The IRS Oversight Board encouraged the Internal Revenue Service to strive for not just "good," but "great" performance, in its 2007 annual report.

The report spells out the need for "breakthrough" performance in four areas: taxpayer service, enforcement, human capital and information technology. To improve taxpayer service, the report recommended that the IRS conduct research and implement education and outreach services tailored to the needs of specific taxpayer groups.

The board also recommended that the IRS improve its enforcement activities to help close the annual $290 billion tax gap. In selecting taxpayers for audits, the IRS should have a high degree of confidence that an audit is necessary, the board suggested. The IRS should use the results of its National Research Program to focus its audit programs where they would be the most effective.

The IRS also needs to concentrate on workforce development to deal with the challenge of the 4,000 IRS employees who retire annually. "Taking the IRS to the next level will require heightened management focus and employee engagement," said IRS Oversight Board Chairman Paul Cherecwich in a statement.

The board urged the IRS to do more to modernize its information technology, while praising the service's increasing use of electronic filing. It said the IRS needed to update its central recordkeeping system on a daily, not just a weekly, basis to keep better track of taxpayer accounts.

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