TIGTA Report 2023-46-026 — Additional Actions Needed to Reduce IRS Accounts Management Inventories to Pre-Pandemic Levels

Record facts

Summary

A final audit report of the Treasury Inspector General for Tax Administration, Report Number 2023-46-026, issued May 10, 2023, assessing IRS efforts to reduce backlogs in its Accounts Management function inventories. It states that as of December 31, 2022 the IRS reported 6.2 million cases in the Accounts Management inventory and 445,000 cases in the Form 1040-X inventory, and that initiatives announced March 10, 2022 did not return inventories to pre-pandemic levels by the end of the calendar year. The report finds fewer surge team employees were available than anticipated and that the loss of employees from other functions led to an estimated $2.6 billion in lost or delayed revenue. It estimates the IRS could save more than $322.2 million a year by automating the processing of Forms 1040-X. It makes 13 recommendations, of which the IRS agreed with 10 and disagreed with three.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

1 
 
 
 
 
 
 
Additional Actions Are Needed to Reduce Accounts 
Management Function Inventories to Below 
Pre-Pandemic Levels 
 
 
May 10, 2023 
 
Report Number:  2023-46-026 
 
 
 
 
 
 
 
 
 
TIGTACommunications@tigta.treas.gov   |   www.treasury.gov/tigta 
 
TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION 

HIGHLIGHTS:  Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Final Audit Report issued on May 10, 2023 
Report Number 2023-46-026 
 
 
Why TIGTA Did This Audit 
In March 2022, TIGTA reported on 
the persistent over-aged Accounts 
Management function inventory 
and made 19 recommendations for 
improvements.  IRS management 
agreed with 16 of our 
recommendations; however, as of 
December 5, 2022, eight remain 
unimplemented. 
This audit continues our 
assessment of the IRS’s efforts to 
reduce significant backlogs in the 
Accounts Management function 
inventories during Calendar 
Year 2022, including Forms 1040-X, 
Amended U.S. Individual Tax 
Return. 
Impact on Tax Administration 
The Accounts Management 
function is responsible for assisting 
individual and business taxpayers 
with tax law and tax account 
inquiries, including making 
adjustments to taxpayer accounts 
when necessary. 
As of December 31, 2022, the IRS 
reported that it had 6.2 million 
cases in its Accounts Management 
inventory and 445,000 cases in its 
Form 1040-X inventory.  Delays in 
working these inventories not only 
increase taxpayer burden but also 
cost to the Federal Government 
(i.e., interest paid).  
What TIGTA Found 
On March 10, 2022, the IRS announced its plans to address the 
continuing backlog of tax returns and other tax account work during 
the 2022 Filing Season.  These initiatives, referred to as the Get Healthy 
Plan, were intended to return the IRS to healthy inventory levels by the 
end of Calendar Year 2022.  The IRS defines “healthy” inventory levels 
as pre-pandemic inventory levels. 
TIGTA reported previously that the Accounts Management function 
inventories would not return to pre-pandemic levels by the end of 
Calendar Year 2022.  Although management took actions to address 
concerns identified during this review, backlogs of inventory remain for 
the 2023 Filing Season.  TIGTA identified the following contributing 
factors to the remaining backlogs. 
 
While the employees assigned to the Accounts Management function 
Surge Team contributed to the additional closures of its inventory, 
there were fewer employees available than anticipated.  In addition, the 
loss of employees from other IRS functions resulted in an estimated 
$2.6 billion in potential lost or delayed revenue, due to fewer 
examination and collection cases being worked.  
Furthermore, the Form 1040-X Surge Team’s closure rates were less 
than one-half of the normal employees’ closure rates.  Automating the 
processing of these amended returns would reduce the burden on 
taxpayers waiting for their amended returns to be processed, and the 
benefits far outweigh the associated costs.  For example, TIGTA 
estimated that the IRS would potentially save more than $322.2 million 
in yearly processing costs by automating the processing of 
Forms 1040-X.  This is in addition to any interest saved. 
What TIGTA Recommended 
TIGTA made 13 recommendations to the IRS, including that 
management establish goals and a plan for all inventory types to reach 
pre-pandemic levels, and that they prioritize funding and 
implementation of automated processing of Forms 1040-X.  
The IRS agreed with 10 recommendations.  The IRS disagreed with 
three recommendations, including that management establish goals 
and a plan for all inventory types to reach pre-pandemic levels. 
 
 

U.S. DEPARTMENT OF THE TREASURY 
WASHINGTON, D.C.  20024 
TREASURY INSPECTOR GENERAL 
FOR TAX ADMINISTRATION 
 
 
 
May 10, 2023 
 
 
MEMORANDUM FOR: COMMISSIONER OF INTERNAL REVENUE 
                                       
 
FROM: 
Heather M. Hill 
 
Deputy Inspector General for Audit 
 
SUBJECT: 
Final Audit Report – Additional Actions Are Needed to Reduce Accounts 
Management Function Inventories to Below Pre-Pandemic Levels  
(Audit # 202240622) 
 
This report represents the results of our review to assess the Internal Revenue Service’s efforts to 
address the backlogged Accounts Management inventory, including Forms 1040-X, Amended 
U.S. Individual Income Tax Return (i.e., amended returns).  This review is part of our Fiscal Year 
2023 Annual Audit Plan and addresses the major management and performance challenge of 
Improving Taxpayer Service.  
Management’s complete response to the draft audit report is included as Appendix IV.  If you 
have any questions, please contact me or Diana M. Tengesdal, Acting Assistant Inspector 
General for Audit (Returns Processing and Account Services). 
 
 
 
 

 
 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Table of Contents 
Background .....................................................................................................................................Page 1 
Results of Review .......................................................................................................................Page 4 
Management Took Actions to Address Concerns 
Identified During This Review ..........................................................................................Page 4 
Recommendations 1 and 2: .....................................................Page 4 
Recommendations 3 and 4: .....................................................Page 5 
Surge Team Members Assisted in Reducing Inventories, 
but This Came at a Significant Cost to the Government .......................................Page 6 
Management Needs to Develop a Plan and Goals to 
Ensure That Inventories Return to Pre-Pandemic Levels ......................................Page 9 
Recommendation 5: ...................................................................Page 10 
Form 1040-X, Amended U.S. Individual Income Tax Return,  
Inventories Will Remain Above Pre-Pandemic Levels Through  
the 2023 Filing Season .......................................................................................................Page 10 
The Benefits of Automating the Processing of 
Amended Returns Outweigh the Associated Costs ................................................Page 12 
Recommendation 6: ...................................................................Page 13 
Recommendation 7: ...................................................................Page 14 
Improvements Are Needed to Reduce the Taxpayer Relations Inventory .....Page 14 
Recommendations 8 and 9: .....................................................Page 15 
Recommendation 10: ................................................................Page 16 
Improvements Are Needed to Ensure Timely Receipt of 
the Accounts Management Function’s Inventory ....................................................Page 16 
Recommendation 11: ................................................................Page 16 
Recommendation 12: ................................................................Page 17 
Recommendation 13: ................................................................Page 18 
Appendices 
Appendix I – Detailed Objective, Scope, and Methodology ................................Page 19 
Appendix II – Outcome Measures .................................................................................Page 21 
Appendix III – Prior TIGTA Report Recommendations and Status ....................Page 23 
Appendix IV – Management’s Response to the Draft Report .............................Page 25 

 
 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Appendix V – Glossary of Terms ....................................................................................Page 36 
Appendix VI – Abbreviations ...........................................................................................Page 37 

 
Page  1 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Background 
The Internal Revenue Service (IRS) Accounts Management function is responsible for assisting 
individual and business taxpayers with tax law and tax account inquiries, including making 
adjustments to taxpayer accounts when necessary.  The Accounts Management function has 
10 sites nationwide that work paper inventory; seven sites are supported by an Accounts 
Management Campus Support Site, and three sites are supported by a Submission Processing 
Tax Processing Center.1   
Figure 1 shows that as of November 23, 2022, IRS management reported having 
23,483 employees working in the Accounts Management function.   
Figure 1:  Accounts Management Function Employees as of November 23, 2022 
AM Employees 
Working Cases  
AM Employees 
Working 
Telephones 
Employees 
Detailed to AM 
Employees 
Detailed  
From AM to SP 
TOTAL 
17,125 
6,618 
658 
(918) 
23,483 
Source:  Information from IRS analysts as of November 23, 2022.   
AM = Accounts Management, SP = Submission Processing 
The majority of the Accounts Management function case work is received from taxpayers 
Most of the Accounts Management function’s inventory is received from taxpayers via  
the mail.  The time it takes for the Accounts Management function to receive and work its 
taxpayer-initiated inventory affects how timely taxpayers receive a response from the IRS and 
have their case resolved.  It is also directly impacted by the Image Control Team’s (ICT) ability to 
timely scan the inventory into the Correspondence Imaging Inventory (CII), the Accounts 
Management function’s primary inventory management system.  IRS management indicates that 
higher inventory levels, as opposed to timely scanning, are a higher contributing factor to longer 
wait times for taxpayers to receive case resolution. 
The Accounts Management function’s goal is to close most of its inventory within 45 calendar 
days of IRS receipt.  At 45 calendar days, it generally classifies the inventory as over-aged.  
Figure 2 provides an overview of the Accounts Management function’s inventory routing from 
IRS receipt. 
 
