The Internal Revenue Service saved about $14.19 million by not mailing out tax form packages this year, but the elimination of the mailings increased the burden on approximately 6 million taxpayers who needed to obtain the forms themselves, according to a new government report.
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Eliminating individual tax package mailings increased the burden for a number of taxpayers, including those who complained they could not locate the forms they needed or did not know which forms to use.
Taxpayers who did not receive Tax Year 2010 tax packages reported difficulties in obtaining forms, schedules and instructions. In addition to making it more difficult for taxpayers to voluntarily comply with tax laws and file their tax returns, the IRS estimated it took the average taxpayer 15 minutes to obtain the forms they needed to file a tax return if they did not receive them in the mail. That translated into approximately 1.5 million additional hours in taxpayer burden for the nearly 6 million taxpayers who received a Notice 1400 and still elected to file a paper tax return without the assistance of tax return preparation software or a paid tax return preparer.
“An important part of the IRS’s mission is to help all taxpayers meet their responsibilities, even while striving to reduce costs,” said TIGTA Inspector General J. Russell George in a statement. “Additional taxpayer burden must be carefully considered when developing strategies to reduce costs and implement efficiencies.”
Taxpayers who ordered documents by calling the IRS or visiting a local office reported difficulties in knowing which forms, schedules and instructions they needed to order or use. For those who ordered forms, if they did not order all of the correct documents, they needed to find another way to obtain the documents, or call the IRS and wait another 10 days to receive the additional documents. Taxpayers who visited a local Taxpayer Assistance Center or Tax Form Outlet Program partner may have had to make another trip to their local office.
To help ensure taxpayers received the forms, instructions and schedules they needed, the IRS automatically sent the applicable instructions to taxpayers who called to order the forms. In addition, the IRS said it is developing an interactive tool that will assist taxpayers in determining which tax forms, schedules and instructions they need. This tool will be available on IRS.gov.
The IRS received 37 congressional inquiries, two White House inquiries, and 230 comments and complaints from individual taxpayers on the IRS’s decision to eliminate the mailings of tax packages.
Many of these taxpayers were elderly or disabled, lived in rural areas, did not have easy access to personal computers or printers, or could not find the documents they needed at their local post offices or libraries. Taxpayers used several options to submit their comments and complaints to the IRS, including submitting comments on IRS.gov. They also contacted the Taxpayer Advocacy Panel, which maintains a system to track and monitor complaints. In addition, some taxpayers chose to contact their congressional representatives who, in turn, contacted the IRS Congressional Correspondence Office. Each congressional inquiry represented one or multiple taxpayer complaints received in the Congressional Correspondence Office.
The IRS does not plan to evaluate how eliminating Forms 1065, 1120 and 1120S package mailings affected taxpayer burden. However, it plans to estimate the effect that eliminating Form 1040 tax packages had on individual taxpayers and report the results in fiscal year 2012.
TIGTA recommended that the IRS develop a process to ensure savings and cost data related to the future elimination or reduction of mailing tax products are current and reliable. In addition, a formal strategy should be developed and documented to ensure that publishing and postage costs are continually evaluated and cost and savings calculations are documented and validated, TIGTA recommended.
In response to the report, the IRS stated that it agreed with the recommendations and has developed a process to ensure that information leading to the elimination and reduction in the mailing of the remaining two tax packages is complete, current and reliable. In addition, the IRS has developed strategies to ensure it continually evaluates costs, implements efficiencies, and evaluates taxpayer burden.
The IRS did not agree with TIGTA’s outcome measure related to the first recommendation. It agreed with TIGTA’s methodology for calculating the average cost per tax package, but believes TIGTA should have multiplied the average costs by a 10-year trending estimate in volume decreases to calculate the average percentage decrease for individual tax packages. TIGTA said it used the formula first provided by the IRS to calculate total savings, but used updated bid prices for the average cost per tax package. The IRS did not provide its own estimate of the cost savings using the 10-year trending estimate in volume decreases.
In its written response to the report, the IRS estimated that it had saved about $26 million by reducing printing and postage costs, or about $24.87 million when taking into account contract termination fees, but it expects to realize the full $26 million in savings next tax season.
“Our efforts have also supported the President’s Going Green Campaign by eliminating both the monetary and opportunity costs associated with printing and/or transporting tax packages that would have otherwise been used by many of the taxpayers who converted from paper to electronic filing for the 2010 Tax Year,” wrote Richard Byrd Jr., commissioner of the IRS’s Wage and Investment Division. “In addition to the elimination of mailing individual and business tax packages, the IRS also achieved savings of more than $4 million through increased use of ground shipping in lieu of next-day air service, the elimination of non-mandatory inserts in taxpayer notices, and improved efficiencies in the procurement of envelope stock, single-sheet forms and instructions.”
