 million,
300,000 taxpayers were served by interactive applications that
provided information not already available on IRS' Tele-Tax System. 
Considering these statistics, IRS has a long way to go in achieving
its goal of shifting 45 percent of taxpayers' calls from customer
service representatives to interactive applications. 

IRS' benefit estimate was also based on fielding 27 applications by
the year 2000.  As of May 1998, IRS had implemented 9 applications at
all of its 25 service centers and had plans to implement one other
application.  Not only has the number of applications declined
significantly, the applications were not implemented when expected. 
For example, View Debit and View Credit applications were to be
implemented in April 1997 but were not implemented until February
1998.  In addition, Refund Release and Refund Trace were also to be
implemented in April 1997; however, Refund Trace was implemented in
May 1998, and Refund Release was still being pilot tested.  IRS
decided to suspend its plans to develop and implement one other
application until it reassesses TRIS and TRIS' role in improving
taxpayer service. 

ICP was a critical component in IRS' estimate of TRIS' benefits.  As
envisioned, ICP was to provide customer service representatives
access to various databases and related information that the
representatives would need to assist taxpayers who called IRS for
help.  IRS officials said one key feature that made ICP so critical
to TRIS' projected benefits was the system's capability to
automatically provide customer service representatives information on
taxpayers who entered an interactive application but defaulted to a
representative.  With this information, the representative would know
why the taxpayer had called and would have the taxpayer's records
available to assist the taxpayer.  This would allow the taxpayer to
be served faster, thereby enabling the representative to serve more
taxpayers.  However, as of February 1997, IRS terminated the ICP
project because of system performance problems and changes in IRS'
plans to modernize its computer systems. 

IRS' Investment Evaluation Review team also raised questions about
TRIS' projected benefits.  Specifically, its September 1996 report
stated that

  -- benefit projections were developed for a group of Customer
     Service projects.\11 No process exists to validate the benefit
     projections;

  -- no effort was made to determine whether other areas of IRS would
     benefit from TRIS applications; and

  -- benefit projects are at significant risk because of budget
     realities. 

The team was unable to calculate TRIS' return on investment because
of "the lack of available consistent historical cost data, the
unsupported benefits projections, the lack of accepted performance
measures, and the future budget outlook." The team recommended that
TRIS undergo a second evaluation in fiscal year 1998.  IRS
Information Systems officials told us there were no plans for another
evaluation as of March 1998. 


--------------------
\11 The business case for TRIS included two other systems:  Automated
Tax Law and Predictive Dialer.  Automated Tax Law was to provide
interactive applications dealing with general and technical tax law
questions.  The Predictive Dialer was to be used by IRS' collection
employees to automate dialing taxpayer calls and screening out no
answers, busy signals, bad numbers, and answering machines. 


      PILOT TEST RESULTS RAISED
      QUESTIONS ABOUT TRIS'
      ABILITY TO INCREASE
      ACCESSIBILITY
---------------------------------------------------------- Letter :5.2

A key feature of IRS' pilot tests of TRIS' interactive applications
was to determine if the applications would increase taxpayer access
to IRS' telephone assistance.  According to the test reports, only
the Voice Balance Due application significantly improved taxpayers'
ability to reach IRS' telephone assistance. 

The pilot tests measured how much the applications increased the
number of hours made available to assist other taxpayers.  For the
60-day test period, the Voice Balance Due increased the number of
hours available for representatives to assist other taxpayers by
1,189 hours.  The Voice Processing Personal Identification Number,
Payoff, Location, and Transcript applications were determined to have
increased the number of hours available to assist other taxpayers by
317, 183, 80, and 69 hours, respectively.  The test results for the
Refund Inquiry application were inconclusive because other factors,
such as changes in the way the site handled calls, significantly
affected accessibility during the test period. 


