GAO examined the Internal Revenue Service's (IRS) financial condition, focusing on the: (1) status of the 1996 filing season; and (2) IRS fiscal year (FY) 1997 budget request. GAO found that: (1) the FY 1996 appropriation for IRS was $7.3 billion, $860 million less than the President requested and $160 million less than the FY 1995 IRS appropriation; (2) to mitigate the funding shortfall, IRS initiated a hiring freeze and reduced its travel and overtime costs, cash awards, hours for seasonal staff, and nonpermanent staff; (3) IRS is delaying fewer refunds in 1996 and validating taxpayers' social security numbers and earned income credit claims; (4) taxpayers are having an easier time contacting IRS by telephone, with the accessibility rate increasing 9 percent over 1995; (6) IRS is requesting a budget increase of $647 million for FY 1997 to develop certain compliance initiatives and correct weaknesses in the Tax Systems Modernization Program (TSM); and (7) IRS is having problems ensuring data accuracy for revenue generated by its enforcement activities and correcting TSM managerial and technical weaknesses.

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