1 See Appendix V for a glossary of terms.   

 
Page  2 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Figure 2:  Overview of the Accounts  
Management Function Inventory Routing 
 
Source:  Treasury Inspector General for Tax Administration (TIGTA)  
graphic based upon Internal Revenue Manuals and walkthroughs  
of sites.  
Accounts Management function inventory  
The Accounts Management function’s inventory is categorized into three high-level inventory 
types: 
• 
Adjustments – this includes correspondence received from individual and business 
taxpayers, more complex amended returns that are not worked by the Submission 
Processing function, and carryback claims.  This inventory impacts taxpayers as they are 
waiting on a response from the IRS or waiting on an adjustment to their tax account, 
which could result in a refund.  Employees who work Adjustments inventory are tax 
examiners (TE) and customer service representatives (CSR).  The CSRs are the same 
employees who answer telephone calls.    
• 
Taxpayer Relations – this includes refund inquiries, technical statutes, and accounts 
maintenance (i.e., transcripts).  A transcript is an internally generated case that indicates 
IRS action or research needs to take place to correct a condition on a taxpayer’s account.  
Technical statutes and the transcripts inventory have a less immediate impact on 
taxpayers.  For example, technical statutes are where the IRS is determining if time 
remains on the statute of limitations to assess tax.  As a result, this may have an 
immediate impact on the IRS’s ability to make an assessment to protect revenue and 
avoid barred assessments.  Employees who work Taxpayer Relations inventory generally 
are the TEs.     
• 
Miscellaneous – this includes identity theft victim assistance, Centralized Authorization 
File, and other smaller inventories.  The largest inventory is identity theft, which directly 
impacts taxpayers.  These cases are more complex and require specialized training that is 
only provided to a limited number of Accounts Management function employees.  

 
Page  3 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Individual amended return inventory  
Form 1040-X, Amended U.S. Individual Income Tax Return, (i.e., amended return) is worked by 
both the Submission Processing and Accounts Management functions.  All inventory is screened 
by the Submission Processing function, and the more complex cases may be forwarded to the 
Accounts Management function.   
Initiatives taken to help backlogs 
In an attempt to address ongoing challenges, on March 10, 2022, the IRS announced its plans to 
address the continuing backlog of tax returns and other tax account work during the 
2022 Filing Season.  These initiatives, referred to as the Get Healthy Plan, were intended to 
return the IRS to healthy inventory levels by the end of Calendar Year 2022.  The IRS defines 
“healthy” inventory levels as pre-pandemic inventory levels.  Figure 3 provides an overview of 
the Get Healthy Plan initiatives. 
Figure 3:  Overview of the Get Healthy Plan Initiatives 
 
Source:  TIGTA analysis of the IRS’s Get Healthy Plan.  CTC = Child Tax Credit,  
RRC – Recovery Rebate Credit, TAC – Taxpayer Assistance Center 

 
Page  4 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Results of Review 
This report presents the results of our continued assessment of the IRS’s efforts to reduce 
significant backlog of inventories in the Accounts Management function and amended tax 
returns processed by the Submission Processing function.  The results in this report are 
presented as of the end of December 2022.  In December 2022, we reported that the Accounts 
Management function inventories would not return to pre-pandemic levels by the end of 
Calendar Year 2022.2  We plan to continue to assess the IRS’s efforts to reduce these backlogs 
during the 2023 Filing Season.3 
Management Took Actions to Address Concerns Identified During This Review 
One of the objectives of our continued assessment of the IRS’s efforts to reduce its backlogged 
inventory is to recommend actions the IRS can take to address challenges that result in 
inefficient processes, unnecessary increases in workload, and increased burden on taxpayers.  As 
such, we made a number of recommendations to IRS management throughout this review, via 
what we refer to as an “e-mail alert,” in order to expedite the IRS’s ability to take corrective 
action.  During this review, we issued the following detailed e-mail alerts to IRS management 
outlining our concerns and are providing the actions taken by IRS management to address 
them.  
Recommendation 1 (E-Mail Alert):  On October 21, 2022, we notified the Directors, 
Submission Processing and Accounts Management, Wage and Investment Division, of our 
concern that employees, at least one ICT site, were stamping correspondence with a received 
date before completing screening, which is intended to ensure that correspondence is either 
scanned into the CII, routed to another function, or destroyed.  In addition, employees at this 
ICT site were not screening documents from individuals and businesses with the same level of 
priority.  The IRS’s internal guidance requires correspondence to be scanned and validated 
within 10 calendar days of receipt by the ICT.  These time frames are tracked and monitored 
based on the date stamped on the correspondence by the ICT.  We recommended that 
management ensure that all sites understand and begin immediately stamping the ICT received 
date after correspondence screening is completed, and that individual and business documents 
are screened with equal importance. 
 
Management’s Response to E-Mail Alert:  IRS management agreed with the 
recommendation and sent a reminder to all sites on November 1, 2022, and 
February 22, 2023.   
Recommendation 2 (E-Mail Alert):  On October 28, 2022, we notified the Directors, 
Submission Processing and Accounts Management, Wage and Investment Division, of our 
concern that at least one IRS Campus Support Site was allowing correspondence screening to be 
conducted by employees at their homes and in IRS locations not co-located with the mailroom.  
 
2 TIGTA Report No. 2023-46-007, Backlogs of Tax Returns and Other Account Work Will Continue Into the 2023 Filing 
Season (Dec. 2022). 
3 TIGTA Audit No. 202340610, Continued Assessment of the IRS’s Efforts to Address the Backlogs During the 2023 
Filing Season.   

 
Page  5 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Management stated that this was done in response to the pandemic and subsequent 
remodeling of IRS office space.  However, our walkthrough confirmed there was adequate space 
in the IRS building where the mail is received and scanned for corresponding screening to be 
completed.  Management’s decision to continue to allow employees to telework unnecessarily 
increased the risk that documents would either be lost, destroyed, or viewed by unauthorized 
persons.  It also increased the time it took for these documents to be scanned and available to 
the Accounts Management function.  We recommended that the IRS discontinue 
correspondence screening via telework and ensure at all sites that screening must be conducted 
in the same IRS facility where documents are being scanned by the ICT. 
 
Management’s Response to E-Mail Alert:  IRS management agreed with the 
recommendation and discontinued telework screening on December 7, 2022.  Screening 
work remains in a secure IRS environment, and the IRS has confirmed with the sites that 
screening is conducted in the same building where space allows.   
Recommendation 3 (E-Mail Alert):  On November 1, 2022, we notified the Director, Accounts 
Management, Wage and Investment Division, of our concerns that cases were incorrectly routed 
to other IRS functions by Accounts Management function employees and of unclear instructions 
to ensure that other IRS function employees returned cases to the originating Accounts 
Management function employee.  Incorrectly routing work results in unnecessary delays that 
burden taxpayers and is an inefficient use of IRS resources.  Our discussions with IRS employees 
and our review identified that the internal guidelines for other IRS functions do not instruct 
employees to return invalid CII cases to the originating Accounts Management function 
employee.  Instead, cases are being returned to the ICT function that then routes the cases back 
to the originating Accounts Management function employee.  We recommended that the IRS 
identify and address the cause of Accounts Management function employees incorrectly routing 
cases to other IRS functions and work with other IRS functions to update their Internal Revenue 
Manuals to make it clear that incorrectly routed documents should be returned to the 
originating employee. 
 
