IRS Website Plans Too Vague, Watchdog Says

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The IRS plans to spend $320 million over 10 years to improve its website, but the agency's plans on how exactly it will do that remain unclear, according to a government watchdog agency.

The IRS has seen increased use of its website over the past several years, and more people are using its e-filing system. In 2011, nearly 80% of individual taxpayer returns were filed electronically, a system that is "more accurate, faster and less expensive for IRS than processing returns filed on paper," according to a recent report by the Government Accountability Office (GAO).

The taxpayer's overall income-tax filing experience could be improved by even more online tools, according to the watchdog agency, and the IRS said it's focused on meeting that challenge with a new website that it will unveil in 2013.

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The IRS might not see a proper return on its planned multi-million-dollar investment, however, because the agency "does not have concrete plans that define what additional online services the new website will ultimately provide and how much the services will cost," according to the report.

To be fair, the GAO said IRS officials have begun working on a roadmap to identify online services it wants to provide, but the roadmap lacks "several fundamental elements," the agency said.

Those elements include allowing taxpayers to view their information online; an assessment of the costs and benefits for the new services; time frames for when the services would be available; and plans to revisit the strategy periodically and make revisions based on IRS's priorities, according to the report.

Choosing services that can reduce the number of phone calls to IRS customer service representatives is key to getting the most out of the new site, according to the GAO.

As it develops its new services, the agency should keep in mind that "the extent to which taxpayers can be diverted to the web will allow IRS to assist them at a much lower cost and more quickly," according to the GAO. Therefore, services or information for which taxpayers otherwise would call the agency's phone lines--where average user wait time has been steadily increasing since 2007, even as the number of calls have decreased--would ease the burden on telephone customer service representatives, according to the agency.

Improved search capabilities also should be a focus of the site. The IRS acknowledged that the reason there has been an increase of traffic to its site is likely because taxpayers are "having difficulties locating information," according to the GAO.

Having a more search-friendly site also will reduce the number of phone calls the IRS receives, and improve the agency's return on its investment, according to the GAO.

Although taxpayers are becoming more confident using the IRS website and in particular its e-filing system, there have been kinks in the service. When the agency rolled out a $524 million e-filing system upgrade in 2010, it initially rejected valid tax returns erroneously.

The GAO also criticized the IRS that same year for cybsersecurity weaknesses that might have put taxpayer information at risk.

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