The most comprehensive study so far of difficulties at the IRS Philadelphia Service Center -- where tax returns from the District of Columbia and Maryland are sent -- has found severe problems in operations.
The General Accounting Office study, to be released today, reports that:
*In seven incidents, some disclosed previously, scores of tax returns involving tens of thousands of dollars were lost or destroyed.
*Backlogs of unprocessed returns, measured by several different standards, are higher at Philadelphia than at any of the other nine service centers around the country.
*Philadelphia is proportionately behind the other centers in issuing refunds.
*Philadelphia has paid out far more in interest on late refunds than any of the others.
The GAO is expected to discuss its recommendations for solving these problems at a hearing next month before the House Ways and Means Committee subcommittee on oversight.
The GAO study was requested by Sen. John Heinz (R-Pa.) who, along with Sen. Arlen Specter (R-Pa.), will release the report at a news conference today in Philadelphia. According an aide, Heinz will not call immediately for specific changes in procedures at the center, but will suggest that the forthcoming GAO recommendations be followed.
IRS spokeswoman Ellen Murphy said the agency worked closely with the GAO during its investigation and is reviewing the report. "We have taken specific actions to address many of the points in the report," Murphy said. "Many of the things we have developed to address the filing-season problem should positively affect the Philadelphia service center."
Just before the April 15 tax return filing deadline this year, IRS Commissioner Roscoe L. Egger Jr. dismissed reports of widespread return-shredding at Philadelphia as "sheer, utter nonsense."
During that month, the GAO reports, a janitor at the Philadelphia center reported finding unprocessed returns and refunds in a trash barrel on the loading dock. There were 109 envelopes, including remittances worth $333,440 in amounts ranging from $1 to $68,000. In a separate incident four days later, an internal investigator found three checks in a trash barrel -- one of them for $2,500.
Also during April, a mail clerk was told by her supervisor to stop throwing checks and returns into wastebaskets, according to the report. The clerk was fired two months later.
Other incidents documented by the GAO took place before 1985. In 1984, a total of 92 processed tax returns were found hidden in the women's restroom on two occasions. Other returns were misfiled and thrown in wastebaskets. Destruction of other kinds of tax-related documents also was reported.
An aide to Heinz noted that the report says three of the 12 employes in the mail unit at the time of the loading-dock incident had been working 19, 17 and 14 consecutive days. The unit supervisor and the primary shift supervisor each had worked 80-hour weeks during the two previous weeks, the report says.
The senator's aide added that reports of inventory backlog and slow processing of returns are more worrisome because they affect far more taxpayers.
Various inventory figures show the Philadelphia center far behind the others in processing tax returns. As of Sept. 21, 302,608 taxpayer documents that had been sent to Philadelphia on or before May 31 were still unprocessed. The next highest centers were Brookhaven, N.Y., with 247,863 and Austin, Tex., with 237,277. The Memphis service center, which handles returns from Virginia, had one of the lower backlogs at 66,440.
Another measure of backlog -- the number of returns with errors made either by the taxpayer or the IRS -- dropped significantly from midsummer but still was the highest in Philadelphia as of Sept. 13. The center had 47,978 returns in its "error-resolution" inventory, compared with 39,769 in Atlanta, the next highest, and 10,602 in Andover, Mass., the lowest.
Philadelphia also is behind in paying refunds and interest on late refunds. The center received 8.2 million returns this year through September, a 4.3 percent increase from the previous year. But the number of refunds it issued as of May 30, the last day on which they could be issued without interest being owed, fell 7.4 percent from 1984 to 1985. And the center paid out $14.3 million in interest through Oct. 19 on late refunds, a 324 percent increase from the previous year