Management’s Response to E-Mail Alert:  IRS management agreed with the 
recommendation.  The IRS created a report of all rerouted CII cases and completed its 
review of CII reroutes.  Applicable procedures have been updated and the Internal 
Revenue Manual sections have been clarified.  
Recommendation 4 (E-Mail Alert):  On November 1, 2022, we also notified the Director, 
Accounts Management, Wage and Investment Division, of our concern that the IRS was not 
hiring a sufficient number of mail clerks to help with opening and sorting the mail as well as 
scanning documents into the CII.  Hiring additional mail clerks would help reduce the backlogs 
in the ICT function and result in taxpayers’ cases being worked in a timelier manner.  We 
recommended that management take steps to hire as many mail clerks as possible.    
 
Management’s Response to E-Mail Alert:  IRS management agreed with the 
recommendation.  The IRS analyzed available space at the sites and took action to hire as 
many clerks as possible, resulting in the hiring of 214 clerks through March 27, 2023.   

 
Page  6 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Although management took actions to address several concerns we brought to their attention 
during this review, Figure 4 provides several other concerns we identified as contributing factors 
to the remaining backlogs of inventory in the Accounts Management function and the 
Forms 1040-X inventory that were not addressed adequately.   
Figure 4:  Factors Contributing to Remaining Inventory Backlogs 
 
Source:  TIGTA graphic based upon findings identified during our review.    
Moreover, in March 2022, we reported on the persistent over-aged inventory and made 
19 recommendations for improvements.  IRS management agreed with 16 of our 
recommendations; however, as of December 5, 2022, eight remain unimplemented.4 
Surge Team Members Assisted in Reducing Inventories, but This Came at a 
Significant Cost to the Government 
On February 2, 2022, the IRS Commissioner announced an inventory Surge Team to assist the 
Accounts Management function with its inventories.  The Commissioner stated that the IRS had 
identified employees as having prior Accounts Management function experience who would be 
a part of the Surge Team, and IRS management subsequently identified about 1,200 employees.  
Starting on February 28, 2022, the Surge Team members underwent up to four work days of 
refresher training.  The actual number of Surge Team members did not materialize and gradually 
decreased from as many as 900 on February 28, 2022, to as few as 658 as of November 23, 2022.  
According to IRS management, the decline of Surge Team members was due to employees who 
either resigned, were promoted to other IRS functions, or were approved for hardships and 
therefore did not participate in the Surge Team. 
In May 2022, Wage and Investment Division leadership announced that they projected Surge 
Team members would assist with closing about 600,000 cases by September 30, 2022.  Our 
analysis of closed CII cases as of November 27, 2022, identified that 476 Surge Team members 
closed 617,494 (4.6 percent) of the 13.3 million CII cases since February 2022.  As noted 
previously, Adjustments is just one of three inventory types and is primarily made up of 
correspondence from taxpayers and amended returns.   
 
4 See Appendix III for the status of the IRS’s corrective actions.  

 
Page  7 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
We also found that the Accounts Management function used Surge Team members in other 
areas such as answering telephones, processing third-party authorizations, clerical support, etc.  
For example, 189 (23 percent) of the 818 Surge Team members who were detailed to Accounts 
Management as of July 6, 2023, answered telephone calls and never closed any Accounts 
Management function inventory.  According to IRS management, these employees were not 
used to work on the backlogged inventory because of agreements with the Union, which 
stipulated that Surge Team members work in areas in which they had prior experience.     
The majority of Surge Team members came from the Small Business/Self-Employed 
(SB/SE) Division  
In December 2022, we reported that the IRS took an “all-hands-on-deck” approach to address 
staffing shortages and the backlog of work at the Tax Processing Centers.5  This approach also 
extended to helping the Accounts Management function with its unprecedented inventory 
levels.  Figure 5 shows the distribution of the 818 employees detailed to the Accounts 
Management function by other IRS functions, as of July 6, 2022. 
Figure 5:  Overview of 818 Employees Detailed to the  
Accounts Management Function by Other IRS Functions 
 
Source:  TIGTA graphic created based upon a report provided by Accounts Management 
function analysts as of July 6, 2022.  Other includes Appeals; Chief Financial Officer; 
Criminal Investigation; Large Business and International Division; Privacy, Governmental 
Liaison, and Disclosure; Tax Exempt and Government Entities Division; etc.    
 
5 TIGTA, Report No. 2023-46-007, Backlogs of Tax Returns and Other Account Work Will Continue Into the 2023 Filing 
Season (Dec. 2022). 

 
Page  8 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
The decision to reassign hundreds of employees to assist with the backlog did not come lightly.  
After evaluating a full range of options, the IRS documented its decision in a Risk Acceptance 
Form and Tool approved by leadership of the SB/SE Division in March 2022 and by the 
Deputy Commissioner for Services and Enforcement in April 2022.  The SB/SE Division agreed to 
transfer the maximum number of employees to assist with the inventory backlogs, noting that 
the Government would experience lost or delayed revenue because of reduced assessments 
from examinations and collections.  In addition, the SB/SE Division noted that it would also be 
affected by an increase in over-aged inventories.   
Finally, the IRS noted that, based on the urgency of the situation, the negative impact to 
taxpayers and the severe reputational risk to the IRS outweighed the billions of dollars of 
potential lost or delayed revenue to the Government by delaying or forgoing certain compliance 
actions.  Figure 6 shows the IRS’s estimates of lost or delayed revenue by the various IRS 
program areas through December 31, 2022. 
Figure 6:  Accounts Management Function Surge Team’s Impact on Other IRS Programs 
Function/Office 
Number of 
Employees 
Potential  
Lost  
Revenue  
Potential  
Lost/Delayed  
Revenue 
SB/SE Division Campus Collection  
265 
N/A 
$2.1 billion 
SB/SE Division Campus Examination 
103 
$310 million 
N/A 
SB/SE Division Field and Specialty 
Examination  
50 
$39 million 
N/A 
Wage and Investment Division Return 
Integrity and Compliance Services 
48 
$49 million 
N/A 
SB/SE Division Field Collection  
47 
N/A 
$59 million 
Large Business and International Division 
3 
$0.7 million 
N/A 
Totals 
516 
$398.7 million 
$2.2 billion 
Source:  Estimates provided by IRS management for the respective functions listed in Figure 6.   
Note:  The number of employees shown in Figure 6 is less than Figure 5 as some employees were support 
personnel and did not result in lost/delayed revenue.  The IRS generally has 10 years to collect on an 
outstanding balance, thus the collection of revenue may be delayed and not lost due to the backlogs. 

 
Page  9 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Management Needs to Develop a Plan and Goals to Ensure That Inventories 
Return to Pre-Pandemic Levels  
In December 2022, we reported that the Accounts Management function inventories will not 
return to pre-pandemic levels by the end of Calendar Year 2022.6  As a result, the IRS will once 
again have a backlog of this work in the 2023 Filing Season.  According to IRS management, this 
was due to higher than anticipated receipts of incoming inventory.  However, our review found 
that a contributing factor was also that while the Accounts Management function established a 
goal to reduce the Adjustments inventory to 1 million or less by the end of Calendar Year 2022, 
there were not similar goals set for the Taxpayer Relations and Miscellaneous inventories.  As 
the Accounts Management function worked towards its goal to reduce the Adjustments 
inventory, the other inventories increased during Calendar Year 2022.   
When we asked management why they did not establish a goal for employees to work towards 
for the other inventory categories, management stated that they focused the majority of their 
resources on the Adjustments inventory because this could resolve other inventories and had a 
larger impact to taxpayers.  For example, if a taxpayer had an amended return waiting to be 
processed, once the amended return was processed, this may help resolve a taxpayer’s refund 
inquiry case.  Moreover, when we asked IRS management how many TEs they would need to 
significantly reduce the Taxpayer Relations inventory level, management could not provide an 
answer.   
Figure 7 shows that the Adjustments inventory made more progress towards reaching 
pre-pandemic levels than the Taxpayer Relations and Miscellaneous inventories.   
Figure 7:  Accounts Management Function Inventory Changes by Inventory Type  
 
Source:  TIGTA graphic created based Accounts Management Inventory Reports from dates shown in 
Figure 7.  
We understand management’s logic for directing most of its resources to working the 
Adjustments inventory; however, if the IRS plans to make significant progress to return all of its 
paper-based inventories to pre-pandemic levels, it needs to establish a plan that includes goals 
for its employees to work towards.  For example, the Submission Processing function created a 
 
6 TIGTA, Report No. 2023-46-007, Backlogs of Tax Returns and Other Account Work Will Continue Into the 2023 Filing 
Season (Dec. 2022). 

