Appendix IV Service Center Recognition/Image SCRIPS is a multimillion dollar system15 designed to process income tax IRS planned to process 76.4 million FTDS, 57.4 million IRP documents, and 8.6 million forms 1040EZ on SCRIPS during the 1995 filing season. IRS expected that SCRIPS would provide faster and more accurate document processing, lower maintenance costs, reduce manual data entry, lessen error correction, and minimize document storage requirements. But, extensive downtime and slower-than-expected processing rates during the filing season limited the effectiveness of SCRIPS. The impact of these problems was most felt in the processing of forms 1040EZ. Some centers stopped 1040EZ processing on SCRIPS completely or for extended periods of time. As a result, IRS was able to process only about 56 percent of the expected 8.6 million forms 1040EZ on SCRIPS. Although the centers were able to process the rest of the forms 1040EZ on their old systems, doing so required additional resources and costs, and some centers reported that the average time it took to process a return increased because of the SCRIPS problems. Processing center officials told us of budget overruns as a result of slower-than-expected SCRIPS processing times. IRS had scheduled 25.6 staff years for processing 15SCRIPS is the first of two document imaging systems intended to improve IRS' ability to capture data electronically and streamline much of its paper-processing operations. IRS' estimate of the cost to design, develop, and maintain SCRIPS through the year 2000 is $132 million. SCRIPS is to be followed by the Document Processing System, which is intended to replace most of IRS' current labor intensive data transcription operations. The Document Processing System is being designed to image data from all types of individual and business returns. Other documents include federal tax deposit (FTD) coupons, Information Returns Program (IRP) documents, such as forms 1099 used by banks and other third parties to report payments of interest, dividends, etc.; and employer's quarterly federal tax returns (Form 941). 23-595 97-19 An official at one processing center told us that as a result of the problems IRS' Internal Audit issued a report on IRS' 1994 SCRIPS test that cited several factors that may have contributed to the problems encountered in 1995.18 Internal Audit found that (1) SCRIPS had not been fully tested to meet output and storage requirements, (2) IRS accepted the system without conducting required acceptance and equipment testing, and (3) SCRIPS was not meeting contractual requirements for capturing Form 1040EZ and IRP data accurately. Had IRS conducted the proper testing, many of the problems encountered during the 1995 filing season might have been identified and corrected before system implementation. At the conclusion of our audit work, IRS was assessing SCRIPS performance to identify problem causes and needed corrective action. In the meantime, IRS postponed plans to process Form 941 on SCRIPS and redistribute 1040EZ workload from the five centers that do not have SCRIPS. We will be monitoring IRS' efforts to improve SCRIPS performance, especially as they affect IRS' readiness for the 1996 filing season. 17"Other-than-full-paid" tax returns are those returns filed by taxpayers who either were due a refund season. 18Interim Evaluation of the Service Center Recognition/Image Processing System (SCRIPS) Pilot, IRS Internal Audit, Reference No. 054406, May 8, 1995. In accordance with 31 U.S.C. section 720, I am writing you concerning actions by the Internal Revenue Service (IRS) in response to the recommendations contained in a report by the General Accounting Office (GAO) entitled Tax Administration: Electronic Filing Falling Short of Expectations (GGD-96-12, October 31, 1995). The GAO report contains several recommendations geared to addressing the electronic filing program (ELF). Specifically, this report focuses on assessing (1) the IRS' progress in maximizing electronic filing; (2) the availability of data needed to develop an electronic filing strategy; and (3) the implications for the IRS if it does not significantly reduce its paper-processing workload. Our July 27, 1995, response to GAO on the draft of this report is included in the final report beginning on page 17. We generally agree with the report recommendations to (1) identify those groups of taxpayers who offer the greatest opportunity to reduce the IRS' paper-processing workload and operating costs if they were to file electronically and develop strategies that focus the IRS' resources on eliminating or alleviating impediments that inhibit those groups from participating in the program, including the impediment posed by the program's cost; (2) adopt goals for electronic filing that focus on reducing the IRS' paper-processing workload and operating costs (these goals could be used in addition to the existing electronic filing goal to assess the IRS' progress in achieving the intended benefits of electronic filing); and (3) prepare contingency plans for the possibility that the electronic filing program will fall short of expectations. In addition to our response to the final report recommendations, we would like to make the following comments. The IRS is continuing to develop and refine its strategies for "non-paper filing." This year, the IRS will be implementing several components of our overall electronic filing strategy to encourage taxpayers to fulfill their tax obligations without sending paper to the IRS. Included among these strategies is the recently-announced plan to expand the very successful TeleFile program |