Outsourcing return processing could reduce costs, IRS says

Outsourcing tax return processing to private industry would create opportunities to reduce costs and improve efficiency and effectiveness, the Internal Revenue Service said in a report to a Senate Appropriations subcommittee.

But outsourcing, with its attendant risks, must be pursued with restraint, IRS warned, given the critical importance of the program, which involves processing more than $1.4 trillion of tax receipts and issuing more than $130 billion in tax refunds annually.

IRS prepared the Jan. 13 report on outsourcing in response to a provision in the agency's fiscal 1997 appropriation, which directed the tax agency to study the potential costs and benefits of outsourcing certain return processing activities.

IRS said it is preparing to issue a request for information to evaluate the industry's capabilities to assess its interest in submitting proposals for the outsourcing of submissions processing, although phasing in outsourcing would be unlikely...