 
Page  10 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
spreadsheet for each of its inventories and established a goal for each inventory type, which it 
then monitored weekly to show progress towards meeting its goals.   
On November 1, 2022, we notified IRS management of our concern and recommended that 
management take steps to ensure that adequate resources were provided to reduce the 
Taxpayer Relations inventory.  IRS management agreed with our concern and stated that they 
have hired additional TEs for Fiscal Year 2023 and are looking for ways to reduce the inventory.  
However, as stated previously, IRS management could not tell us how many TEs they needed to 
reduce the inventory to pre-pandemic levels.  It is important that the Accounts Management 
function establish goals for each inventory type and a plan to meet those goals, which takes into 
consideration any resource needs.    
Recommendation 5:  The Commissioner, Wage and Investment Division, should establish goals 
for each of the Accounts Management function’s inventory types and develop a plan for 
addressing those goals to ensure a timely return to pre-pandemic inventory levels. 
  
Management’s Response:  IRS management disagreed with the recommendation.  
Management stated that limited resources and the numerous types of inventory do not 
allow for goals to be established for each of the inventory categories.  The Accounts 
Management function is balancing trained resources to deliver goals for the toll-free 
service while addressing paper inventories in a first-in, first-out order as opposed to 
reaching a set goal by inventory type.  The IRS will continue to monitor inventory levels 
and manage resources to address inventory while moving towards more advanced 
digitalization to achieve pre-pandemic inventory levels. 
  
Office of Audit Comment:  We remain concerned with management’s plan to 
maintain the status quo in hopes that the inventory will return to pre-pandemic 
inventory levels.  When we brought our concern to management’s attention 
during this review, management indicated they hired additional TEs for Fiscal 
Year 2023 and would look for ways to reduce the inventory.  However, 
management did not know how many TEs were needed to reduce the inventory 
to pre-pandemic levels.  We continue to believe that establishing goals and 
developing a plan to achieve those goals will help ensure that the other Accounts 
Management inventories return to pre-pandemic inventory levels in a timely 
manner. 
Form 1040-X, Amended U.S. Individual Income Tax Return, Inventories Will 
Remain Above Pre-Pandemic Levels Through the 2023 Filing Season  
The IRS estimates that the Form 1040-X inventory will not be at pre-pandemic levels until 
June 2023.  As of December 31, 2022, there were 445,000 Forms 1040-X in ending inventory, 
whereas, as of January 4, 2020, there were 124,000 Forms 1040-X in inventory.  Since 
January 1, 2022, the IRS has significantly reduced the Forms 1040-X inventory by more than 
1.9 million.  However, as shown in Figure 8, the inventory level remains above pre-pandemic 
levels.  

 
Page  11 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Figure 8:  Form 1040-X Inventory  
 
1/4/2020 
1/2/2021 
1/1/2022 
12/31/2022 
Submission Processing Function 
20K 
1.3M 
1.7M 
224K 
Accounts Management Function  
104K 
201K 
707K 
221K 
Total 
124K 
1.5M 
2.4M 
445K 
Source:  Consolidated Submission Processing and Accounts Management Form-1040X Report as of 
dates listed in Figure 8.  K = Thousands, M = millions 
In May 2022, the Accounts Management function agreed to assist the Submission Processing 
function with addressing the high volume of Form 1040-X (i.e., amended return) inventory.  
Leadership from the Accounts Management function agreed to provide a Surge Team consisting 
of approximately 1,000 employees who were previously responsible for answering telephone 
calls.  Surge Team members received two weeks of classroom training and one week of 
on-the-job instruction to prepare them for their new job responsibilities.   
On average, Surge Team members processed amended returns slower than their 
counterparts in the Submission Processing function 
On average, Surge Team members closed cases at a rate less than one-half the number of cases 
of the Submission Processing function’s Form 1040-X cases.  For example, Surge Team members 
closed an average of 2.8 cases per hour during Calendar Year 2022, whereas Submission 
Processing function employees closed on average 6.9 cases per hour (from January through 
June 2022).  The IRS reports that since June 2022, the 1,015 Surge Team members closed more 
than 1.9 million cases.   
When we asked IRS management to explain why it was taking Surge Team members longer to 
close a case, management stated that it was because Surge Team members were trained by the 
Accounts Management function to perform more thorough reviews than intended by the 
Submission Processing function.  IRS management indicated they offered on-the-job training to 
employees.   
However, the closure rate did not adjust accordingly.  Management indicated that despite the 
closures being slower, they would not bring all the original Submission Processing function 
Form 1040-X employees back to assist as these employees were needed to help other 
Submission Processing function areas.  As such, this structure remained throughout Calendar 
Year 2022.    
According to IRS management, they plan to reach pre-pandemic inventory levels for 
Forms 1040-X during the 2023 Filing Season by moving the original employees in the 
Submission Processing function back to processing Forms 1040-X and hiring an additional 
200 employees to work this inventory specifically.   

 
Page  12 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
The Benefits of Automating the Processing of Amended Returns Outweigh the 
Associated Costs  
The IRS’s plan to automate efforts for Forms 1040-X is not occurring soon enough.  TIGTA 
reported previously that the IRS needs to modernize its processing of Forms 1040-X.7  These 
recommendations have included further automation during processing.  In August 2020, the IRS 
began accepting electronically filed (e-filed) Forms 1040-X, no longer requiring IRS staff to open 
these Forms 1040-X and manually enter the data from these forms.  As of May 16, 2022, the IRS 
had electronically received nearly 3.5 million Forms 1040-X.  Although the IRS now accepts  
e-filed Forms 1040-X, the forms are still processed manually after they are received 
electronically.  At a high-level, this requires employees to determine if the return meets criteria 
to be processed or should be routed to the Examination function, complete tax account research 
to ensure that the original return amounts listed match IRS records, and ensure that the return 
does not contain any mathematical errors, etc.   
In June 2022, the Electronic Tax Administration Advisory Committee also encouraged the IRS to 
continue working on automating processing after intake so that fewer returns will require 
human intervention.8  The Committee noted that these e-filed amended returns also have the 
benefits of the automated validity, fraud detection, and consistency checks.  However, these 
benefits will only be realized if the IRS fully automates the processing of Forms 1040-X.   
Fully automating the processing of Forms 1040-X would also result in cost savings to the IRS 
and reduce burden on taxpayers by decreasing the time taxpayers wait for their amended return 
to be processed and their refunds paid.  When we asked the IRS to provide us with a cost 
estimate for a fully automated solution, the IRS stated that it would cost a total of $20 million 
through Fiscal Year 2027 to implement.  This seems minimal when compared to the costs for IRS 
employees to manually process the Forms 1040-X.  For example, the IRS estimates that it 
currently costs $6.64 to process a Form 1040-X in the Submission Processing function and 
$109.26 in the Accounts Management function.9  In contrast, the IRS can systemically process an 
e-filed Form 1040 for $0.28.  As such, we estimate that the IRS would potentially save more than 
$322.2 million in yearly processing costs by automating the processing of Forms 1040-X.10  This 
is in addition to any interest paid to taxpayers as a result of manual processing delays.  As 
interest rates continue to rise, this will result in increased interest paid by the IRS.     
The National Taxpayer Advocate recommended that the IRS implement electronic amended 
return processing to eliminate the delays caused by traditional paper processing, and Congress 
fully fund the IRS’s information technology modernization needs to allow for expedited 
 
7 TIGTA, Report No. 2014-40-028, Amended Tax Return Filing and Processing Needs to Be Modernized to Reduce 
Erroneous Refunds, Processing Costs, and Taxpayer Burden (Apr. 2014) and TIGTA, Report No. 2019-40-042, Actions 
Have Not Been Taken to Improve Amended Tax Return Review Procedures to Reduce Erroneous and Fraudulent 
Refunds (July 2019). 
8 Publication 3415, Electronic Tax Administration Advisory Committee Annual Report to Congress (June 2022). 
9 On average, during Fiscal Year 2022, 63 percent of the 4.5 million total Forms 1040-X were processed by the 
Accounts Management function. 
10 Fiscal Year 2022 Submission Processing function closures of 1,660,662 x $6.64 = $11 million plus Fiscal Year 2022 
Accounts Management function closures of 2,859,969 x $109.26 = $312.5 million less total Fiscal Year 2022 closures of 
4,520,631 x $0.28 = $1.3 million equals $322.2 million.   

