Expecting a tax refund? IRS track record on returns in 2010 was worst in years

Introduction

The Internal Revenue Service posted its worst performance in years in getting tax refunds to the public—about 3.3 million refunds were delayed through last August.

In addition, the delays cost the IRS $12.6 million in interest on refunds, according to a Government Accountability Office report.

It was the worst refund performance since at least 2005.

Seventy-one percent of all individual taxpayers filed online, which saves the IRS considerable funds. Each electronic return costs the IRS 19 cents and its paper counterpart $3.29. Consumers didn’t take advantage of other programs intended to expedite the process for both the IRS and the taxpayer: one would have provided refunds on debit cards, for taxpayers without bank accounts, but the program was rarely used in 2010. The GAO criticized the agency for not taking into account key factors in it how it assessed the program, adding the “IRS risks not learning the real reasons for low participation.”

One big frustration for taxpayers was waiting for their return, the report said. The IRS had designed a new Modernized e-File system, which was supposed to cut down on wait time and generally streamline the process, as well as replace the IRS’ old system. But the new system didn’t work as well as intended, the GAO report said. IRS officials have decided to use the new system along with the old until 2012. The system was plagued by problems, including delayed acknowledgements and slow servers, and the IRS said many consumers turned to traditional filings out of frustration.

Most people who called the IRS for help received the answers they needed—more than 90 percent received accurate answers, according to the report. However, average wait times increased to a little less than 10 minutes.

“Ensuring the timeliness of IRS’s response to taxpayer correspondence directly reduces the volume of calls made to IRS’s telephone services, which can represent significant annual cost savings as phones represent one of the most expensive forms of taxpayer services,” the report said.

FAST FACT: The Making Work Pay tax credit, which meant $400 for working individuals or $800 for married couples, is gone in 2011. Instead, the Affordable Care Act will affect many returns because of changes in how health care taxes are calculated.

Following are other new watchdog reports released by the Government Accountability Office (GAO), various federal Offices of Inspector General (OIG), and other government entities.

NATIONAL SECURITY

• A GAO report says that 1,442 service members separated under the military’s “homosexual conduct policy” held critical occupations. Twenty-three percent had important language skills. The policy cost the Defense Department $193.3 million over six years. Congress repealed the policy, known as “Don’t Ask, Don’t Tell,” and President Obama signed the bill on Dec. 22.

HEALTH CARE

• New York State improperly claimed more than $200 million in Medicaid reimbursements, according to a report from the Department of Health and Human Services’ Inspector General.