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July 9, 2009
Robert Sperling
TIGTA-PAO@tigta.treas.gov
(202) 622-6500

TIGTA Releases Review of Fuel Excise Tax Data Retrieval System

The Treasury Inspector General for Tax Administration (TIGTA) today publicly released its review of the development of the Internal Revenue Service's (IRS) Excise Files Information Retrieval System (ExFIRS).

TIGTA conducted the audit as a follow-up to its October 2005 report on the IRS's implementation of its electronic system for reporting and tracking compliance with the motor fuel excise tax (The Excise Files Information Retrieval System Has Not Been Effectively Implemented (Reference Number 2006-20-001).

The motor fuel excise tax is a major source of funding for the Highway Trust Fund, which helps States pay for highway and transit projects. The IRS uses ExFIRS to improve motor fuel excise tax compliance and reduce fraud by identifying potentially noncompliant taxpayers.

TIGTA's new report found that while the IRS has taken actions to improve system development effectiveness and address concerns previously identified by TIGTA, additional actions are needed to ensure efficient and effective system development as well as to reduce costs and delays. For example, certain changes to ExFIRS upgrades that were made by the IRS after the upgrades had commenced increased the cost of such upgrades by almost $2.8 million and delayed implementation by one year.

TIGTA recommends that the IRS adequately consider all potential alternatives before making a final selection with respect to system development and upgrades and that program managers clearly understand and report all program costs.

"The Excise Files Information Retrieval System is a vital component of the IRS's motor fuel excise tax compliance program," commented J. Russell George, the Treasury Inspector General for Tax Administration. "In these difficult economic times, the IRS must ensure that all software development is conducted as efficiently and cost-effectively as possible."

In an April 2009 report on the Fuel Excise Tax Compliance Program, TIGTA found that the IRS had made significant progress in improving motor fuel excise tax compliance, including implementing electronic filing requirements.