 
Page  13 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
processing of original and amended tax returns.11  The Inflation Reduction Act of 2022 
subsequently provided the IRS with more than $7.9 billion to use toward modernizing its 
information technology environment and improving services to taxpayers.12  This additional 
funding will allow the IRS to transform the way it interacts with taxpayers, providing for a more 
taxpayer friendly and focused organization that offers more digital and streamlined options.  IRS 
management did not comment whether the additional funding would allow the IRS to prioritize 
the automation of amended returns.  However, IRS management stated that they are continuing 
to develop a plan to show how the IRS will spend the additional funding while ensuring that 
addressing tax return and correspondence backlogs, including amended returns, remains a top 
priority.   
Recommendation 6:  The Commissioner, Wage and Investment, should prioritize funding and 
implementation of automated processing of Forms 1040-X to increase efficiencies and reduce 
taxpayer burden. 
  
Management’s Response:  IRS management agreed with the recommendation, and 
funding was approved on February 28, 2023.  The IRS will evaluate requirements and a 
solution for automated processing of Form 1040-X based upon the feasibility of the 
requirements.  See Appendix II for management’s response to the outcome measure.    
Management urged to identify solutions to reduce the backlog of Forms 1040-X to 
pre-pandemic levels until an automated solution is implemented 
The National Taxpayer Advocate also reported that the IRS was not proactively solving the 
backlog of amended returns, stating that, “the IRS has committed to doing very little to  
address the processing backlog to ensure taxpayers expeditiously get the refunds to which  
they are entitled.”  TIGTA performed on-site walkthroughs at the Tax Processing Centers in 
Kansas City, Missouri; Austin, Texas; and Ogden, Utah, to observe the work being completed by 
the staff, discuss any concerns or challenges they have, and identify opportunities for 
improvement.  As it relates to Forms 1040-X, they are not processed like original returns, where 
refunds are processed first.  However, Forms 1040-X are worked in first-in/first-out order.  Thus, 
potentially adding unnecessary delays for taxpayers due a refund and resulting in additional 
interest paid.   
Our analysis of 1.9 million e-filed Forms 1040-X accepted between January 18, 2022, and 
October 22, 2022, found that 897,088 (47 percent) of the Forms 1040-X accepted by the IRS 
were refund returns.  We identified 309,083 cases in the Accounts Management function’s 
inventory that were still open and could be prioritized by the IRS.  On October 21, 2022, we 
notified IRS management of our concerns that the IRS was not prioritizing amended returns 
requesting refunds and provided them with the cases we identified.  We recommended that 
they prioritize working these Forms 1040-X and update their internal guidelines to reflect this 
change.  IRS management disagreed with our recommendation stating that working amended 
returns in a first-in/first-out manner ensures fairness to all taxpayers.   
 
11 National Taxpayer Advocate Annual Report to Congress 2021. 
12 Public Law 117-169.  This includes $3,181,500,000 for Taxpayer Services and $4,750,700,000 for Business Systems 
Modernization.   

 
Page  14 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Management also stated that taxpayers often make mistakes on the Form 1040-X and could 
incorrectly show the return as a refund when it is not.  In addition, management stated that 
prioritizing amended returns with refunds could unnecessarily delay the resolution for those 
taxpayers filing an amended return in response to an examination.  Finally, management noted 
that because amended returns do not have a filing due date, balance due returns would 
constantly be pushed to the back, thus increasing the risk of a barred assessment or a loss of 
interest to the Government.   
Although management’s rationale may support not prioritizing Forms 1040-X with refunds as a 
long-term solution, we disagree that the reasons provided should prevent management from 
exploring a short-term solution as they continue to work through their backlogged inventory.  
The lack of actions to prioritize Forms 1040-X to reduce delays to taxpayers due a refund is a 
great disservice to taxpayers.   
Recommendation 7:  The Commissioner, Wage and Investment Division, should implement 
temporary solutions for the processing of Forms 1040-X to reduce the backlogs, reduce taxpayer 
burden, and save IRS resources until an automated solution is implemented.  
 
Management’s Response:  IRS management agreed with the recommendation and 
continues to take actions to reduce all inventory.  Management has a Surge Team of 
employees focused on Forms 1040-X only, and additional employees are moved to 
process inventory as resources allow. 
Improvements Are Needed to Reduce the Taxpayer Relations Inventory  
We also identified the following concerns with the Accounts Management function’s ability to 
timely and efficiently work the Taxpayer Relations inventory.    
• 
Manual refund requests are prepared for small dollar amounts.  Our review found that 
when certain conditions are present on a tax account, current procedures require that 
Accounts Management function employees prepare a request for a manual refund to be 
released by the Accounting function.  According to IRS employees we spoke with during 
our review, in many instances, these refunds are for small dollar amounts and a taxpayer 
may not be waiting for a needed refund (e.g., a deceased taxpayer).  As of 
December 3, 2022, the IRS reported it had 24,492 transcripts in its Taxpayer Relations 
inventory that require a manual refund of under $100.  The IRS reports that it cost $71 to 
issue a manual refund.  As such, it can cost the IRS more to prepare the manual refund 
request than the refund amount itself.  We notified IRS management of our concern and 
recommended that management consult with IRS Office of Chief Counsel on the legality 
of adding a dollar tolerance and not generating transcripts or issuing manual refunds 
below that dollar threshold.  IRS management disagreed stating that all taxpayers are 
entitled to their refund when it was greater than $1 and that manual refunds are 
currently necessary due to programming limitations.  We agree with the IRS’s assertion; 
however, allowing a temporary deviation from its policy would help the IRS work through 
its backlogged inventory more efficiently.     
• 
Paperwork associated with barred statutes takes time to complete and is taking away 
resources that could be assigned to work other cases.  During a walkthrough, Accounts 
Management function employees indicated that they are still required to complete 

 
Page  15 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
paperwork for barred statutes, even though most of the barred statute cases are the 
result of the backlogs and not an IRS employee’s inaction.  Internal guidelines require the 
Accounts Management function employee to document the total net loss to the 
Government, the reason for the statute expiration, the corrective action that will be taken 
to prevent a recurrence, etc.  The paperwork must then be reviewed by the unit manager, 
department manager, operations manager, and the Campus Director, which is time 
consuming.  We notified IRS management of our concern and recommended that 
management reduce or limit paperwork employees are required to complete, so they 
can focus on eliminating the backlogged inventory that would in turn prevent future 
barred statutes.  IRS management agreed stating that they were exploring options to 
reduce some of the paperwork and acknowledgement requirements.  However, as of 
January 10, 2023, IRS management has not made a decision or changed the policy and 
could not provide a date when a decision would be made.   
• 
Inventory can be worked more efficiently if all types of work were in one consolidated 
inventory system.  During our walkthroughs, Accounts Management function employees 
indicated that being able to work other Taxpayer Relations cases in the same inventory 
management system, the CII, as other Accounts Management function inventory would 
be helpful and allow inventory to be worked faster and more efficiently.  We notified IRS 
management of our concern and recommended that management coordinate with the 
Information Technology organization to explore the possibility of adding Taxpayer 
Relations inventories into the same inventory management system.  IRS management 
partially agreed.  Management stated that this was explored previously and adding the 
Taxpayer Relations inventory into the CII would lose many current benefits, such as 
systemically closing transcripts that have been resolved without additional action 
needed, etc.  As an alternative, management stated that they are discussing other 
inventory management options with programmers but have not provided any additional 
details on these options. 
The Commissioner, Wage and Investment Division, should:  
Recommendation 8:  Coordinate with the Information Technology organization to prevent 
generating transcripts for manual refunds less than $100 and adjust the frequency that some 
transcripts are generated to help management get through the inventory more efficiently. 
  