      COMMISSIONER'S PROPOSAL MAY
      CHANGE ROLE OF INTERACTIVE
      SYSTEMS
---------------------------------------------------------- Letter :5.3

The role of interactive applications and their benefits could change
as IRS reorganizes and rethinks its efforts to improve customer
service.  In January 1998, the IRS Commissioner announced his plans
to reorganize IRS and to improve customer service to the level
offered by private industry.  As of May 1998, Congress was
considering legislation that included a provision to restructure IRS
around distinct types of taxpayers (i.e., wage and investment, small
businesses, large businesses and corporations, and exempt
organizations and employee plans).  Although the details of the
Commissioner's efforts to improve customer service and the
legislation have not been finalized, reorganizing IRS around types of
taxpayers could have dramatic implications for IRS' customer service
vision.  IRS' goal of handling 45 percent of taxpayer calls without
human intervention may change because the Commissioner has
recommended expanding face-to-face assistance, and IRS' fiscal year
1999 budget request included increased funding for walk-in sites. 
IRS is also faced with incorporating TRIS and its interactive
applications in IRS' modernization blueprint. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

Interactive telephone applications offer promise for improving
taxpayer service.  However, relatively few taxpayers are using TRIS'
applications, and most of those who use them obtain information that
is available on another automated system.  Accordingly, TRIS'
interactive applications have had little effect on improving
taxpayers' access to IRS' telephone assistance.  IRS appears to have
automated some assistance that relatively few taxpayers need. 
Additionally, some taxpayers may find the system difficult to use,
are restricted from using certain applications, or may be reluctant
to use the applications because they are not familiar with the system
and the services the applications provide because IRS has not
publicized them.  Also, local operational decisions have limited the
availability of the interactive applications when the demand for
assistance exceeds the number of available customer service
representatives. 

IRS has made sizeable investments in TRIS without having a reliable
estimate of the benefits that it will provide.  Although IRS
conducted a business case for TRIS in July 1996, the benefits were
based on assumptions that may no longer be valid.  Additionally, the
Commissioner's plans to improve IRS and proposed legislation to
reorganize IRS around types of taxpayers and other efforts to improve
customer service could have dramatic implications for IRS' customer
service vision and plans for interactive applications. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

Considering the relatively small number of taxpayers who are using
the interactive applications, the absence of a reliable estimate of
benefits, and plans to reorganize, we believe IRS needs to rethink
its plans for TRIS and the role of interactive applications as it
strives to improve customer service.  Accordingly, we recommend that
the Commissioner of IRS devise a plan to reassess TRIS and its role
in improving taxpayer service.  The plan should include (1) an
analysis of the services taxpayers need, want, and will use; (2) an
assessment of why taxpayers are not using the existing TRIS
applications; and (3) a reevaluation of the costs and benefits of
TRIS.  Further, we recommend that IRS delay development and
implementation of any additional interactive applications until the
reassessment is completed. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :8

We requested comments on a draft of this report from the Commissioner
of Internal Revenue or his designated representative.  In a June 4,
1998, meeting, responsible IRS officials, including the National
Director, Customer Service Telephone Operations and Systems; the
Customer Service Transition Executive; and staff of the Assistant
Commissioner (Customer Service) and Information Systems (Customer
Service) provided oral comments and factual clarifications, which we
incorporated in the report where appropriate. 

The Commissioner of Internal Revenue provided us written comments on
June 17, 1998, (see app.  II).  He concurred with the report's
findings and recommendations.  He said IRS was beginning to see
significant benefits from TRIS.  For example, he said that from
fiscal year 1997 through April 1998, TRIS automated 9.7 million
calls. 

The Commissioner said that IRS was already undertaking efforts to
address our recommendations and improve TRIS in both the near term
and the long term.  Short-term actions include (1) reviewing
procedures established for various applications to adjust them to
benefit taxpayers, (2) researching reasons why callers default or
hang up, (3) working with a contractor to define problems with TRIS
and identifying menus and scripts that may be limiting caller use,
(4) expanding marketing efforts, (5) improving scripts and enhancing
applications, and (6) reevaluating costs and benefits of TRIS.  In
the long term, the Commissioner said his modernization concept
proposed in January 1998 will enable IRS to improve not only TRIS but
all taxpayer-related products and practices.  He said IRS is to
provide a status report for us on their efforts to improve TRIS by
December 31, 1998.  We believe the efforts to improve TRIS in both
the near term and the long term, if properly implemented, should
accomplish the intent of our recommendations. 


