IRS chiefs divide to conquer

The IRS will pull personnel from the yearly tax filing grind to handle the mammoth job
of reorganizing the service, IRS chief information officer Paul Cosgrave said recently.

The reassignments, he said, will solve one of the chief obstacles to past modernization
efforts: performing years of work in the six months between peak tax seasons.

A rough diagram posted on Cosgrave’s office wall shows how the four IRS
segments—operations, modernization, information technology and commissioner Charles
Rossotti’s office—will interact during the reorganization.

The right side of the diagram depicts the modernization effort run by John D. LaFaver,
which will not be involved with the tax filing season, Cosgrave said. LaFaver will oversee
about 192 IRS employees, with Booz, Allen & Hamilton of McLean, Va., supplying
additional contract staff.

The left side of the diagram shows Bob Wenzel, deputy commissioner for operations,
running the IRS day-to-day operations. His staff will be involved in tax processing.

Rossotti and Cosgrave’s IT organization will have a foot in both worlds until the
modernization is complete.

Modernization is occurring in three phases. During Phase 1, Booz Allen did an initial
study on reorganizing the agency. The second phase, designing the new organization, began
last month and will probably be finished by spring, Cosgrave said. At that point, the IRS
will have a firm idea of which basic processes will be centralized and which will not,
Cosgrave said.

A dozen teams, one of which will be made up of IT employees, will design the IRS
structure during Phase 2.

The IRS will be organized by taxpayer type rather than geographic regions as in the
past, Cosgrave said. IRS employees will be assigned to one of four business units: Wage
and Investment Income Group, Small Business Group, Middle Market and Large Corporate Group
and Exempt Organizations Group.

Phase 3 will roll out the implementation of the new structure and at that point
Wenzel’s and LaFaver’s organizations will be combined, Cosgrave said.

Cosgrave wants to increase electronic filing faster than Congress has mandated. In the
IRS Restructuring and Reform Act passed this year, Congress gave the IRS until 2007 to get
80 percent of federal tax returns filed electronically. Cosgrave wants to do better than
that, he said.

Electronic filing would solve several problems, Cosgrave said. First, it would solve
the seasonal personnel shortage the IRS faces each tax season. The service last year had
to set up seven remote processing sites to get workers.

Second, electronic filing will reduce errors, half of which are due to keypunch
mistakes, Cosgrave said. Error rates could be reduced from 25 percent for paper forms to 1
percent for electronic forms.

Third, it would reduce the need for outsourcing. Cosgrave’s predecessor, Arthur A.
Gross, had wanted to outsource the work usually done by IRS service centers. But the idea
lost support in Congress.

Cosgrave plans to reduce the number of mainframe data centers from 12 to three.
Employees at the remaining nine centers will handle customer service telephone calls,
conduct telephone audits and process tax returns using PCs on their desks.


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