IRS sets plan to outsource returns processing

In an outsourcing report mandated by Congress last year, IRS laid out its plans for
farming out systems work. But before massive outsourcing can begin, IRS must modernize
some critical systems itself, the report said.

''Regardless of the merit and cost benefit of outsourcing, the long lead time
associated with outsourcing dictates that the IRS develop and implement a near-term plan
to replace the deteriorating, noncentury date-compliant core systems which process more
than 90 percent of the tax returns and 35 percent of the payments received annually,'' the
IRS report said.

Even if IRS began the contracting process immediately, the earliest a vendor could take
the reins is 2001, the IRS concluded in its outsourcing report.

The 43-page report, Study of the Feasibility of Outsourcing Submissions Processing,
said IRS has no choice but to modernize the 13-year-old Data Input System (DIS) and the
19-year-old Remittance Processing System (RPS), both of which are ''wholly dependent''on
IRS' masterfile database, the National Advance System (NAS).

Because of antiquated mainframe equipment, NAS cannot be made to handle dates come the
year 2000 and therefore must be replaced, IRS said.

Replacing DIS and RPS is a critical issue facing the tax agency, said IRS deputy chief
information officer Robert F. Albicker at the GCN Forum luncheon in Washington this month
just before it sent the outsourcing report to Congress.

The replacement systems, to be tested next January and implemented agencywide in
January 1999, will be Microsoft Windows NT-based and use both off-the-shelf and
vendor-developed software, he said. In the long term, IRS will look at outsourcing the
entire submission portion of tax processing, Albicker said.

Albicker called 1997 a transition year for the service as it focuses on its
modernization strategy and divides Tax Systems Modernization into more doable parts with a
new management structure and lifecycle approach.

IRS is reorganizing its TSM staff and has completely reworked its quality assurance
program, Albicker said. IRS chief information officer Arthur A. Gross plans to send a
reworked systems architecture to Congress this spring.

For now, IRS has set some near-term TSM goals that Albicker said can provide the
service with more bang for its limited bucks.

IRS is focusing on its Electronic Federal Tax Payment System, a comprehensive
electronic funds transfer system that will let both individual and business taxpayers
transfer payments electronically.

The service also is expanding its successful TeleFile system, which lets taxpayers file
simple returns using a Touch-Tone telephone, and is making more use of the World Wide Web,
fax services and CD-ROMs to disseminate forms and information to taxpayers.

IRS also has set up a group to work on year 2000 projects. ''We have to complete
this,'' Albicker said, adding that the agency cannot postpone completing conversions
because 2000 is coming whether IRS finishes or not.

Albicker said the service has identified 62 million lines of code in 19,000 corporate
system programs alone, running on mainframe systems, that will need reworking.

IRS is completing the inventory on the business-developed applications and on its
off-the-shelf software and hardware, he said. The service has reassigned 315 people who
have knowledge of IRS' older systems to work on the problem.

As it works on systems issues, IRS management also must deal with a series of planned
personnel cutbacks and shifts.

IRS informed officials from the National Treasury Employees Union that there will be no
layoffs in the service's Washington information system division, a significant turn of
events from talk just weeks ago of a reduction in force of as many as 800 people from
headquarters IT jobs.

IRS and NTEU officials still are working on the final RIF and buyout agreement. The tax
agency must submit its RIF plan to Congress March 1.

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