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IRS tax system modernization falls further behind

Modernization of the IRS’ 60-year-old Individual Master File (IMF) system, the key source for individual tax data, has been in development since 2009, but even replacing core functions only might not be complete until 2030, according to the Government Accountability Office.

A modernized system would provide the infrastructure needed for real time digital taxpayer interactions, rapid access to data and agile response to legislative changes, according to the GAO report.

In its review of five IRS IT investments, GAO found that they met most performance goals for FY 2019 and 2020.

However, the program intended to modernize the IMF, called Customer Account Data Engine 2, has seen many delays and cost changes since the IRS first started developing it in 2009, GAO said. A key milestone for replacing selected functions, for example, has been pushed back by nine years, from 2014 to 2023. The fully modernized system isn't scheduled to be finished until 2030.

The delays have pushed development costs about four times higher than originally planned, and the specialized workers needed to support legacy IRS systems are expensive and increasingly difficult to find, GAO said.

One factor affecting the IRS' modernization efforts: the pandemic response.

IRS had to deploy IT equipment and upgrade IT infrastructure bandwidth to respond to the coronavirus pandemic and maximize telework capabilities. Among the issues that delayed infrastructure refreshing were back-ordered hardware, delays in procurement activities and staff being reassigned to support COVID-19 response.

In comments included in the report, Jeffrey Tribiano, IRS deputy commissioner for operations support, highlighted IMF's importance in providing data "to support IRS customer service, compliance, custodial accounting and fraud detection."

"Despite its limitations, the system continues to perform and enable the IRS to implement legislative mandates," he said. "The IMF modernization plan, which has been independently assessed, positions the IRS to incrementally deliver benefits each year for the next 10 years. With the American Rescue Plan providing modernization funding, we are accelerating these efforts, but continued progress will depend on available funding."

This article was first posted to FCW.

About the Author

Natalie Alms is a staff writer at FCW covering the federal workforce. She is a recent graduate of Wake Forest University and has written for the Salisbury (N.C.) Post. Connect with Natalie on Twitter at @AlmsNatalie.

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