---------------------------------------------------------- Letter :8.1

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
from the date of this letter.  At that time, we will send copies of
this report to the Subcommittee's Ranking Minority Member, the
Chairmen and Ranking Minority Member of the House Committee on Ways
and Means, and the Senate Committee on Finance; various other
congressional committees; the Secretary of the Treasury; the
Commissioner of Internal Revenue; the Director of the Office of
Management and Budget; and other interested parties.  Copies will
also be made available to others upon request. 

Major contributors to this report are listed in appendix III.  Please
contact me on (202) 512-9110 if you have any questions. 

Sincerely yours,

Lynda D.  Willis
Director, Tax Policy and Administration Issues


DESCRIPTIONS OF TRIS APPLICATIONS
AVAILABLE AS OF MAY 1998
=========================================================== Appendix I

1.  Location provides the taxpayer with the IRS mailing addresses for
the most common tax forms and installment agreement documents.  The
taxpayer inputs information, such as the type of form, whether
payment will be included with the form, and the taxpayer's home
address zip code. 

2.  Refund Inquiry provides the taxpayer information on the status of
a refund, including whether the return has been processed and when
the check will be mailed.  The caller inputs the Social Security
number (SSN) for the return, the amount of the refund, and the
taxpayer's filing status. 

3.  Voice Balance Due allows a taxpayer to obtain a payment extension
or set up an installment agreement if the taxpayer agrees with an
outstanding balance but is unable to pay in full.  The taxpayer
inputs the SSN number for the return, a six-digit number printed on
the taxpayer's bill, and other information.  The application provides
information on how to submit payments and initiates a confirmation
letter covering the terms and conditions of the payment plan. 

4.  Voice Processing Personal Identification Number allows taxpayers
to establish their identity prior to accessing account information
through other interactive applications.  It provides taxpayers an
automated method to establish a personal identification number (PIN)
when using these applications or to change an existing PIN in order
to restrict access to account information. 

5.  Payoff provides the taxpayer with the amount required to pay off
a balance due on an account.  The taxpayer enters information
including the PIN and the SSN for the account. 

6.  Transcript allows the taxpayer to request a transcript of a
return or account for any tax year.  It also allows taxpayers to
request Form 4506 to obtain an actual copy of a tax return.  The
taxpayer enters such information as the SSN for the return. 

7.  View Debit allows the taxpayer to get information about the
history of the taxpayer's account, including debits posted to the
account.  For example, it helps explain balance due notices taxpayers
receive, including information about how penalties and interest were
calculated, if applicable.  The taxpayer must have a PIN to use this
application. 

8.  View Credit allows the taxpayer to get information about credits
posted to the taxpayer's account.  For example, it helps taxpayers
confirm that payments have been received or determine the amount of
estimated tax payments.  Taxpayers can search their accounts for a
specific payment or request a list of the last six payments. 
Taxpayers must have a PIN to use this application. 

9.  Refund Trace enables eligible callers to initiate actions to
resolve problems with lost, stolen, or mutilated refund checks or to
order a copy of their cancelled refund check. 




(See figure in printed edition.)Appendix II
COMMENTS FROM THE INTERNAL REVENUE
SERVICE
=========================================================== Appendix I



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

GENERAL GOVERNMENT DIVISION,
WASHINGTON D.C. 

Robert L.  Giusti, Evaluator-in-Charge

ATLANTA FIELD OFFICE

A.  Carl Harris, Assistant Director
Ronald W.  Jones, Senior Evaluator
Jyoti Gupta, Evaluator
Kim Rogers, Evaluator

*** End of document. ***