Management’s Response:  IRS management agreed with the recommendation.  
Management has requested programming changes for potential implementation in 
January 2025 that will allow systemic issuance of decedent refunds when the appropriate 
personal representative information has been updated within the account.   
Recommendation 9:  Temporarily relieve employees in the Accounts Management function 
from having to complete paperwork for barred statutes, so they can focus on eliminating the 
backlogged inventory and prevent future barred statutes. 
  
Management’s Response:  IRS management agreed with the recommendation.  
Management is developing a plan that balances streamlining the barred statutes 
paperwork process with accountability responsibilities to reduce the backlog of aged, 
barred statute cases. 

 
Page  16 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Recommendation 10:  Coordinate with the Information Technology organization to explore 
adding Taxpayer Relations inventories into the CII, so that all Accounts Management inventory is 
located in the same inventory management system. 
  
Management’s Response:  IRS management agreed with the recommendation.  
Management is working with the Information Technology organization Accounts 
Management Services programmers to create a universal unassigned inventory, similar 
to the CII system, which will streamline the work distribution process. 
Improvements Are Needed to Ensure Timely Receipt of the Accounts 
Management Function’s Inventory  
Our review continues to find that improvements are needed to ensure the timely receipt of the 
Accounts Management function’s inventory.  Our analysis of cases received between 
January 1, 2022, and November 27, 2022, found that it was taking, on average, 30 calendar days 
to process documents once received by the ICT.  This is significantly longer than what is allowed 
according to the IRS’s internal guidance, which states that all cases must be prepped, scanned, 
and validated within 10 calendar days of ICT receipt or 20 calendar days of IRS received date.  
The following concerns contributed to the delays in receipts of the Accounts Management 
inventory.    
• 
There are no timeliness standards for screening.  IRS management has not established 
any goals to measure the time it takes to screen correspondence.  As such, IRS 
management cannot accurately determine if the screening process is resulting in delays 
in meeting the requirement that documents be prepped, scanned, and validated within 
20 calendar days, as outlined in the internal guidance.  On October 21, 2022, we notified 
IRS management regarding the lack of timeliness standards and recommended that they 
establish time frames for correspondence screening and a process to measure timeliness.  
IRS management disagreed stating that the screening process is designed to be 
completed daily, and there were no delays pre-pandemic.  Management also stated that 
adding an additional date stamp could slow down the process and would not help the 
backlog.  However, management provided us no support for their statements.  
Management agreed to revisit the recommendation as they catch up, if they determine 
the screening process is contributing to the delays in the ICT.  We disagree that 
management will know that the screening process is contributing to delays without a 
timeliness standard documented and without processes to track the timeliness in which 
it is completed at each site.       
Recommendation 11:  The Commissioner, Wage and Investment Division, should 
establish time frames for and a process to measure correspondence screening timeliness 
at each site. 
  
Management’s Response:  IRS management disagreed with the 
recommendation.  Management stated that prior to the campus closures 
associated with the Coronavirus Disease 2019 pandemic, there was no significant 
delay in the screening of correspondence.  The current backlog in ICT operations 
is due to the increased workload attributed to the pandemic relief provisions that 
have driven an increased number of amended return filings, and not due to 

 
Page  17 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
delays in correspondence screening.  Any changes made to the process will only 
create additional burdens to the overall ICT process and require additional 
programming updates with minimal benefits. 
  
Office of Audit Comment:  Management contends that any changes in 
their processes will create additional burdens; however, management has 
not provided any documentation to support the basis for this 
assertion.  Without time frames and a process for measuring timeliness, 
management cannot accurately evaluate what is contributing to delays.    
• 
Management is not using mail clerks to assist with screening documents.  IRS 
management’s policy has been to allow only the TEs and the CSRs to screen 
correspondence.  As noted previously, the TEs and the CSRs are responsible for working 
the Accounts Management function’s inventory and answering telephone calls.  On 
October 28, 2022, we notified IRS management of our concern that they were not using 
mail clerks to perform screening and recommended they rescind their policy and allow 
all sites to use mail clerks, after providing them with adequate training.  IRS management 
disagreed stating that it is necessary for the TEs and the CSRs to perform 
correspondence screening because of its technical nature; however, they did not provide 
any evidence to support their position that mail clerks cannot screen correspondence.   
Recommendation 12:  The Commissioner, Wage and Investment Division, should 
rescind the requirement that only the TEs and the CSRs perform correspondence 
screening and encourage all sites to use mail clerks, after providing them with adequate 
training. 
  
Management’s Response:  The IRS disagreed with this recommendation.  The 
IRS stated that the screening process was developed for the TEs and the CSRs 
due to its technical nature and the necessary training and experience required to 
properly identify the different types of correspondence work. 
  
Office of Audit Comment:  As noted previously, management did not 
provide any information to support their position that mail clerks would 
be unable to screen correspondence if they received adequate training.  
• 
Additional high-speed scanners could be helpful.  Campus Support Sites assist the 
Tax Processing Centers with scanning inventory.  However, due to differences in the 
scanner capabilities, how the Tax Processing Center prepares documents for scanning 
differs from the way this is performed at the Campus Support Sites.  This leads to 
inefficiencies because the Campus Support Sites may have to re-prepare documents 
received from the Tax Processing Centers before scanning them.  If the Campus Support 
Sites had the same types of high-speed scanners as the Tax Processing Centers, this 
rework would not be necessary.  Moreover, ICT functions at the Campus Support Sites 
would be able to handle additional inventory, as was recommended in our prior report.13  
Furthermore, additional scanners have not been added at the Tax Processing Centers 
despite the IRS’s policy decision to scan all Forms 1040-X, which greatly increased the 
inventory the ICT was required to scan.  On November 1, 2022, we recommended that 
 
13 TIGTA, Report No. 2022-46-027, Program and Organizational Changes Are Needed to Address the Continued 
Inadequate Tax Account Assistance Provided to Taxpayers p. 5 (Mar. 2022). 

 
Page  18 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
IRS management evaluate the costs of adding high-speed scanners at all Campus 
Support Sites and additional high-speed scanners at Tax Processing Centers and request 
the necessary funding to purchase them.  IRS management stated they would consider 
additional scanners as part of an ICT review they are conducting in response to our prior 
recommendation; however, they did not provide an expected completion date.     
Recommendation 13:  The Commissioner, Wage and Investment Division, should 
ensure prompt completion of the ICT review to determine if additional scanners will be 
purchased. 
  
Management’s Response:  IRS management agreed with the recommendation 
and is completing the ICT review.  Through March 2023, the IRS has conducted 
studies of ICT operations at six of the 10 sites and is evaluating the results to 
determine whether the information thus far collected is sufficient for a 
determination to buy more scanners. 
 

 
Page  19 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Appendix I 
Detailed Objective, Scope, and Methodology 
The overall objective of this audit was to assess the IRS’s efforts to address the backlogged 
Accounts Management inventory, including amended returns.  To accomplish our objective, we: 
• 
Determined what actions the IRS took in response to our prior audit recommendations. 
• 
Met with IRS management to discuss their plans to prioritize inventories and their goals 
to get inventories to pre-pandemic levels.    
• 
Determined the impact of Surge Team members assisting Accounts Management and 
the impact it had on other IRS functions.    
• 
Assessed and monitored ICT, Accounts Management, and amended return inventories 
during Calendar Year 2022 and compared to pre-pandemic levels and IRS goals.  
• 
Performed site visits and met with site employees and management to identify concerns 
with working inventories and to identify opportunities to improve the efficiency in which 
inventory is worked, thus helping to reduce the backlogs of inventory.  
Performance of This Review 
This review was performed at the IRS’s Tax Processing Centers located in Kansas City, Missouri; 
Austin, Texas; and Ogden, Utah, as well as IRS Campus Support Sites located in 
Andover, Massachusetts, and Holtsville, New York, during the period February through 
December 2022.  We conducted this performance audit in accordance with generally accepted 
government auditing standards.  Those standards require that we plan and perform the audit to 
obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and 
conclusions based on our audit objective.  We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit objective.   
Major contributors to the report were Diana Tengesdal, Acting Assistant Inspector General for 
Audit (Returns Processing and Account Services); Linna Hung, Director; Jeffrey Cullum, Audit 
Manager; Lorenzo Moss, Lead Auditor; and James (Philip) Bailey, Auditor. 
Validity and Reliability of Data From Computer-Based Systems  
We performed tests to assess the reliability of data extracts from the CII and the Modernized Tax 
Return Database.  We evaluated the data by performing electronic testing of required data 
elements and reviewing existing information about the data and the system that produced 
them.  In addition, we selected data from each extract and verified that the data in the extracts 
were the same as the data captured in the source databases.  We determined that the data were 
sufficiently reliable for purposes of this report. 

 
Page  20 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Internal Controls Methodology 
Internal controls relate to management’s plans, methods, and procedures used to meet their 
mission, goals, and objectives.  Internal controls include the processes and procedures for 
planning, organizing, directing, and controlling program operations.  They include the systems 
for measuring, reporting, and monitoring program performance.  We determined that the 
following internal controls were relevant to our audit objective:  IRS inventory reporting and 
monitoring processes.  We evaluated these controls by reviewing the Internal Revenue Manual, 
meeting with IRS management, and reviewing relevant documentation provided by the IRS.   

 
Page  21 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Appendix II 
Outcome Measures 
This appendix presents detailed information on the measurable impact that our recommended 
corrective actions will have on tax administration.  These benefits will be incorporated into our 
Semiannual Report to Congress.  
Type and Value of Outcome Measure: 
• 
Taxpayer Privacy and Security – Potential; 60,261 documents received at the Brookhaven 
Campus Support Site were screened at IRS employee’s telework sites and in IRS locations 
not co-located with the mailroom, which increased the risk that documents would be 
lost, destroyed, or viewed by unauthorized individuals (see Recommendation 2). 
Methodology Used to Measure the Reported Benefit:  
In response to our e-mail alert, IRS management agreed to ensure that screening work remains 
in a secure IRS environment and to discontinue telework screening.  During Fiscal Year 2022, 
60,261 correspondence documents were received at the Brookhaven Campus Support Site and 
screened at telework sites.  As a result of our recommendation, these documents will now 
remain secure and the privacy maintained for the associated taxpayers. 
Type and Value of Outcome Measure:  
• 
Taxpayer Burden – Potential; 14,980,000 documents will be processed more timely by the 
ICT and taxpayers notified sooner that the IRS received their correspondence 
(see Recommendation 4). 
Methodology Used to Measure the Reported Benefit: 
In response to our e-mail alert, IRS management hired 214 additional mail clerks.  The IRS 
estimated that each mail clerk is able to process about 70,000 documents in the ICT each 
calendar year.  We multiplied the number of additional employees to be hired times the number 
of documents they can process to estimate that 14,980,000 (214 x 70,000) documents will be 
processed more timely and taxpayers notified sooner that their correspondence has been 
received. 
Type and Value of Outcome Measure:  
• 
Inefficient Use of Resources – Potential; $322,241,232 in potential savings if the IRS were 
to automate the processing of Forms 1040-X (see Recommendation 6). 
Methodology Used to Measure the Reported Benefit: 
According to the IRS, it estimates that it would cost a total of $20 million through Fiscal 
Year 2027 to implement a fully automated solution to process Forms 1040-X.  In addition, the 
IRS estimates that it currently costs $6.64 to process a Form 1040-X in the Submission 
Processing function and $109.26 in the Accounts Management function.  During Fiscal 
Year 2022, the Submission Processing function processed 1,660,662 Forms 1040-X and the 

 
Page  22 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Accounts Management function processed 2,859,969 Forms 1040-X.  In contrast, the IRS reports 
that it can systemically process an e-filed Form 1040 for $0.28. 
We estimate at least $322,241,232 in annual cost savings if the IRS implemented our 
recommendation to prioritize the implementation of automating processing of Forms 1040-X.   
• 
Submission Processing function = 1,660,662 Forms 1040-X x $6.64 = $11,026,796 
• 
Accounts Management function = 2,859,969 Forms 1040-X x $109.26 = $312,480,213 
• 
Estimated automated processing costs = 4,520,631 Forms 1040-X x $.28 = $1,265,777 
Total Cost = $11,026,796 + $312,480,213 – $1,265,777 = $322,241,232 
Management’s Response:  Although the IRS agreed that automating the Form 1040-X 
processing will increase efficiencies and reduce taxpayer burden, they disagreed with this 
outcome stating that an outcome measure should not be calculated until requirements and a 
solution have been evaluated with the Information Technology organization.  The evaluation 
process and feasibility study of the automation could take several years due to the complexity 
associated with Form 1040-X processing that must be done across multiple systems.  
Management also disagreed with the outcome assuming that all Forms 1040-X will be e-filed.   
 
Office of Audit Comment:  Our outcome measure illustrates the potential benefit to the 
IRS if it were to automate the processing of all Forms 1040-X.  The dollar amounts were 
calculated using estimated costs provided to us by the IRS during our audit.  We agree 
that the actual savings will be realized when management develops the solution. 
Type and Value of Outcome Measure:  
• 
Taxpayer Burden – Potential; 309,083 open cases related to Forms 1040-X that indicate a 
refund and could be prioritized by the IRS to ensure that taxpayers receive refunds 
sooner (see Recommendation 7). 
Methodology Used to Measure the Reported Benefit: 
Our analysis of 1.9 million e-filed Forms 1040-X from the Modernized Tax Return Database 
through October 22, 2022, found that 897,088 returns claimed a refund.  Our review of the 
refund Forms 1040-X identified 309,083 unique open CII cases through November 27, 2022.  
Because these are electronic cases and remain open, the IRS could prioritize them. 
Type and Value of Outcome Measure:  
• 
Inefficient Use of Resources – Potential; $1,738,932 potentially saved if the IRS prevents 
the generation of transcripts for refunds less than $100 (see Recommendation 8). 
Methodology Used to Measure the Reported Benefit: 
As of December 3, 2022, the IRS reported that it had 24,492 transcripts in its Taxpayer Relations 
inventory that require a manual refund of under $100.  The IRS reports that it costs about $71 to 
issue a manual refund (under $1 million).  We estimate that the IRS could potentially save 
$1,738,932 (24,492 x $71) by implementing our recommendation to prevent the generation of 
these transcripts.   

 
Page  23 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Appendix III 
Prior TIGTA Report Recommendations and Status 
Recommendation 
Status  
Recommendation 1:  Establish guidance/clarification on when 
resources can be directed to the office to help with correspondence 
screening inventory, ensure that sufficient staff is available to 
screen in a timely manner, and establish processes to monitor 
progress. 
Agreed – Implemented.  The IRS ensured that staff was brought into 
Austin and the correspondence screening inventory was significantly 
reduced.   
Recommendation 2:  Evaluate directing taxpayers to send inventory 
intended for Accounts Management directly to Campus Support 
Sites for processing to reduce backlogs at Tax Processing Centers 
and improve services to taxpayers. 
Disagreed – N/A.  The IRS states that it does not have enough staffing 
in Campus Support Sites and that it has had trouble hiring at these sites 
in the past.  The IRS also stated that space would be a concern.   
Recommendation 3:  Prioritize the development and 
implementation of tools that will enable taxpayers seeking 
assistance or responding to Accounts Management to correspond 
with the IRS electronically, including the ability to directly upload 
documents. 
Agreed – Not Implemented.  The IRS shows this recommendation as 
implemented, but TIGTA remains concerned that actions taken to date 
do not fully address the concerns raised by TIGTA.  The IRS has piloted 
technology uploading documents in other IRS functions.  However, 
Accounts Management is awaiting this functionality following IRS 
modernization plans.   
Recommendation 4:  Evaluate establishing two distinct IRS 
programs as part of the IRS reorganization under the Taxpayer First 
Act – one dedicated to answering toll-free telephone calls and one 
dedicated to working Accounts Management inventory – with 
adequate staffing. 
Agreed – Not Implemented.  The IRS now reports an implementation 
date of September 15, 2023. 
Recommendation 5:  Assess the availability of Campus Support 
Sites’ ICT staffing or other resources that could be made available to 
assist with clearing ICT backlogs at Tax Processing Centers. 
Agreed – Implemented.  Accounts Management has continued to 
provide resources to the Submission Processing function to assist with 
validating ICT inventory.   
Recommendation 6:  Provide us with plans to address concerns 
identified with the new Fresno Campus Support Site, including 
staffing the ICT. 
Agreed – Implemented.  Staffing was increased through voluntary 
reassignments and external announcements.  All scanners were being 
used.   
Recommendation 7:  Complete a review of all 10 ICT sites to 
determine what contributes to the ICT’s inability to timely scan and 
validate documents.  Develop an action plan to ensure that the 
high-capacity ICT scanners and staffing are realigned to the 
appropriate sites based on actual or expected inventory levels.  
Ensure that responsibility of ICT operations is consolidated under 
the appropriate function. 
Agreed – Not Implemented.  The IRS will perform a Lean Six Sigma 
assessment to evaluate the potential for efficiency gains within the ICT 
process by February 15, 2023.  This will address opportunities to 
improve procedures and the overall operation of the program. 
Recommendation 8:  Cross-train additional mail clerks at Campus 
Support Sites to work ICT validations or consider shipping inventory 
to sites with less inventory to be scanned.   
Agreed – Implemented.  Accounts Management is continuing to assist 
the Submission Processing function in validations and transshipment of 
ICT inventory. 
Recommendation 9:  Develop specific instructions and a common 
template for all 10 ICT sites to consistently capture ICT inventory 
information. 
Agreed – Implemented.  The IRS developed a common mechanism for 
the Submission Processing and Accounts Management functions to 
capture ICT inventory information starting in July 2022.  A finalized 
version was used beginning December 2022 and is shared between 
both the Accounts Management and Submission Processing functions. 
Recommendation 10:  Update existing scanning software or obtain 
a new software to address document capacity concerns. 
Disagreed.  The IRS determined the existing platform is sufficient to 
handle current and future needs. 

 
Page  24 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Recommendation 
Status  
Recommendation 11:  Ensure that programming is updated to 
systemically reject electronic submissions of Forms 2848, Power of 
Attorney and Declaration of Representative, and 8821, Tax 
Information Authorization, without manually mailing a rejection 
letter. 
Agreed – Not Implemented.  The IRS states that Optical Character 
Recognition capability is critical for the ability to systemically issue 
rejection letters and does not show implementation until 
October 2024. 
Recommendation 12:  Ensure that the rejection letter used for 
Forms 2848 and 8821 is updated to include language that a revised 
form can be sent electronically. 
Agreed – Implemented.  Forms and letters were updated in 
February 2022 to include the ability to electronically submit 
authorization requests to a taxpayer's online account or submit 
Forms 2848 and 8821 online through Tax Pro.   
Recommendation 13:  Develop an action plan to prioritize the 
continued expansion of documents that can be sent in via e-fax and 
converted into a CII image.   
Agreed – Not Implemented.  The IRS will perform a Lean Six Sigma 
assessment to evaluate the overall efficiency of the ICT process by 
February 2023.  The evaluation will consider expansion of e-fax 
services. 
Recommendation 14:  Identify priority work that needs to be 
expedited by the ICT and assess the feasibility of creating an e-fax 
number to receive this inventory. 
Agreed – Not Implemented.  The IRS will perform a Lean Six Sigma 
assessment to evaluate the overall efficiency of the ICT process.  The 
evaluation will consider expansion of e-fax services. 
Recommendation 15:  Perform a reconciliation of each site’s 
Accounts Management Inventory Report (AMIR) to the source 
reports to identify inventory inconsistencies and reporting errors by 
site. 
Agreed – Implemented.  In January 2022, the IRS performed a 
reconciliation on the AMIRs for each site to identify the inventory 
inconsistencies and reporting errors by sites.  Minor discrepancies 
were found at each of the sites, but the overall accuracy of the 
reporting was greater than 99 percent.   
Recommendation 16:  Implement processes to provide oversight by 
periodically performing reconciliations for each site. 
Agreed – Not Implemented.  The IRS will perform annual 
reconciliations for each site and address any issues identified by those 
reviews. 
Recommendation 17:  Develop specific and detailed instructions for 
preparing the AMIR, including how controlled and uncontrolled 
inventory should be captured. 
Agreed – Implemented.  The IRS has developed the instructions for 
preparing the AMIR.  In June 2022, Accounts Management met with 
the sites to ensure consistency and understanding of report 
preparation. 
Recommendation 18:  Develop a process to systemically pull all 
controlled inventory for each site for the AMIR to ensure 
consistency, reduce human error, and increase efficiencies. 
Agreed – Not Implemented.  The IRS is pursuing systemic changes to 
pull controlled inventory.  The requisite programming is subject to 
budgetary constraints, limited resources, and competing priorities.  
Consequently, an estimated date of October 2024 has been set. 
Recommendation 19:  Modify inventory reporting to report 
unassigned controlled inventory separately on the nationwide AMIR 
and limit the site specific AMIRs to only the inventory assigned to be 
worked in each site.   
Disagreed.  The IRS disagreed and stated that implementing this 
change would result in more complex reporting and would change the 
meaning of the AMIR. 
Source:  TIGTA summary of the Joint Audit Management Enterprise System as of December 5, 2022, for 
TIGTA Report No. 2022-46-027.  

 
Page  25 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Appendix IV 
Management’s Response to the Draft Report 
 

 
Page  26 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
 

 
Page  27 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
 

 
Page  28 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
 

 
Page  29 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
 

 
Page  30 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
 

 
Page  31 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
 

 
Page  32 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
 

 
Page  33 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
 

 
Page  34 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
 

 
Page  35 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
 

 
Page  36 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Appendix V 
Glossary of Terms 
Term 
Definition 
Campus Support Site 
IRS locations that handle incoming and outgoing mail operations where 
Tax Processing Centers have closed.  Campus Support Sites are located 
in Fresno, California; Chamblee, Georgia; Florence, Kentucky; Andover, 
Massachusetts; Holtsville, New York; Philadelphia, Pennsylvania; and 
Memphis, Tennessee. 
Centralized Authorization File 
The Centralized Authorization File is a computerized system of records, 
which houses authorization information from both powers of attorney 
and tax information authorizations. 
Correspondence Imaging 
Inventory 
The CII is an inventory system for scanning all Accounts Management 
receipts into digital images and working the cases from those images. 
Image Control Team 
The ICT provides services for Accounts Management by scanning their 
correspondence and forms sent in by taxpayers requesting adjustments 
to their accounts. 
Internal Revenue Manual 
The Internal Revenue Manual is the source of instructions to IRS staff, 
and includes policies, delegated authorities, procedures, instructions, 
and guidelines related to the operation of the IRS. 
Modernized Tax Return 
Database 
The database used to store original e-filed tax return data. 
Statute of Limitations 
The Internal Revenue Code states the IRS will assess, refund credit, and 
collect taxes within specific time limits.  These limits are known as 
Statute of Limitations. 
Tax Processing Center 
The location where the IRS processes paper and electronic submissions, 
corrects errors, and forwards data to the Computing Centers for analysis 
and posting to taxpayer accounts.  Tax Processing Centers are located in 
Kansas City, Missouri; Austin, Texas; and Ogden, Utah. 
 
 

 
Page  37 
Additional Actions Are Needed to Reduce Accounts  
Management Function Inventories to Below Pre-Pandemic Levels 
Appendix VI 
Abbreviations 
AMIR 
Accounts Management Inventory Report 
CII 
Correspondence Imaging Inventory 
CSR 
Customer Service Representative 
e-filed 
Electronically Filed 
ICT 
Image Control Team 
IRS 
Internal Revenue Service 
SB/SE 
Small Business and Self-Employed 
TE 
Tax Examiner 
TIGTA 
Treasury Inspector General for Tax Administration 
 

 
 
 
 
 
 
 
To report fraud, waste, or abuse,  
call our toll-free hotline at: 
(800) 366-4484 
By Web: 
www.treasury.gov/tigta/ 
Or Write: 
Treasury Inspector General for Tax Administration 
P.O. Box 23291 
Washington, D.C. 20026 
 
 
Information you provide is confidential, and you may remain anonymous.

File and source

File

REPORT_TIGTA_additional-actions-are-needed-to-reduce-accounts-management-function-i_2023-05-10.pdf

Size

5,628,621 bytes

SHA-256

72be64edbe0c6aaeeeacc5217b9a2f21afec75c90d97838ae6676eeb4ad201ee

Our copy

REPORT_TIGTA_additional-actions-are-needed-to-reduce-accounts-management-function-i_2023-05-10.pdf

Original

www.oversight.gov